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TAXES

Tax Authority: ‘we do all the calculations for you’

Even though less than a week remains until Sweden’s the May 5th deadline for filing taxes, the majority of tax payers need not panic.

Tax Authority: ‘we do all the calculations for you’

Sweden’s Tax Authority (Skatteverket) has done all that it can to ensure that in most cases filing takes only a few minutes.

“We do all the calculations for you,” said Skatteverket’s Kaj Kojer to The Local.

Having already sent out paper forms to approximately 7.4 million tax filers, the agency expects about 60 percent to submit their final tax declarations electronically—via telephone, internet, or text message.

This year, additional forms have been added to Skatteverkets online tax filing system, one dealing with the sale of single family homes (Form K5) and the sale of apartments (Form K6). In addition, all individual business owners can file their forms online using the new business form (Form NE).

Moreover, tax filers will find that the electronic versions of their tax forms actually have more information than the paper versions when it comes to stock and real estate sales, and business activity.

As Skatteverket receives the bulk of its information from banks and employers, the information is generally “high quality and very accurate,” according to Kojer.

On the rare occasion that a mistake does crop up, it is often because an employer either failed to submit or sent in faulty information about the wages earned by an employee.

“In that case, that person can simply change the figure online and then tell their employer to submit the correct information,” said Kojer.

In most cases, however, filing taxes electronically in Sweden is a rather quick affair.

“If everything is in order, it can take about 20 seconds,” explained Kojer.

Of course, questions undoubtedly come up along the way and when they do, Kojer urged people to simply pick up the phone.

And don’t worry if you can’t speak Swedish—Skatteverket has operators trained to answer questions in several languages.

“It’s better to call and avoid making some mistake which could end up being quite costly.”

According to Kojer, non-Swedes make many of the same mistakes that Swedish citizens do when filing their taxes such as calculating deductions correctly or accounting for capital gains.

Sometimes people also have difficulty knowing what qualifies as a business expense.

In one instance, a foreign businessman ran into trouble due to what Kojer explained as “some wrong assumptions based on common practices in his home country.”

“He wanted to list payments made to public officials as a business expense,” said Kojer.

Kojer also pointed out a couple of significant changes which taxpayers should bear in mind when filing their forms this year.

First of all, the long-running tax on wealth has been abolished, meaning people are no longer levied a 1.5 percent charge on wealth exceeding 1.5 million kronor ($250,000) for individuals.

“This is a big change,” said Kojer.

In addition, the minimum level required to qualify for certain itemized deductions have also changed.

Individuals now must incur at least 8000 kronor in travel related expenses, up from 7000 kronor, to qualify for a deduction. And the level required for a general business expense deduction has been raised from 1000 kronor to 5000 kronor.

The general income tax deduction, which is calculated as a percentage of salary, has also been raised somewhat, resulting in a mean reduction of about 7000 kronor per person.

There is also a new capital gains tax rate of 22 percent for profits stemming from the sale of real estate, up from 20 percent last year.

But Kojer emphasized that a different rate of 30 percent applies for gains from the sale of stocks and other financial instruments.

Of course, keeping track of all this information is really more of an academic exercise for the majority of tax payers, as it is ultimately Skatteverket which ends up doing the calculations.

Rather than leaving all the information collection up to the individual, Skatteverket instead bears the burden of gathering and calculating information accurately, which they then send along a pre-filled form to taxpayers for review.

In general, explained Kojer, Skatteverket strives to be seen more as a “service agency” than a “controlling agency”, and is viewed as such by the Swedish public.

“The approach in Sweden and the Nordic countries is somewhat different than much of the rest of the world,” he said.

Kojer admits that having a state agency keep such a close eye on one’s financial dealings may seem a bit intrusive or strange for people from other countries, but believes that Swedes have just become accustomed to it—perhaps in part because they appreciate the fact that Skatteverket has done much the legwork for them when it comes to filing taxes.

“It seems Swedes find it easier to accept that the authorities are working for you and not the other way around,” he said.

“They find the tax authorities more reliable and trustworthy.

And with more and more people electing to file electronically, Kojer sees benefits for both the agency and taxpayers.

“It’s better for everyone. People can get their tax refunds by Midsummer (June 20) and there is a higher degree of accuracy,” he said.

And are Kojer and his Skatteverket colleagues disappointed that Denmark has overtaken Sweden as the country with the highest tax burden?

“Oh, yes, we are very sad about not being number one,” he joked, tongue in cheek.

“With taxes so high in all the Nordic countries, a change of a percentage point or two doesn’t make much difference.”

For members

PENSIONS

Reader question: Do I have to pay Swiss taxes on my foreign pension?

Questions about taxes and retirement in Switzerland are among the most common ones for foreign nationals living here. Here is what you should know.

Reader question: Do I have to pay Swiss taxes on my foreign pension?

Once you begin to work in Switzerland, your employer will withhold a certain portion of your salary towards the obligatory pension scheme — that is, the AHV / AVS (the first pillar) and occupational one, BVG /LPP, also known as the second pillar.

You will pay half and your employer the other half, with amounts of contributions depending on your income. (Some companies, however, are more generous, and contribute more than the obligatory half to their employees’ pension funds).

READ ALSO: Everything you need to know about retiring in Switzerland 

Once you retire and start drawing first and second pillar pensions, you will have to pay taxes on it, as it is considered income.

(The only exceptions are certain types on the third-pillar private pensions). 

What about retirement funds you receive abroad?

If you have worked in your home country before moving to Switzerland and paid into a pension fund there, then yes, these pensions will be taxed as income in Switzerland — but only if this money is deposited into a Swiss bank account.

If, on the other hand, you keep these funds in a bank in another country and don’t transfer them to a Swiss bank, then they will be taxed there, but not in Switzerland.

But if you do receive your foreign pension in Switzerland, be ready to pay Swiss taxes on this money.

However, according to Moneyland consumer platform, “foreign old-age pensions are taxed differently, depending on whether they are comparable to Swiss pension funds or not. This will be decided by the tax office.”

This means that “withdrawals from pension funds which are considered similar to Swiss pension funds are taxed at the same reduced rate which applies to Swiss pensions when performed after you reach retirement age.”

‘Withdrawals’ is the key word here, because pension savings are not taxable while they are parked in a bank; you will pay tax on them once you withdraw these funds.

What happens if a foreign pension fund is not considered comparable to Swiss pension funds?

In such a case, assets held in the fund must be taxed as wealth and you do not benefit from lower income tax rates when you withdraw your assets.

READ ALSO: Does everyone have to pay Switzerland’s wealth tax? 

Keep in mind, however, that Switzerland has tax treaties with a number of countries.

Their goal is to prevent having to pay taxes — whether on retirement income or in general — both in Switzerland and your home country.

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