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UK Employer, Swedish Tax

Hopelessly confused

ChrisSlater
post 3.Oct.2013, 03:10 PM
Post #1
Joined: 3.Oct.2013

Hi there

I'm really hoping someone might be able to clarify a couple of things.

I'm planning on moving to Sweden in Jan 2014 and to be there for at least 2.5 years. I will however be staying with my current employer just working remotely. They have no connections at all in Sweden.

I believe tax-wise I would be liable to pay Municipal tax due to my salary level but the confusion comes in with regards to the social security tax payments.

I have used the following link that I found on another forum post but find the results confusing.

http://www.ekonomifakta.se/sv/Fakta/Skatte...+vhzuvuYM/06wLk

The result lists "The employer pays for you" at the top, an item below as "Employer" which I'm assuming is the social security tax and then below that my Gross Salary.

Am i to assume that Gross Salary in Sweden means something different than in the UK and in fact Sweden would consider the figure under "The Employer pays for you" as my gross salary out of which I then have to pay the "Employer" and "Municipal" parts ?

The main reason I ask is that if this is the case, I would effectively be suddenly going up to around 58% tax on my whole salary which pretty much means I can't afford to go.

Any help clearing up this confusion would be most gratefully received.

thanks!
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PageyGB
post 3.Oct.2013, 04:01 PM
Post #2
Location: Europe
Joined: 25.Oct.2007

Do you NEED to register in Sweden? I mean I know it is not totally legal but honestly, so many people I know do it if employed abroad. Just be officially living in the UK still and stay in Sweden. Get some year round health insurance and you are set. You can stay as long as you want as you are an EU citizen. You are only required to register if you plan to reside there. So don't!

once you are on the book you will be paying tax like crazy and you will never escape the Swedish system. If you have no plans to settle in Sweden I just wouldn't bother.
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Ivor stephé
post 3.Oct.2013, 04:40 PM
Post #3
Joined: 20.Aug.2013

I personally wouldn't risk it as I am sure it would be classed as tax fraud if caught.
Also how would the OP rent an apartment without more issues, gas or electricity and so on.
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PageyGB
post 3.Oct.2013, 05:04 PM
Post #4
Location: Europe
Joined: 25.Oct.2007

It all depends on how many days you plan to stay in Sweden in the year. I think it is 180 days you can live in Sweden without being obliged to pay tax there. Check that out.
It is actually easier I think to get a 2nd hand contract than a real one. I have many ex-colleagues in Stockholm who have all managed to find apartments and live there for more than 5 years without registering... totally wrong and in no way I condone it. I was a full tax payer myself. But, if I was to go back and not plan on staying I would open a UK company and have my place of residence as there. No way would I pay the full hit of tax without planning to take advantage of it (staying long term).
I am still bothered by Skatteverket 2 years after leaving. I actually got some tax back this year! (after 4 years of paying over 50%) so that was nice...
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Temp
post 3.Oct.2013, 05:34 PM
Post #5
Location: Stockholm
Joined: 14.Jun.2006

On the ekonomifakta site, you can read the figures as follows:

* The "arbetsgivare betala för dig" is total cost to your employer of you, salary wise; i.e. gross salary plus employer fees (broadly the Swedish "equivalent" of employer National Insurance contributions in UK)

* "Din bruttolån" figure is your headline monthly gross salary before your taxes, i.e. what you would normally call salary in UK, though we use monthly value rather than yearly.

* "På ditt lånbesked" value is what you get in pocket after taxes each month (communal tax plus, if you earn enough, state tax - communal tax varies depending on where you live, even in Sthlm it ranges between 29,45% at 32,23%)

If I remember right, Swedish employer fees are higher than UK employer NI contributions, so by being registered in Sweden you will likely cost your employer more (or take a pay cut...).

I guess you will be paid in sterling, so would nominally avoid any currency exchange risks, though of course there's bank fees etc for either using your card here or transferring money which will reduce a little your overall salary value.

So, for example if you get £25K in UK now, that's roughly 21,875SEK/month, using 10.5SEK to the £. You would get 17,348SEK/month in your pocket and it would cost your employer 28,748SEK/month (or about £33K/year).

You can use this calculator http://nicecalculator.hmrc.gov.uk/Class1NICs1.aspx to find out how much your employer pays on top of the £25K at the moment to get a comparison between what you cost to an employer in UK and Sweden.

As always: you should get some expert tax advice to protect you and employer and not just rely on forum info :-)

Hope some of that helps!

//A
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Bender B Rodriquez
post 3.Oct.2013, 09:23 PM
Post #6
Joined: 25.Mar.2006

If you live in Sweden you are obliged to pay Swedish tax and your employer is obliged to pay Swedish social security contributions for you, no matter where the employer is located. However, if I remember correctly, foreign employers without permanent establishment in Sweden pay reduced social security. Also, your employer should not pay UK payroll tax.

Of course, if you do not register as a resident in Sweden the tax office will not know about your existence, but then you will not get a social security number (personnummer) which can make everyday life quite difficult, as some posters can attest to. Technically, if you spend more than 50% of your time in Sweden you are still liable to pay Swedish tax and SS, even if you don't register as a resident.

If you don't need the money while in Sweden, an option would be to create a UK Ltd. and bill your employer. To reduce Swedish tax you simply only pay yourself a modest salary while living in Sweden. The remaining money you can later withdraw when you are back in the UK and subject to UK taxation.

Also, there is tons of deductions you can make in both scenarios, so you should really talk to an expert. I have used these guys before, and I think they are excellent: http://www.skattepunkten.se/?q=en/node/3
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AgeOfReason
post 4.Oct.2013, 08:54 AM
Post #7
Location: Stockholm
Joined: 1.Sep.2013

Since you do not say if you are moving to Sweden for personal reasons or not. It sounded like you were moving to Sweden but not to work with a swedish customer? (you said working remote for UK employer and not working on-site in sweden at a customer for a UK employer?)

You will be liable for Swedish income tax, AND social taxes, your employer should not deduct the taxes and you are personally liable to pay them, remember swedish equivalent of employers NI is 31.4% of your total salary!!! The most important part to remember is that you are personally liable for the tax, not only your income tax but also the employers social taxes. Even if your employer makes a deduction and doesn't pay the swedish tax authorities.

If you go down the Ltd company route, that could be risky. You would have to technically quit your job or it will be viewed as a construct to avoid tax. Also, Swedish taxes Ltd companies in a special manner when the ownership is spread between a few people, where dividends to a certain level are counted as normal income so normal company and personal tax rules apply (the taxable amount is due to increase next year, if I remember correctly). Having the company incorporated in the UK would make little difference to this, if investigated by the tax authorities, since you would be in sweden, manage the company, own the company, then they would treat you as a swedish company so even potentially corporation tax would be paid in sweden (not always a bad thing!). Taking the money out later is a potential possibility, but remember that sweden tax authorities can go backwards 10 years to recover tax due if they need to, and even if you liquidate the company swedish tax authorities have the right to recover tax debts as personal debt for the board members (ie. board members are personally liable for company tax debts).

And dont forget that the UK also has special rules for small ownership Ltd companies, due to so many executives and contractors trying to minimise tax liabilities. Where if they suspect that it is a tax move to push income via dividends, then the inland revenue have the right to estimate what the earnings would have been if you were employed by your customer. It depends if you can prove you have multiple customers or the contract is written specifically on a project basis short term, but rolling possibility for renewals (as projects can over-run).

If your move is purely personal and your companies clients are in the UK, it is a bad move, just having you here in sweden can constitute a permanent establishment for your employer even if you work from home, just because they have nothing else here. Working on a customer site for 2 to 5 years can be classed as a permanent establishment for that period etc...

If the company is sending you, get them to advise of all the tax implications and you should ask for a net-pay agreement so they take the tax hit/responsibility, they will have had to check! An alternative approach would be to do a rolling 6 months over 12, and work from both UK and Sweden, this way you should be able to minimise swedish tax liabilities, and there is also chance that you could recover some of the income tax paid in the UK since you wouldnt have been there for a long period. (cant remember the exact rules of top of head)
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ChrisSlater
post 11.Oct.2013, 03:25 PM
Post #8
Joined: 3.Oct.2013

Thank you all so much for the responses. I apologise for having not responded sooner to say this but having received no email notification (i guess it is switched off), i figured i hadn't had any replies. I've also been over in Lund for the last week so haven't been checking anyway smile.gif

There is clearly a lot to think about and digest from everything that has been said here. I do want to do this legally and above board but I have a suspicion that if i am liable for income tax AND social tax payments (since there's no way my employer will pay this), then the whole plan to go will be over before it starts.

@AgeofReason - The move is purely personal as my girlfriend who lived in the UK for 2 years has moved back to do a degree. My employer has very graciously allowed me to move there so i would be working from home but all our customers are indeed UK based. I'm not entirely sure why you specifically classed this as a "bad move" but that is it i'm afraid.

One thing i think did read somewhere regarding the social tax (which seems to be the key issue here) is that payment of this only comes into play if you are (at the outset) planning on being in Sweden more than 24 months. I had been planning on being there longer but i'm not wondering if i state 24 months maximum, could i then be able to pay Swedish Income Tax and UK NI instead.

More deliving needs to be done but thank you all again for your replies.
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AgeOfReason
post 13.Oct.2013, 10:25 AM
Post #9
Location: Stockholm
Joined: 1.Sep.2013

QUOTE (ChrisSlater @ 11.Oct.2013, 04:25 PM) *
I'm not entirely sure why you specifically classed this as a "bad move" ...

Because when moving for personal reasons your employer and yourself have no possibility to have you classed as a posted worker, which is when the special rules (12 to 24 months) with regards social-taxes and income taxes apply.

You will become resident in Sweden and therefore liable to income tax on global earnings at swedish rates. As for your employer, since you are resident in Sweden, working from sweden then according to the general directive with regards movement of workers and social taxes, the country that you will be liable to pay employers social taxes in is Sweden. However, since the employer is not established in sweden and you came for personal reasons the social taxes that are due to be paid are at the reduced rate of somewhere between 25-28% of your total pay. There are 2 options available, if I remember correctly, your employer can register with the swedish tax authorities and send declaration of income etc.. and pay the social taxes + income taxes for you, or you have an agreement that you will pay both in sweden yourself and you need to inform the tax authorities. If you intend to pay, then you should negotiate with your employer a 25-28% equivalent increase in pay so as to cover the additional taxes due. As said, it can be a bad move since your employer will have to double their social-tax costs, are they willing to do that? For how long until they decide it is cheaper to let you go and employ someone in the UK?, or are you expected to cover the addition out of existing pay, do you want an effective pay cut? And let's not forget, with the freedom of movement, employment contracts are governed by employment law, in your case your employer should realise that swedish employment law is more generous than the UK, even though your contract is in the UK, when working in Sweden it is Swedish Employment Law that is precedent, and regardless of the fact that the contract is UK, the general principle within the EU is that where there is a conflict between the employment contract member state law and employment law where the work is carried out then it is the legislation that is most favourable to the employee that is to be applied, which can place your employer in a more tricky position (which maybe they do not realise!!!). eg. You become resident in Sweden, UK contract says 20 days vacation, Swedish law says 25 minimum, you are entitled to 25. Also rules with regards redundancies, etc.etc. can be tricky for an employer that does not know what they are doing.
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ChrisSlater
post 15.Oct.2013, 09:52 PM
Post #10
Joined: 3.Oct.2013

I really appreciate you clarifying these points for me, thank you so much.

No they would not be prepared to cover the additional costs (I'm fairly sure they don't know about them currently) and I wouldn't be able to cover it myself.

So from what I am gathering from what you have said (and from what I think I've figured out from things I've read), the best course of action would be for my employer to say they are "posting me in Sweden" and at the outset state that it will be for a 2 year term. As far as I can tell, under these circumstances, I would therefore be entitled (with agreement between countries) to continue paying UK NI instead of Swedish Social Tax, and of course Swedish income tax. I have no idea whether they have to state why they would be posting me there but the truth I suppose would be that the alternative would be to find a new employee. Since I'd rather live in Sweden with my fiancee, I would be actively looking for employment there instead.
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