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TAXES

How to pay your taxes on a side hustle in Sweden

Tax season is coming and for many employees, you just need to read over your declaration and make sure the information is correct. For anyone running a side business however, there are extra details to be aware of.

How to pay your taxes on a side hustle in Sweden
Whether it's blogging, crafting, or performing, make sure you get your paperwork in order for your Swedish side hustle. Photo: Henrik Montgomery/TT

During the coronavirus pandemic, many people have set up their own businesses after having working hours reduced, or finding themselves with more free time. Perhaps you spent the summer berry-picking and sold your haul to neighbours, or a pandemic hobby has started to become profitable.

Hobby income

If your total annual income is above 20,008 kronor (including any salary you may earn from a full-time or part-time job), all money earned is taxable, even if it’s just a from a hobby, for example selling homemade crafts, blogging or performing. You should save all documentation associated with your hobby (proof of purchases and sales linked to the hobby) for six years, even if you don’t need to declare it at first.

This includes not only things like handicrafts, artwork, or gardening, but also blogging and e-sports for example. But any of these could be classed as a business if you run it like one: for example, if you make a proactive effort to reach customers and expand your business. Hobbies are defined by the Swedish Tax Agency as activities you do in your spare time without a profit-making goal and that is not your main source of income, and it’s the agency that makes the decision whether you are running a business or a hobby.

You need to fill in the form T2 in your tax declaration with information about any money you earned through your hobby, as well as any costs, and the Tax Agency will then calculate if you’re entitled to any deductions.

Once you earn more than 30,000 kronor a year from your hobby alone, this counts as a business and you need to register to pay VAT.

Selling items second hand

Made some cash by selling second hand items at a flea market or online? If it’s your own used belongings you’re selling, you can make a profit of up to 50,000 kronor each year without needing to pay tax on it (the reasoning being that you paid tax on the items when they were first bought).

Profit above 50,000 kronor is taxed as income from capital, but you can deduct the purchase cost, or if that’s unknown, you can make a 25 percent deduction from the sale price. There is an exception for some items considered collectables, including artwork and antiques, in which case you may need to follow slightly different tax rules.

If you are buying items to sell on for profit, rather than selling your own possessions second hand, this is usually classed as running your own business which means you follow the applicable tax rules for that, including VAT. Read more about second hand selling here.

Berries and foraging

If you sold berries, mushrooms or other items you picked yourself in Sweden, you do not have to pay tax on any profits unless you earned more than 12,500 kronor from the sales.

Photo: Gorm Kallestad/NTB scanpix/TT

Using an umbrella company

For some freelance activities, you might decide to use an umbrella company to take care of the admin side. 

This is worth considering if your freelancing will not be considered as a hobby and if you don’t want to organise the invoicing and taxes yourself.

There are several of these companies in Sweden: Frilans Finans, Cool Company, CanSolo, and Gigger, for example. You might want to look into the fees, level of customer service, and reviews from other users, in order to see which if any is right for you. They will take a small percentage of your income in return for taking care of the admin.

If you use these options, they will arrange the tax with each invoice, so you don’t need to do anything extra when tax season comes – just make sure that the details on your declaration match up with your documents.

Setting up as a sole trader

If your side hustle is a significant income source, it could be worth setting up as a sole trader, meaning you will fill out tax returns for income earned. If you are doing this alongside working as an employee, you need to register for FA tax, instead of F tax which is for people only working as a sole trader.

When you set up your sole tradership, Skatteverket will ask you to estimate how much money you will make and to submit a preliminary tax return. Then you pay tax each month based on that amount. At tax season, you submit your income declaration, and the agency will calculate how much tax you should have paid based on this. This means you could get a tax refund from the agency, or you may have to pay extra tax, depending on if your estimates were an over- or under-estimate.

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For members

WORKING IN SWEDEN

CHECKLIST: Here’s what you need to do if you move away from Sweden

What authorities do you need to inform before you leave, are you liable to Swedish tax and how can you access your Swedish pension? Here's a checklist.

CHECKLIST: Here's what you need to do if you move away from Sweden

Tell the relevant authorities if you’re leaving for more than a year

If you’re planning on leaving Sweden for more than a year, you will have to let the authorities know. The main authorities in question are Skatteverket (the Tax Agency) and Försäkringskassan (the Social Insurance Agency).

Försäkringskassan

You have to tell Försäkringskassan when you leave so they can assess whether or not you still qualify for Swedish social insurance. As a general rule, you aren’t eligible for Swedish social insurance if you move away from Sweden, but there are exceptions, such as maternity or paternity benefits if you’re moving to another EU country.

This also applies to any family members who move with you – any over-18’s should send in their own documentation to Försäkingskassan about their move abroad. If you’re moving abroad with anyone under 18, you can include them in your own report to Försäkringskassan.

If both legal guardians are moving abroad together, both need to include any children in their application. If one legal guardian is moving abroad and the other is staying in Sweden, you need the guardian staying in Sweden to co-sign your application. If you are the sole legal guardian of any under-18’s travelling with you, you don’t need any documentation from the other parent.

You can register a move abroad with Försäkringskassan on the Mina sidor service on their website, here (log in with BankID).

Skatteverket

If you are moving abroad for a year or longer, you also need to tell the Tax Agency. This also applies if you were planning on moving abroad for less than a year but ended up staying for longer.

If you move to another Nordic country, you will also need to register your move with that country’s authorities if you will be there for six months or more. You’ll be deregistered from the Swedish population register the same day you become registered in another Nordic country’s register.

This doesn’t mean that you’ll lose your personnummer – you’ll still be able to use it if you ever move back to Sweden – but you will no longer be registered as resident in Sweden.

Similarly to Försäkringskassan, you will also need to report any children you are bringing with you, and both legal guardians must sign the form, whether or not both guardians are moving abroad or not.

In some cases, you may still be liable to pay tax in Sweden even if you live abroad – particularly if you are a Swedish citizen or have lived in Sweden for at least ten years. This could be due to owning or renting out property in Sweden, having family in Sweden, or owning a business in Sweden.

You can tell the tax agency of your plans to move abroad here.

Contact your a-kassa, if relevant

If you are member of a Swedish a-kassa (unemployment insurance), make sure you tell them that you’re leaving the country. As a general rule, you have unemployment insurance in the country you work in, so you will most likely have to cancel your a-kassa subscription.

If you are moving to another country with the a-kassa system, such as Denmark or Finland, it may pay to wait until you have joined a new a-kassa in that country before you cancel your membership in Sweden.

This is due to the fact, in some countries, you only qualify for benefits once you fulfil a membership and employment requirement. In Sweden and Denmark, you must have been a member for 12 months before you qualify. In Finland, the membership requirement is 26 weeks.

If you qualify for a-kassa in Sweden before you leave the country, you may be able to transfer your a-kassa membership period over to your new a-kassa abroad and qualify there straight away, but this usually only applies if your period of a-kassa membership is unbroken.

Check what applies in your new country before you cancel your membership in Sweden – your a-kassa should be able to help you with this.

Contact your union, if relevant

Similarly, if you are a member of a Swedish union or fackförbund, let them know you’re moving abroad.

If you’re moving to another Nordic country, they might be able to point you in the direction of the relevant union in that country, if you want to remain a member of a union in your new country.

If you’re moving to another EU country, you may be able to remain a member of your Swedish union as a foreign worker with the status utlandsvistelse.

If you chose to do this, you will usually pay a lower monthly fee than you do in Sweden, and they can still provide assistance with work related issues – although it may make more sense to join a local union in your field with more knowledge of the labout market.

If you don’t want to be a member of a union in your new country and don’t want to be a member of a Swedish union, you should contact your  union and ask them to cancel your membership.

Collect relevant documents regarding your Swedish pension

If you have worked in Sweden and paid tax for any length of time, you will have paid in to a Swedish pension. You retain this pension wherever you move, but you must apply for it yourself.

To do so, you will need to give details of when you lived and worked in Sweden, as well as providing copies of work contracts, if you have them. If you have these documents before you leave Sweden, make copies so that you can provide them when asked.

If you move to the EU/EES or Switzerland, you may also have the right to other, non-work based pensions, such as guarantee pension for low- or no-income earners, or the income pension complement (inkomstpensionstillägg).

Currently, you can receive your Swedish pension once you turn 62 – although there is a proposal in parliament due to raise pension age to 63 for those born after 1961 from 2023, so this may change.

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