Sweden’s tax system can be complicated to understand, especially for non-Swedish individuals intending to work here for a limited period. A-tax ("A-skatt") is a crucial aspect for foreign employees working temporarily in Sweden. Let’s delve into it.
What is Swedish A-tax?
Sweden’s tax system mandates that every employee receiving taxable income must register for tax purposes in Sweden. Consequently, various applications exist based on the employee’s tax and residency status in Sweden.
Primarily, individuals intending to stay in Sweden for at least one year must register as residents with the Swedish Tax Agency. This registration automatically generates an A-tax decision from the Swedish Tax Agency. Employers are required to comply with this decision regarding monthly tax withholdings from the employee's salary. Also, getting A-tax can be crucial for employees in the construction business, since this is often needed to get ID06 access cards to the construction site.
Conversely, for individuals staying in Sweden for less than a year, matters become more intricate. Determining their tax status in Sweden—whether they are tax residents or non-tax residents—involves an assessment that is not straightforward. Unlike many other countries, Sweden does not apply a fixed threshold of days to determine tax residency. Instead, the assessment relies on Swedish Case Law, which can be somewhat vague and ambiguous. Often, a lawyer specializing in tax law conducts this assessment.
If the outcome confirms tax residency, an A-tax application should be prepared and filed with the Swedish Tax Agency ("Skatteverket"). If the individual is deemed a non-tax resident, they may need to file either a SINK application or no application at all, depending on whether the 183-day rule can exempt the Swedish tax claim.
Should I apply for Swedish A-tax?
To answer this question, one must consider:
Whether they are considered tax residents in Sweden.
If not, whether they meet the 183-day rule.
Determining the applicability of the 183-day rule involves assessing whether the foreign employer could be deemed to have a 'Permanent Establishment' for tax purposes in Sweden. This assessment is complex and typically requires external advice, often arranged by the employer. The employer’s legal and tax obligations in Sweden are determined by how their employees are taxed in Sweden, making it crucial for employers to have these issues properly assessed.
Will I have to file a Swedish Tax Return if I have A-tax?
A-tax should be applied for if an individual is considered a tax resident under Swedish domestic tax law. Generally, individuals with Swedish A-tax are also obligated to file an Annual Swedish Tax Return. The deadline for filing takes place in the beginning of May for the preceding year's taxes.
A-tax and Double Taxation
For individuals coming to Sweden to work temporarily, it's common for their home country to also tax their Swedish-sourced employment income, potentially resulting in double taxation. To mitigate this, the provisions of a Swedish Double Tax Agreement can be invoked. Alternatively, in the absence of a tax treaty, the Swedish Internal Foreign Tax Credit law might apply, though its application to Swedish-sourced income is often limited.
Summarizing Remarks
When foreign employees come to Sweden, determining their tax status is crucial. Depending on their status, they may need to:
Apply for Swedish A-tax,
Apply for Swedish SINK tax, or
Not apply at all.
Employers must fulfill their obligations in Sweden based on the tax status of their employees, which may include withholding Swedish Preliminary Wage Tax and filing monthly PAYE reports.
If you're a business owner planning to send your staff to Sweden, please reach out to us for assistance in setting up a compliant and tax-optimal setup.