The Swedish Government intends to clarify when an individual is considered to have a permanent stay in Sweden, an issue that may have significant tax implications. On 28 May, the Ministry of Finance published a legislative referral proposing that the Swedish Income Tax Act should include a statutory definition of the concept of permanent stay.
Background
The concept of permanent stay is important, as it constitutes one of the three independent grounds for unlimited tax liability in Sweden under the Swedish Income Tax Act, alongside residence and essential ties. If an individual is considered have a permanent stay in Sweden, that person is, as a mail rule, liable to tax in Sweden on their worldwide income, including both Swedish and foreign-source income. The concept is therefore particularly relevant when assessing individuals who are not resident in Sweden but who stay in the country repeatedly or for longer periods.
Until now, the interpretation of permanent stay has mainly been based on case law, as the legislation has not contained an explicit definition. The assessment has therefore depended on factors such as the duration, continuity and overall extent of the stay. As a result, the application of the rules has often been perceived as both complex and difficult to predict.
The proposal
The proposal which is based on a memo from the Tax Agency that was published already by the end of 2023, would introduce clear thresholds for when a stay in Sweden is to be regarded as permanent. As a main rule, an individual would be considered to have a permanent stay if they spend more than 160 days in the country during a calendar year. Although, shorter stays may also qualify if the individual spends more than 120 days in Sweden during one year and also exceeded 120 days during the preceding year. Only days when individual spends their daily rest in Sweden would be counted for these purposes. By introducing fixed day thresholds, the Government aims to make the rules more predictable and easier to apply for individuals, employers and the Swedish Tax Agency alike.
The proposal is welcome and is expected to create greater certainty for many individuals, not least those who work in several countries, have international assignments, or live abroad but wish to spend time in Sweden, for example for holidays or family reasons.
The new definition is proposed to enter into force on 1 January 2027.
If you have any questions about how the proposal may affect you or your employees, you are more than welcome to contact us at Skeppsbron Skatt. We have extensive experience assisting both companies and private individuals with matters relating to international taxation and Swedish tax liability.
