FOR MEMBERS

Explained: How does income tax work in Sweden?

Explained: How does income tax work in Sweden?
The amount you'll pay the taxman depends not only on how much you earn, but also where you live, and whether you're eligible for deductions. Photo: Sofia Sabel/imagebank.sweden.se
Sweden is an expensive place to live, with the highest earners paying up to 55 percent in tax above certain thresholds. Understanding how income tax works is crucial before a salary negotiation or accepting a job offer.

Income tax is split into two categories in Sweden.

All wage earners will pay a local or municipal tax, whether or not they reach the threshold for national tax. This consists of two parts: the tax you pay to the municipality (kommun) where you live and the region.

So if you for example live in Malmö, your taxes go to Malmö City Council, where they are used to fund things like schools and care homes, and Region Skåne, which is responsible for healthcare and public transport.

The average municipal tax rate in Sweden is currently 32 percent, but it can reach as high as 35 percent depending on where you live. This is calculated based on where you live, not where you work, so moving home can lead to a change in your pay check. Within the Stockholm region, your tax rate could range from 29.2 percent in Solna to 32.23 percent in Botkyrka.

(article continues below)

See also on The Local:

On top of that, higher earners pay a national tax (statlig skatt) of 20 percent.

This is only paid on annual income over a certain threshold, set at 509,300 kronor (49,100 euros) in 2020. If you earn less than the lower limit, the national tax is not applicable.

As of 2020, there is only one income band for higher earners, after an additional five percent tax (called värnskatt) for the highest earners was scrapped. So however much you earn, the national tax never rises above 20 percent. 


Photo: Melker Dahlstrand/imagebank.sweden.se

Your general tax rate will therefore fall somewhere between 29 and 55 percent, depending on your income and where in the country you live.

But deduction rules can enable you to reduce your overall tax rate, including by earning a fair bit more than the 509,300 kronor limit without actually having to pay the national tax.

The basic deduction — how much you can earn before calculating municipal and national tax — shifts a bit depending on income but also age. It is between 13,900 and 36,500 kronor annually for under-65s, with a fixed amount of 20,100 kronor for low income earners. 

Expenses incurred during fulfilment of employment can generally be deducted from the income on which you are taxed. These include things like travel expenses, car expenses, living allowances on business trips, necessary literature and tools of the trade. For travel between home and work, expenses must exceed 11,000 kronor to be deductible.


Member comments

Become a Member to leave a comment.Or login here.