Payroll Taxation
Employers in Sweden are obliged to pay social fees in the form of employer’s contribution at a rate of 31.42%. The social fee amount is calculated monthly as the Gross Salary x 31.42%. The proper naming in Swedish for the 31.42% fee is “Arbetsgivaravgift” and its translation to English can vary. Common translations are Payroll Tax, Employer Tax, Employer Fees, Social Contributions.
The Arbetsgivaravgift will apply for all salary payments to employees with no distinction made between Swedish citizens, EU citizens and non-EU citizens. Tax rebates are from time to time made available for employees in certain age segments and disabilities and for employment in rural areas of Sweden.
Withholding Tax and Net Salary
Swedish employers are also obligated by law to deduct a preliminary Withholding Tax before salary is paid out to any employee on a monthly basis. The withholding amount is deducted from the Gross Salary. The Net Salary is then paid directly to the employee while the withholding tax amount is paid by the employer to the Swedish tax authority Skatteverket.
Preliminary Withholding Tax calculations can be complex and the percentage to be applied ranges from 0 - 62%
The calculation input includes where the employee is residing, what kind of work is performed, previous salary engagements and so on. We strongly recommend consulting a professional for an estimation with substance however a standard input for preliminary Withholding Tax in Sweden is usually set at 30-40% on the Gross Salary amount.
SINK and EU citizens
Special beneficial and simplified rules for Withholding Tax apply for non-Swedish citizens that work in Sweden and “reside abroad”.
The preliminary and final Withholding tax applicable for employees qualifying for SINK is 25%.
The SINK regulatory framework and application may at first sight be perceived as complex however spending a few hours on an application can save considerable amounts for the employee, in some cases up to 20-30% or more on the Gross Salary.
SINK can be applied when all of the following conditions apply:
- The employee’s official residence is not in Sweden
- The intended employment duration is maximum six months
- The employee is permitted to work in Sweden (for example EU-citizens)
- The employee opts in for SINK tax by submitting the SKV4350 form
SINK and Umbrella Employment
The SINK application is processed by the Swedish tax authority Skatteverket according to the conditions set forward by the employee and a decision is made irregardless of who the employer is.
Once the SINK application is approved all official Swedish employers including SMEs, large corporations, umbrella employers, employment agencies as well as foreign entities registered as a Swedish employer are obliged to deduct preliminary Withholding Tax at 25%.
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