Capital gains tax must be applied when foreign currency and receivables in foreign currency are divested. The provisions encompass all types of receivables, such as bonds, debentures, deposit accounts in foreign banks (bankbooks), private debt instruments/promissory notes, as well as bank notes and coins in foreign currency.
Convertibles, participation certificates and equity proportions certificates are also encompassed by the provisions if they are issued in a foreign currency, in distinction to those that are issued in SEK, and which are taxed in the same manner as partial-ownership rights (share etc.).
This group of financial instruments also comprise forward contracts, options and similar agreements where the underlying property can be linked to foreign currency or receivables in foreign currency or a currency index.
Foreign-exchange gains and losses are liabilities in foreign currency are also taxable and deductible, under scheduled income tax contributions.
For practical reasons, a tax exemption was introduced. This is applicable to foreign-exchange gains and losses on travel currency. Currency that is intended for the taxpayer’s personal living expenses during a temporary stay abroad are thus neither taxable nor deductible. This is also applicable to traveller’s cheques and similar. A temporary stay normally refers to a maximum of six months. The purpose of the financial content is the determinant factor. Consequently, the exchange of any leftover currency upon the return trip is not taxable.
Anyone who procures a payment to or from Sweden exceeding SEK 150,000 on behalf of a natural person, estate or legal entity, must submit a statement of earnings and deductions regarding such payment. A statement of earnings and deductions is also to be submitted for instalments where the total amount exceeds SEK 150,000. For natural persons and estates, a liability to disclosure (notifiability) applies only if the individual is subject to unrestricted taxation. A statement of earnings and deductions is also to be submitted for payments within Sweden to/from a person who is subject to restricted taxation, to/from a person who is subject to unrestricted taxation.
A natural person who is subject to unrestricted taxation refers to:
All other natural persons are subject to restricted taxation, which entails that only certain forms of their income are taxable in Sweden.
A statement of earnings and deductions comprises information about the payment amount, what the payment pertains to, which country the payment was made to or comes from, as well as the recipient’s name in cases of payment to other countries.
Taxation occurs with divestment transactions, which in these cases, may pertain to currency exchange, foreign-currency withdrawals from bank accounts, payments in foreign currency, sales and redemption of debentures or other receivables in foreign currency.
The divestment of a liability in foreign currency occurs when the debts are paid, meaning, for every amortisation transaction. If a debt should, against payment, be assumed by another borrower, this is also considered a divestment. On the other hand, the renewal of a loan in foreign currency is not regarded as a divestment. A loan renewal refers to the extension of a loan, primarily with unamended terms and conditions.
The exchange of one currency for another, whether it be a receivable or liability, constitutes a divestment that prompts taxation, even if such an exchange does not involve any Swedish crowns (SEK). For example, on exchanging YEN to USD, a capital gains must be calculated on the divestment of YEN in terms of SEK. This amount and any supplementary transaction costs are calculated as the acquisition cost for the USD.
Divestments of property for a payment in foreign currency, for example, foreign shares, share-indexed options, share-indexed forward contracts and properties etc., are calculated pursuant to Swedish regulations. Normally, assets are divested and payments made in the foreign currency. This is followed by translation into SEK. In actuality, this would mean the calculation of two capital gains, one from the sale of property and one from the exchange of the foreign currency.
However, there may be an exception, if payment for property is translated to SEK within 30 days of the date of divestment. In this case, the exchange rate on the date of exchange is counted as a payment of capital gains on the sold property.
When foreign currency or a receivable in foreign currency is divested, payment constitutes the amount in SEK that is received, or the SEK value of the property that is received, for example, from the translation to another foreign currency. The acquisition cost is the redemption amount obtained for the property or the value of the property that may be submitted in the translation into SEK.
The calculation of capital gains on a receivable not only includes inherent exchange-rate fluctuations, but changes in value of the actual receivable. If, for example, some were to purchase an interest-bearing bond in USD and the US interest rate were to fall, the value of the bond would rise. Upon divestment, both the rise in value and the exchange-rate fluctuations are factored in when calculating capital gains.
If someone exchanges NOK 7,000 for USD 1,000 and then changes the USD 1,000 into EUR 700, the USD is considered to be divested (at a SEK value) for the EUR 700 that replaces it. The acquisition cost is the SEK value of the NOK that is paid to acquire the USD. In a similar manner, the value of USD 1,000 at the point of exchange into EUR 700 is the acquisition cost for acquired EUR.
When a liability in foreign currency is divested, usually through amortisation, the borrower must disclose as revenue, the value of the repaid amount when the loan was raised. The borrower obtains deductions of the value of the repaid amount upon amortisation.
Kalle borrows EUR 50,000 when the exchange rate is SEK 9.50. He repays EUR 20,000 when the exchange is SEK 9.00.
Revenue: 20,000 x 9.50 = SEK 190,000
Deduction: 20,000 x 9.00 = SEK 180,000
Kalle’s exchange-rate gain on the repaid amount is SEK 10,000 (190,000 – 180,000 = 10,000).
With respect to liability in foreign currency, only exchange-rate gains are taxable. If a gain should occur as a consequence of the creditor offering a certain capital discount for advance repayment, such gains are not taxable.
The acquisition cost must be calculated pursuant to the average cost method if a similar property type, such as a particular currency, is acquired at different occasions. If a loan were to be raised at different occasions, the average acquisition cost must be applied in the calculation of capital gains.
If translation has occurred, the actual exchange rate is applied in the calculation of capital gain. If translation has not occurred, the fixed rate adopted on every bank day by Nasdaq Stockholm AB should be applied. Data on daily fixed rates are available at the Nasdaq website and the Riksbanken (Swedish Central Bank) website. In the absence of fixed rates for a particular currency, the average exchange rate between the buying and selling rate on the transaction date pursuant to official exchange rates may be applied.
Currency and market-listed receivables in foreign currency are to be reported through appendix K4, under Section C. Unlisted receivables in foreign currency are to be reported using appendix K4, Section D. Divestment of liability in foreign currency: see guide form SKV 2191 (Liability in foreign currency, Gains and losses). The most convenient way to submit appendix K4 is by using e-identification in the e-Service, Income Tax Return 1, together with your income-tax return. You will be assisted with various calculations and transfers of amounts to the income-tax return. Your tax is also calculated on your behalf. If you prefer not to file your return electronically, you can obtain further information below, under Forms.
Divestment of foreign currency and market-listed receivables in foreign currency must be reported using form K4, under Section C.
Unlisted receivables in foreign currency must be reported using form K4, under Section D.
Divestment of liability in foreign currency: see guide form SKV 2191 (Liability in foreign currency, Gains and losses) – link below.