Recently, the Swedish Tax Agency published a memorandum suggesting amendments to the tax rules governing tax residency for individuals.
In Sweden, an individual can be either unlimited (tax resident) or limited tax liable (non-tax resident). Generally, unlimited tax liability implies taxation on global income, while limited tax liability results in taxation only on income derived from Swedish sources.
There are three legal grounds that may lead to unlimited tax liability in Sweden for individuals. These grounds are residence (“bosättning”), substantial ties (“väsentlig anknytning”), and permanent stay (“stadigvarande vistelse”).
Individuals moving to and from Sweden can have a permanent stay in Sweden. Case law set by the Supreme Administrative Court implies that the assessment for individuals who were previously residents in Sweden is somewhat different compared to individuals moving to Sweden.
The Tax Agency’s proposal entails defining permanent stay, similar to many other countries, based on the number of days per calendar year that the individual stays in Sweden. The proposal essentially implies the following:
- Individuals who spend more than 160 overnight stays per calendar year are considered to have a permanent stay in Sweden.
- Individuals who stay over 120 days per calendar year, for two consecutive calendar years, are considered to have a permanent stay in Sweden.
It remains to be seen whether the legal proposal will be implemented. It can however be noted that the proposal brings increased predictability for both individuals and employers, which is positive in relation to the current legal uncertainty.
If you have any questions regarding tax liability in Sweden, in relation to yourself or your personnel, please do not hesitate to contact us.
