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Moving from London to Stockholm - Self employed

Tax guidance

Meetjoeblack16
post 15.Apr.2018, 09:30 AM
Post #1
Joined: 15.Apr.2018

Hi everyone,

Long time reader, first time poster here. I'm looking for some clarity on the tax system in Sweden (I know, I know, a very exciting post!)

I am a freelance filmmaker and in the near future, I will be moving permanently to Stockholm.

From my understanding, I will need to set up either an AB company or become a sole trader.

In my research, I've seen that AB companies are taxed at 22% but then they also have to pay social security tax ~30% for each employee (in this case, I am the only employee) and then I'd also have to personally pay municipal tax ~30%. (I've attached a very rough breakdown of how I understand it - apologies for the bad quality)

I've been unable to find exact sole trader tax liabilities.

Side note: I'm currently setup with a limited company in the UK. Part of me wonders if I could work for my UK company but live in Sweden and pay personal Swedish tax. Is that allowed?

Overall, I'd love to know what percentage of my income will be taxed as a freelancer.

Any general advice into setting up as a freelancer in Sweden would be brilliant as well.

Thanks a lot!


 
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Essingen55
post 15.Apr.2018, 04:44 PM
Post #2
Joined: 12.Dec.2013

QUOTE
In my research, I've seen that AB companies are taxed at 22% but then they also have to pay social security tax ~30% for each employee (in this case, I am the only employee) and then I'd also have to personally pay municipal tax ~30%. (I've attached a very rough breakdown of how I understand it - apologies for the bad quality)


Yes, except that I would put it the other way around...they pay the employees first with the social security tax rates you have indicated and then what is left is taxed at 22%.

You can't avoid the social security contributions by being self-employed instead, which is ....as far as I can read it...what your example seems to imply.
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Meetjoeblack16
post 15.Apr.2018, 07:15 PM
Post #3
Joined: 15.Apr.2018

QUOTE (Essingen55 @ 15.Apr.2018, 04:44 PM) *
Yes, except that I would put it the other way around...they pay the employees first with the social security tax rates you have indicated and then what is left is taxed at 22% ... (show full quote)


Aha ok. That's good to know.

And apologies, my example is a bit misleading. My understanding was that I'd always have to pay social security as a business owner...so it's good to have it confirmed.

Thanks for your reply! smile.gif
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Cheeseroller
post 15.Apr.2018, 10:31 PM
Post #4
Location: Germany
Joined: 10.Apr.2007

What you need to consider is your pension. State pensions usually require 35 tax paying years for full payout. When you pay tax in two countries during a lifetime, the payout can be MUCH less.
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bonviveur
post 16.Apr.2018, 06:48 AM
Post #5
Location: Värmland
Joined: 12.Oct.2015

QUOTE (Cheeseroller @ 15.Apr.2018, 11:31 PM) *
What you need to consider is your pension. State pensions usually require 35 tax paying years for full payout. When you pay tax in two countries during a lifetime, the payout can be MUCH less.

does it not add up, from every EU country you paid tax?
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Cheeseroller
post 16.Apr.2018, 10:01 AM
Post #6
Location: Germany
Joined: 10.Apr.2007


QUOTE (bonviveur @ 16.Apr.2018, 07:48 AM) *
does it not add up, from every EU country you paid tax?


No! Nor can you transfer a UK pension to Sweden for example.

If you look at a curve of years worked and pension payout, the slope is very gradual until you reach 30 years and then it increase exponentially. So if you worked 25 years in UK and then 20 years in Sweden, you will get perhaps 30% of what you would staying in UK.

There is a minimum guaranteed pension in Sweden for those who were unemployed for example, but this is not enough to live on.

So much for real Freedom of Movement - which in reality is purely designed to provide low cost labour to the countries in the West.
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Essingen55
post 17.Apr.2018, 07:40 AM
Post #7
Joined: 12.Dec.2013

Sorry Cheeseroller, but a lot of what you say is completely wrong. The correct situation is this:

1. The Swedish state pension is a defined contribution system based on life income. You build up a pot of money from which you can buy a pension. The maximum amount per year that can be put into it is about SEK 75,000. The average pension coming out of this system these days is about SEK 12,000. There is no skewing towards later years .

2. The OLD occupational pension scheme in Sweden (which many people still benefit from) supplemented the state pension scheme and was a defined benefit scheme. This scheme was indeed skewed towards accumulating during the later years of the 30 year period to which it applied.

3. The NEW occupational pension scheme in Sweden (which is now the market standard for new employees) is defined contribution whereby a pot of money is build up in the same way as the state scheme.

State pensions can be accumulated in different EU countries. The question of whether or not you are better off will be the result of a variety of factors, not least the generosity of the respective pension schemes themselves. You will not inherently pay more tax because you have pensions arising in two different countries. Tax rates in the country in which you are domiciled for tax are those which apply. However, if you have been taxed at a higher rate on your pension in another country, you are unlikely to be able to re-claim the difference.
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yet another brit
post 17.Apr.2018, 08:42 PM
Post #8
Joined: 5.Jan.2013

OP - if you set up an AB in Sweden, then note that:

- if you can build up a buffer of profit (taxed) then you can, the following year, extract some of that profit (roughly, 150 kSEK or 50% of your companies salary bill, whichever is the greater) as dividend, which is taxed at 20%. So 22% company tax, then 20% dividend tax. This is the most tax efficient way of paying yourself.

- The absolute worst way of paying yourself is to take personal income from taxed company profits (which I think is what you think might happen). In this case, you pay 22% company tax on your EBIT. Then - if you take salary from that cash in a subsequent financial year - 32% in employers tax, then whatever your personal/marginal tax rate is (say 30-40%).

The moral - pay yourself in income as much as you can (but see below) straight away, so that it is paid out before the end of the company tax year, and so doesn't appear in the company EBIT. Take anything left as dividend the following year.

Qualifier to the above - the best amount to pay yourself as salary (if you can) - excluding dividend - is the exact amount that is on the boundary of higher rate tax.
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yet another brit
post 17.Apr.2018, 09:06 PM
Post #9
Joined: 5.Jan.2013

Here is what on might do, in your position (invoicing 400k/yr), and if you can afford to live that way in year one ...(figures approximate)

Year 1 : allocate 200 to salary, leave 200 in company

Of the 200 in salary, 60 goes in employers tax. Personal income to you, 140, taxed at 30% = cash in hand = 100 (give or take).

Of the 200 left in the company, 40 goes in corporation tax. Remaining, 160.

Year 2 : allocate 200 to salary, leave 200 in company, plus pay dividend.

Of the 200 in salary, 60 goes in employers tax. Personal income to you, 140, taxed at 30%. cash in hand = 100 (give or take) (effective tax rate 50%)

Also pay yourself 150k in dividend (from taxed company money), 20% tax = cash in hand =120 (give or take).

Annual net income = 220, effective total tax rate (including all corporate, employers, social, and personal tax) = 40% or so.

If you had paid yourself a salary rather than a dividend out of taxed corporate profits in year 2 - don't do it - then the effective tax rate would be much higher (about 65%).


The further qualifier - set your hourly rate to reflect the above. This is completely OK to do, since the comparator is the c 50% effective tax between the total that the employer pays and the employee takes home, as in the example.
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Cheeseroller
post 17.Apr.2018, 10:05 PM
Post #10
Location: Germany
Joined: 10.Apr.2007

QUOTE (Essingen55 @ 17.Apr.2018, 08:40 AM) *
Sorry Cheeseroller, but a lot of what you say is completely wrong. The correct situation is this:


I stand corrected regarding the pension system in SE. However, that doesn't help much if the majority of your working life was spent in the UK.
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Meetjoeblack16
post 22.Apr.2018, 05:08 PM
Post #11
Joined: 15.Apr.2018

QUOTE (yet another brit @ 17.Apr.2018, 09:06 PM) *
Here is what on might do, in your position (invoicing 400k/yr), and if you can afford to live that way in year one ...(figures approximate)Year 1 : allocate 200 to salary, lea ... (show full quote)


This was really helpful! Thank you so much. smile.gif
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sandon
post 23.Apr.2018, 08:10 AM
Post #12
Joined: 6.Jan.2007

Be careful of the calculation on here as to start with dividends are capital gain and all capital gains in Sweden are taxed at 30%, not 20% as stated.

Income tax is not 30% i would say dependiong on salary and where in the country you will be residing closer to 25-27%

The most important when you have your own AB is the salary is loaded with 31.34% contribution taxes.

Drop me a line at swaaccounting@hotmail.com and i will give you the information needed to ensure that the numbers are correct.


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Essingen55
post 23.Apr.2018, 10:04 AM
Post #13
Joined: 12.Dec.2013

QUOTE
Be careful of the calculation on here as to start with dividends are capital gain and all capital gains in Sweden are taxed at 30%, not 20% as stated.


Wrong.

https://www.foretagande.se/sa-beraknas-skat...-3-12-reglerna/
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sandon
post 23.Apr.2018, 12:12 PM
Post #14
Joined: 6.Jan.2007

Thanks for the correction .

To be able to access the 3:12 rule which in the case stated above 200tkr doesn't reach the lower limit in salary then you can only lift 169 000 in a lower taxed dividend.
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