Settlement of foreign tax

If the income is not tax exempt in Sweden, you could instead eliminate double taxation, in its entirety or in part, by requesting a settlement and/or deduction of the tax you have paid abroad.

In cases where Sweden has a tax treaty with the country concerned, the treaty will outline the means by which double taxation can be eliminated. Under most tax treaties, double taxation is eliminated by granting a person settlement of foreign tax in the country where they are domiciled.

When eliminating double taxation through settlement, Sweden applies the provisions of the Swedish Foreign Tax Credit Act. Further information is provided here about how settlement is implemented in Sweden. The following description proceeds from the assumption that double taxation is to be eliminated through settlement in Sweden.

If you receive a refund of foreign tax

In the event that you have been granted a settlement of foreign tax and the foreign tax is consequently reduced, you are responsible for reporting this to the Swedish Tax Agency. You must report this within three months of the date that you receive the decision on the reduction. Your notification is to be made using the form, SKV 2705: "Anmälan, nedsättning av utländsk skatt" (Notification of reduction on foreign tax).

Settlement of foreign tax on earned income

If you live in Sweden and have been working in another country, you may be liable for income tax, both in Sweden and the country concerned. You would then be entitled to request that the tax you have paid in the other country be deducted from the tax that you are liable for in Sweden.

You may only request a settlement of foreign final tax. You can request settlement by checking the box under "Övriga upplysningar" (Other information) in your Swedish tax return, either through the e-Service Income Tax Return 1 or on the paper form of the year that you report the foreign income. When requesting settlement, it is important that you also submit the following information under the section, "Övrigt" (Miscellaneous):

• what the income pertains to (for example employment income from private or public service)
  
• the amount of foreign income and tax in SEK
  
• the country in which the income was generated
  
• the country or countries in which you have worked
  
• the exchange rate you used for restatement into SEK
  
• the expenses you have deducted pertaining to the foreign income.

You can also apply for settlement using the form, SKV 2703. You must be able to prove that you have paid the foreign final tax to which your request for settlement pertains.

Note that you can never be granted a settlement for a higher amount than the Swedish tax on the foreign income. If, for example, your tax abroad totals SEK 10 000 and the Swedish tax on your foreign income totals SEK 8 000, you are eligible for a settlement of SEK 8 000. Some types of foreign income included in your tax return may impact your settlement or increase the scope of settlement, even if the income was not taxed abroad. The relevant forms of income are: income from a permanent establishment or a property holding abroad, interest, dividends and royalties from abroad.

When calculating the Swedish tax on foreign income, we take into consideration certain tax reductions you have been granted, such as for capital deficits, national pension fees, tax deduction for building repairs and extensions, gifts and earned income tax credit.

You can also request deduction for foreign tax under "Inkomst av tjänst" (Earned income). The deduction is voluntary and made under the item, "Övriga utgifter" (other disclosures). If you request a settlement of final tax for which you have already requested deduction, we take into account the tax cut resulting from any such deduction.

• Common deductions in the tax return

Adjustments pursuant to income-year tax adjustments and the preliminary tax return

During the income year, you can request an adjustment of the tax deduction granted in Sweden by filling the form, SKV 4302. You may request adjustments if you have a Swedish employer or foreign employer with a permanent establishment in Sweden. The Swedish Tax Agency then calculates the amount of tax deduction that may be granted, taking into consideration that you are also paying foreign tax for which you are seeking a settlement. In your application for tax adjustment, you are to indicate the same information about the foreign income and tax that you subsequently submit through your income-tax return.

Foreign employers without a permanent establishment in Sweden who are paying for their own Swedish tax through preliminary tax charges may request an adjustment of their preliminary tax return (SKV 4314). In the preliminary tax return, you are to indicate the same information about the foreign income and tax that you subsequently submit through your income-tax return.

Settlement of foreign tax on investment income

You are entitled to request settlement for the final tax you have paid abroad, if, for example, you have:

• received dividends on foreign shares or investment funds
  
• received interest from a foreign account
  
• achieved capital gains from the sale of foreign shares, investment funds or properties that are subject to tax both in Sweden and abroad
  
• received income from the leasing of a privately owned residential property abroad that is subject to tax both in Sweden and abroad
  
• received income from foreign assets held in an investment savings account.

You can request a settlement of foreign taxes through your Swedish tax return for the year that you are reporting the foreign income.

You must state in the income-tax return:

• what the income pertains to (for example, the leasing of a residence, from interest or dividends received)
  
• whether it pertains to assets held in an investment savings account
  
• the amount of foreign investment income or capital gains abroad
  
• the amount of foreign tax translated to SEK
  
• the country in which the income was generated
  
• the exchange rate you used for the restatement into SEK

You can also apply for settlement using the form, SKV 2703. You must be able to prove that you have paid the foreign tax for which you are requesting settlement.

Using the service, Räkna om utländska inkomster (“Translate foreign income,” only available in Swedish), you can check whether you are eligible for settlement and translate foreign currencies into SEK.