Taxes - Sweden
As a sole trader, you pay tax on your profits.
Profits are your earnings minus your costs. You are allowed to make a fixed deduction of up to 25% for social security contributions (self-employed contributions). The amount of profit remaining after the fixed deduction is called the operating surplus.
As you cannot be employed in your own business, you cannot draw a salary. Instead, the money you take from the company is called your own withdrawal.
After paying self-employed contributions and municipal tax (kommunalskatt) and any state income tax, you can make your own withdrawal if there is any operating surplus left.
A partnership does not pay any income tax. Instead, the partners pay tax on their individual shares of the company's profits.
A partnership does however pay property tax, payroll tax and dividend tax on pension costs for employees.
Limited companies pay corporation tax at 26.3 % on the profits they make during the year. The owners are taxed on their salaries for the work that they do, or on the dividend paid on their shares.
There are special rules for closed corporations [fåmansföretag].
Shareholders in a limited company who work in the business are regarded as employees and their salaries are taxed in the same way as for any other employee. Limited companies pay employer's contributions based on gross salary.
All entrepreneurs are liable for VAT if they trade in goods or services on a commercial basis in Sweden.
Trade covers sales of goods, the provision of services, exchange and own withdrawals from the business. VAT is levied at every stage of the production and distribution chain, up to and including sale to the consumer.
There are three tax rates for VAT.
- 25 % VAT is the general tax rate, applied to most goods and services;
- 12 % VAT on, for example, groceries, hotels and works of art sold directly by an artist;
- 6 % VAT on, for example, newspapers, books, concerts and domestic travel (taxi, bus, air and train journeys), etc.
When you add VAT you must add it to the total amount paid by the customer for goods or services, excluding any interest charged.
If you are an entrepreneur, VAT is not a cost because you can deduct the VAT that you pay on purchases by your business. You pay the difference between the VAT you collect on your sales (output VAT) and the VAT you pay on your purchases (input VAT).
In Sweden the National Tax Board (Skatteverket) is in charge of administering taxes.
All companies must apply for a corporation tax card (F-skattsedel) from the National Tax Board. The tax card is proof that the company is running a business that is registered for tax and VAT.
Your corporation tax card means that you are an entrepreneur who takes care of paying your taxes and contributions yourself. For your customers the corporation tax card is proof that they do not need to deduct tax or pay employer's contributions in relation to any payments made to you.
If you plan to run a business that is liable for VAT, or entitles you to a refund of VAT, you must register for VAT with the National Tax Board, no later than two weeks before you start up.
Submitting your tax declaration
Everyone who pays tax and contributions will have their own clearing account for taxes and charges with the National Tax Board.
All payments you make to the National Tax Board are recorded in your clearing account for taxes and charges. VAT, employer's contributions and tax deductions are also recorded in the tax return.
The tax is paid every month in advance and then reconciled against the return.
If you are operating as a sole trader, preliminary estimates of income tax and self-employed social security contributions are included in the corporation tax (F-skatt) that you pay into the clearing account for taxes and charges each month. Estimated VAT is also included if you provide VAT returns on an annual basis.
In a partnership, partners pay tax on their individual shares of the company's profits. They pay a preliminary tax each month into their respective clearing accounts for taxes and charges. Even if a partnership does not pay tax, it may also obtain a corporation tax card.
In a limited company, the profits are distributed to the shareholders by way of dividends. The shareholder pays tax on the dividend as income from capital. A special form is used for closed corporations.
The business portal verksamt.se provides answers to frequently asked questions about taxes.
A lot of the information on the National Tax Board website is available in languages other than Swedish. For a full list of the documents available, please visit the Board's home page.
Check also the legislation on this topic in: