Chapter. Sweden
This chapter includes data on the income taxes paid by workers, their social security contributions, the family benefits they receive in the form of cash transfers as well as the social security contributions and payroll taxes paid by their employers. Results reported include the marginal and average tax burden for eight different family types.
Methodological information is available for personal income tax systems, compulsory social security contributions to schemes operated within the government sector, universal cash transfers as well as recent changes in the tax/benefit system. The methodology also includes the parameter values and tax equations underlying the data.
The national currency is the Swedish Kronor (SEK). In 2015, SEK 8.43 was equal to USD 1. In that year, the average worker earned SEK 421 364 (Secretariat estimate).
1. Personal income tax systems
1.1. Central government income taxes
1.1.1. Tax unit
Spouses are taxed separately.
1.1.2. Tax allowances and tax credits
1.1.2.1. Standard reliefs
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Basic reliefs: A basic allowance is given for assessed earned income and varies between SEK 13 100 and SEK 34 300, depending on income. When individuals pay central government income tax, the basic allowance is at its lowest level, which equals SEK 13 100. The basic allowance depends on the assessed earned income and the basic amount, which equals SEK 44 500 in 2015.
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Standard marital status reliefs: None.
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Relief(s) for children: None.
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Work-related expenses: None.
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Other: None.
1.1.2.2. Main non-standard tax reliefs applicable to an AW
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Interest on qualifying loans: Interest payments are offset against capital income. The resulting net capital income is the tax base. A tax credit is given in the case of negative capital income.
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Contributions to pensions, life insurance, superannuation schemes: A deduction of maximum SEK 1 800 can be claimed for premiums paid to private pension arrangements. Medical expenses: None.
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Other allowances are given for:
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the amount of commuting expenses exceeding SEK 10 000;
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other types of work-related expenses exceeding SEK 5 000; examples are the costs of tools, work-related phone calls using the taxpayer’s private telephone;
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increased living expenses while on business trips, e.g. such as the use of a private car if these costs are not reimbursed by the employer;
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double housing expenses due to temporary work at other geographical locations (too far from home for commuting), or if the family for some reason can’t move, even if the job is of a permanent nature;
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travelling expenses for travelling home if the taxpayer works in another place than his/her place of residence.
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1.1.3. Tax schedule
1.1.4. Tax credits
A tax credit equal to 100% of the compulsory social security contributions paid by the employee is granted.
For a person aged 65 or less, an annual Earned Income Tax Credit (EITC) worth up to SEK 26 486 at the average local tax rate is granted on labour income. For those older than 65, a higher credit worth up to SEK 30 000 is granted. For a person aged 65 or less the EITC is calculated as follows: EITC = (Special Amount – Basic Allowance) * local tax rate. For those older than 65 a simplified EITC was introduced in 2009 so that it is no longer connected to the local tax rate, the basic allowance or the basic amount. The Basic Allowance is determined in Section 1.121; the local tax rate is discussed in Section 1.2. The Basic Amount (BA) in 2015 is SEK 44 500. The Special Amount is based on the taxpayer’s (gross) earned income.
For taxpayers younger than 65, the Special Amount is calculated as follows:
For taxpayers older than 65, the EITC is calculated differently:
1.2. Local government income taxes
1.2.1. General description of the systems
Sweden has both a central government and a local government personal income tax. They are completely coordinated in the assessment process and refer to the same period, i.e. the income year coincides with the calendar year.
1.2.2. Tax base
The tax base is the same as for the central government income tax. The basic allowance for individuals paying local government tax varies between SEK 13 100 and SEK 34 300; it depends on the taxpayer’s income. For a taxpayer earning the AW, this basic allowance amounts to SEK 13 100 (based on an AW equal to SEK 407 974 – subject to revision with the AW).
1.2.3. Tax rates
The local government personal income tax is proportional and differs between municipalities. The average rate amounts to 31.99% in 2015, with the maximum and minimum rates being 34.70% and 29.19%, respectively.
2. Compulsory social security contributions to schemes operated within the government sector
2.1. Employees’ contributions
A general pension contribution of 7% of personal income is paid by employees and the self-employed when income is equal to or greater than 42.3% of the basic amount underlying the basic allowance (see Section 1.121). The contribution cannot exceed SEK 32 800 since the general pension contributions are not paid for income over SEK 468 900 (= 8.07*58 100). The employees’ contribution is offset with a tax credit.
2.2. Employers’ contributions
The employers’ contributions are calculated as a percentage of the total sum of salaries and benefits in a year. For the self-employed, the base is net business income. The rates for 2015 are listed below.
In certain regions, a reduction of 10% of the base, maximum SEK 7 100 per month, is granted (SEK 18 000 per year for self-employed) (it is not included in the calculations underlying this Report). For employees aged under 25 a reduced SSC rate of 25.46% is applied (23.69% for self-employed). For employees who are over 65 years old and born after 1937 only the retirement pension contribution (10.21%) is applicable. For persons born in 1937 or earlier no employers’ social security contributions are applied. On premiums for occupational pensions paid by the employer a reduced SSC rate (24.26%) is applied.
For self-employed a general reduction of 7.5% on the SSC is applicable if the income exceeds SEK 40 000 per year. The maximal reduction is SEK 15 000 per year.
3. Universal cash transfers
3.1. Transfers related to marital status
None.
3.2. Transfers for dependent children
The transfers are tax exempt and independent of the parents’ income. The transfers for each child are as follows:
4. Main changes in tax/benefit systems since 1998
A tax credit of SEK 1 320 was introduced for low- and average income earners in 1999. The credit is reduced by 1.2% of taxable income above SEK 135 000. This reduction was abolished in 2003 and was replaced by an increase in the basic allowance.
A tax credit of 25% of the social security contribution paid by employees and the self-employed was introduced in 2000. The tax credit has been gradually increased to 100% in 2006.
In 2004, a special tax credit equal to SEK 200 was provided for the statutory minimum local income tax. The special tax credit was abolished in 2005 as was the statutory minimum state income tax (a lump sum tax) of SEK 200. The central government income tax bracket is indexed with the consumer price index plus 2%. However, in 2004, 2005 and 2006 the central government income tax bracket was restricted to be indexed with the consumer price index plus 1%. In order to reduce the number of people paying the central income tax, there was an additional increase of the tax bracket in 2009.
The child allowance was raised by SEK 1 200 per year in 2000, 2001, 2006 and in 2010 the child allowance for multiple children was raised by SEK 50 for the second child, SEK 100 for the third, SEK 150 for fourth and SEK 200 for the fifth and subsequent children.
Maximum fee for childcare was introduced in 2002.
The basic allowance has been increased in 2001, 2002, 2003, 2005 and 2006.
Regarding the unemployment benefit the higher benefit level of SEK 730 for the first 100 days was removed in 2007 and the maximum unemployment benefit was set to SEK 680 during the entire benefit period of 300 days (or 450 days for persons with children under the age of 18). In August 2015, the maximum unemployment benefit was raised to SEK 910 per day in day 1-100 and to SEK 760 per day in day 101-300 (or day 101-450). The compensation in the sick leave was raised from 75 to 80% in 1998. In 2003 the compensation was lowered to 77.6% and, at the same time, the number of days for which the employer is responsible was increased from 14 to 21 days. In 2005 the compensation in the sick leave and the number of days for which the employer is responsible were set to their before-2003 level.
The lowest level of compensation in the parental leave was raised on 1 July 2006 from SEK 60 to SEK 180 per day. In 2006 also the maximum income compensated for in the parental leave was raised from 7.5*Basic Amount to 10* Basic Amount.
An earned income tax credit was introduced in 2007 with the purpose of making work economically more rewarding relative to unemployment or inactivity. The earned income tax credit was increased in 2008, 2009, 2010 and 2014.
In 2007, the social security contributions for 18-24-year-old employees and self-employed were reduced. In 2009 the reduction were increased and expanded to include all aged under 26. From 1 August 2015 the reduction was reduced by half with the intention to abolish the reduction in 2016. A special wage tax for persons older than 65 was abolished in 2007 for persons born after 1937 and in 2008 for persons born in 1937 or earlier.
An increased basic allowance for persons older than 65 was introduced in 2009 and extended in 2010, 2011, 2013 and 2014.
A general reduction on the SSC for self-employed was introduced in 2010 and increased in 2014.
The deduction for premiums paid to private pension arrangements was lowered in 2015 with the intention to abolish the deduction in 2016 (see section 1.12).
5. Memorandum items
5.1. Identification of an AW and calculation of earnings
Basic data for gross earnings are taken from the series Official Statistics of Sweden, published by Statistics Sweden. The calculation is based upon total average monthly or hourly earnings, primarily in September of the calendar year. To arrive at the annual earnings, data have been multiplied by the normal amount of hours worked during the year or the stipulated monthly salary has been multiplied by a factor of 12.2. The figures are representative for the country as a whole. The branch classification is NACE Rev. 2 B-N according to the OECD recommendation.
5.2. Employer contributions to private health, pension, etc. schemes
There are a handful of widespread private social security schemes. The employers’ contributions to these systems for the blue-collar workers in the private sector equalled to 6.3% of wage earnings in 2007. For white-collar workers in the private sector the employers’ contributions to private social security schemes was 14% in 2007. These figures are based on the statistics of labour costs in the private sector, published by Statistics Sweden.
2015 tax equations
The equations for the Swedish system are mostly repeated for each individual of a married couple. But the cash transfer is calculated only once. This is shown by the Range indicator in the table below.
The functions which are used in the equations (Taper, MIN, Tax etc) are described in the technical note about tax equations. Variable names are defined in the table of parameters above, within the equations table, or are the standard variables ”married” and ”children”. A reference to a variable with the affix ”_total” indicates the sum of the relevant variable values for the principal and spouse. And the affixes ”_princ” and ”_spouse” indicate the value for the principal and spouse, respectively. Equations for a single person are as shown for the principal, with ”_spouse” values taken as 0.