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30% flat tax in Sweden, is that enough?

In this blog, we will touch upon Sweden and instances where temporary contractors are presented with NET pay calculations showing a flat % of tax (30% for example). These pay calculations look great, but you may not be told  that there is likely to be a lot more tax to pay depending on your income level at the end of the financial year. Meaning these individuals will receive a huge tax bill.

Sweden has an income tax and a state tax. Across the various municipals within Sweden, the income tax deductions range from 29% to 35% (you can already see where a flat 30% deduction by your employer or payroll company might be a problem). In addition to this, if you are anticipated to earn over 615,300 SEK (for those under 66 years of age) over the financial year, you will pay an additional 20% tax on any income that would exceed this income threshold. Therefore, if you’re a higher earner, 30% deductions through the year will leave a huge shortfall for the employee to pay which can come as a very nasty shock!

Let’s look at an example.

If an individual in a month earns a taxable salary of 70,000 SEK (840,000 SEK for a full 12-months), 30% flat tax would be 21,000 SEK paid per month or 252,000 SEK total tax paid over a 12-month period.

In reality, if the individual is in Malmo and earned a salary of 70,000 SEK per month (840,000 SEK for a full 12 months), the income total tax would actually be 266,881 SEK as well as an additional 44,940 SEK due to some of the income falling over the threshold giving a total tax due of 311,821 SEK for the year!

In summary…

Deducted through the year (based on 30% flat tax deductions) = 252,000 SEK

Total taxes actually due = 331,821 SEK

Difference to pay at the end of the year of 59,821 SEK !

For temporary workers that are new to Sweden and expect their employer to account for deductions in full – this is a lot of money to find after the financial year is closed

Don’t get caught out. Something may look attractive initially, but always look deeper to make sure that your deductions through the year aren’t going to leave you substantially short.

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