Foreign currency

This group of financial instruments also comprises forward contracts, options and similar agreements where the underlying property can be linked to foreign currency or claims in foreign currency or a currency index.

Foreign-exchange gains and losses on liabilities in foreign currency are also taxable or deductible as income from capital.

A tax exemption for foreign-exchange gains and losses on travel currency has been introduced for practical reasons. Currency used for personal living expenses during a temporary stay abroad is not subject to taxation and is not deductible. This also applies to traveller’s cheques and similar. A temporary stay is normally six months or less. The purpose of the expense determines whether or not it is exempt from taxation. Foreign exchange gains made on leftover currency after returning home are therefore not subject to taxation.

Statement of earnings and deductions

Anyone who conveys a payment of more than SEK 150,000 to or from Sweden on behalf of a natural person, the estate of a deceased person, or a legal entity, must submit a statement of earnings and deductions regarding the payment. A statement of earnings and deductions must also be submitted for instalment payments when the total amounts to more than SEK 150,000. In the case of natural persons and estates of deceased persons, the obligation to disclose information applies only if the party in question has unlimited tax liability. In addition, a statement of earnings and deductions must be submitted for payments made within Sweden if one of the parties has unlimited tax liability and the other has limited tax liability.

A natural person with unlimited tax liability refers to all of the following:

• anyone resident in Sweden
• anyone staying in Sweden on a continuous basis
• anyone with significant connections to Sweden who has lived here previously

All other natural persons have limited tax liability, which means that only certain parts of their income are subject to taxation in Sweden.
 
A statement of earnings and deductions includes details of the size of any payment made, the purpose of the payment, the country to or from which the payment was made, and (in the case of payment to a country other than Sweden) the recipient’s name.

Disclosures in your tax return

Tax point

Divestment transactions are subject to taxation. Examples of these transactions include currency exchange, withdrawal of foreign currency from a bank account, payments in foreign currency, and amortisation, the sale and redemption of debentures or other claims in foreign currency.

The divestment of a liability in a foreign currency occurs when the liability is settled – i.e., each time an amortisation payment is made. If a liability is assumed by another borrower in return for payment, this is also considered a divestment. However, the renewal of a loan in foreign currency is not regarded as a divestment. The renewal of a loan refers to the extension of a loan, with largely unamended terms and conditions.

Whether it involves a loss or gain, the exchange of one currency for another constitutes a tax-liable divestment – even if the exchange does not involve Swedish kronor (SEK). For example, when exchanging euros (EUR) for US dollars (USD), the capital gain on the divestment of EUR must be calculated in SEK. The SEK value of the amount received in USD constitutes the sale price of the divested EUR. This SEK value also constitutes the purchase price of the USD. Additional transaction costs are applied in both cases.

Asset divestments are taxed in accordande with Swedish regulations even if payment is made in forreign currency. Normally, assets are divested and payments made in the foreign currency, and the amounts are then converted to SEK. Three capital gains calculations should subsequently be made: one for the sale of the asset; one for the purchase price; and one for the conversion of foreign currency to SEK.

However, an exception applies if the purchase price of the asset is converted to SEK within 30 days of the divestment date. In this case, gains or losses resulting from the exchange rate on the conversion date should be included in the amount of compensation when calculating the capital gain for the divested asset. Capital gains or losses relating to both currency exchange and purchase price are thus included in the gain or loss made on the asset, and taxation is in accordance with the regulations that apply to the asset.

• Swedish Tax Agency´s position statement: Sales of assets with payment in forreign currency, and application of the 30-day rule (legal guidance in Swedish) External link.

How are taxable earnings and deductible losses calculated?

Compensation for divestment of foreign currency – or a claim in a foreign currency – is either the amount received in SEK, or the SEK value of an asset received in exchange (another foreign currency, for example). The acquisition cost is the price paid for the asset.

In the case of the sale of part of a claim that relates to lending on several occasions, the acquisition cost must be calculated according to the average cost method. "Sale" in this context means that another person becomes the holder of part of the claim.

In the case of repayment (amortisation) of a claim, the average cost method should not be used. Capital gains tax and tax deductions for losses are not applicable until the total acquisition cost of the claim has been offset.

A bank account in a foreign currency is considered a claim on the bank. If you withdraw money from the bank account in order to pay with cash, you are considered to have exchanged a claim on the bank for the foreign currency. Every withdrawal from forrein currency accounts is a divestment of the withdrawn amount and every deposit an acquisition of the deposited amount. This also applies when intereset is deposited into the account.

• Swedish Tax Agency´s position statement: Capital gains tax - amortisation of claims in forreign currency (legal guidance in Swedish) External link.

If you have taken multiple loans from the same lender – in the same currency, and with the same terms and conditions – you must apply the average cost method when calculating the capital gain.

The Swedish Tax Agency´s position statement: Repayment of foreign currency loans - capital gains tax (legal guidance in Swedish) External link.

If a currency exchange has taken place, the actual exchange rate is used when calculating the capital gain. If a currency exchange has not taken place, the mid-market rates published by the Riksbank for each banking day should be applied. If mid-market rates for a particular currency are unavailable, the average exchange rate – between the buying and selling rate on the transaction date according to official exchange rates – may be applied.

• Search interest rates an exchange rates (Sveriges Riksbank) External link.

In addition to exchange rate changes, the capital gain calculation for a claim includes any change in value of the claim itself. For example, the value of an interest-bearing bond in USD increases if the US interest rate falls. When the bond is divested, the capital gain calculation will factor in both this increase in value and the exchange rate differences.

E-services

You must declare currency and market-listed claims in foreign currency in annexe K4, in section C.

You must declare unlisted claims in foreign currency in section D of annexe K4. However the part of a capital loss that occurred due to a change in the exchange rate during the holding period must be declared in section C of annexe K4.

Further information in Swedish about the divestment of liabilities in foreign currency is available in our guidance form SKV 2191: Skuld i utländsk valuta – Vinst och förlust.

The most convenient way to submit annexe K4 is by logging into the e-service, “Income Tax Return 1” (“Inkomstdeklaration 1”) using e-ID, and filing it with your income tax return. The e-service will help you to make various calculations, and to transfer various amounts to your income tax return. It will also calculate your tax for you.

If you choose not to file your tax return digitally, you will find further information under “Forms” below.

Forms

You must declare divestment of foreign currency and market-listed claims in foreign currency in section C of annexe K4.

You must declare unlisted claims in foreign currency in section D of annexe K4. However, the part of a capital loss that occurred due to a change in the exchange rate during the holding period must be declared on K4 under section C.

Divestment of liabilities in foreign currency: see guidance form SKV 2191: “Liabilities in foreign currency – Gain and loss” (“Skuld i utländsk valuta – Vinst och förlust”) – please see link below.