How to declare your income: freelance taxes in Sweden

Olympias Moran
Posted by Olympias Moran on Jun 6, 2019 2:44:27 PM
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Learn how to set up your own business and filing your taxes as a freelancer or as a company in one of the best countries to live in.

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What is it like being a self-employed freelancer?

Freelancing or registering as self-employed at your own company is not for the faint-hearted. It is for those who love a great challenge - ready to build a business from the ground-up. Freelancers are free to make their own decisions, get their own clients and choose their own hours. Being a freelancer means that you control everything - including your pricing, your expense reports and your tax payments to the government.

Even with a good model, the whole process of maintaining a successful business by yourself can be quite overwhelming. You need to focus on a variety of areas including product/service quality, target potential leads, close the deal, deliver the goods/service, get paid and report your financials including income and business expenses. That’s a lot of work for a one-person activity.

Things get even more complicated further down the road. Once you start doing business remotely and internationally, the number of different clients you can take on, at one time, adds up and the clients’ country of residency can be anywhere in the world. This significantly increases the risks of mismanagement as well as not getting paid in time - if even at all. Freelancers and self-employed individuals need to ensure that they are invoicing correctly, that they will be paid within a specified date and their certainty of payment.

The need for assistance in managing day-to-day administrative activities has grown and umbrella companies are providing a solution. Joining an umbrella company - a payroll service - is a popular trend for freelancers. Umbrella companies employ contractors using Contracts of Employment making them responsible for issuing invoices between two parties. While the self-employed person can focus on their core business, the payroll service can help freelancers manage their financial administrative tasks leaving them worry-free in terms of invoicing, reporting and tax compliance.

Self-employed registration in Sweden

As a sole trader, your company will be connected to your personal identity number (personnummer) which is allocated to you by the Skatteverket. The most essential part in starting as a sole trader is registering for F-skatt (F-taxes) which represents the fact that you work as an entrepreneur and not as an employee - tax and social contribution payments must be administered by the freelancer and the responsibility is his/hers. The F in F-skatt stands for “företagare” – entrepreneur. It is good to note here that the Skatterverket is also where you can go to receive your tax code in case you are asked by an employer.

As a foreigner, starting a business in Sweden has many different rules and regulations which change depending on your country of citizenship. European Union (EU) or European Economic Area (EEA) can apply for a “personnummer” without registering for a residents permit from the Swedish Migration Agency (Migrationsverket). If you are from Denmark, Finland, Norway, or Iceland, you do not need to register with the Swedish Migration Agency and you are also exempt from applying for a residence permit. Non-EU or EEA will have to request a residence permit from the Swedish Migration Agency.

Freelancers can also opt to open their own limited company - a Bolagsverket - if they have enough capital. For a private limited company, a contribution of at least SEK 50,000 must be made and for a public limited company - SEK 500,000. [1] Starting a limited company reduces liability risks. Unlike a sole trader, the company is legally distinct from the owner which means that as a freelancer - your personal finances are separated and not at risk. It is also important to note that simplified expenses (the average costs of running your business) can be done as a sole trader, but not as a limited company. Limited companies must state exactly what they spend.

What rate of tax do freelancers in Sweden have to pay?

In Sweden, the growth rate of self-employed individuals is smaller than most in the E.U at 9.9%.[2] The reason for the lower freelance rate may be due to the complexities of running your own business as well as the tax situation in the country. Sweden is not a cheap place to live in. Although you will be taken care of in the social welfare system, it can be hard to grow a business when expenses are too high to keep up with. That being said, successful freelancers that pay the high-income tax rates can charge enough to clients so that they can live happily off their net income - also known as home pay.

Self-employed individuals pay the same income tax as those employed by a company. The tax system is the same in most EU countries with a progressive system of taxable income levels. These numbers are from 2018 and are subject to change for 2019.

The general rates for 2018 are as follows (based on yearly incomes)[3]:

  • 0% from 0 kronor to 18,800 kronor
  • Circa 32% (ca. 11% county and 20% municipality tax which is the Swedish average): from 18,800 kronor to 468,700 kronor
  • 32% + 20%: from 468,700 kronor to 675,700 kronor
  • 32% + 25%: above 675,700 kronor

In addition to income tax, and VAT - (let’s not forget that one - standard rate is 25%) normal employees pay 32.5% in social security contributions. The 2017 rates in Sweden are as follows:

  • Pension insurance - 10.21%
  • Health insurance - 4.35%
  • Unemployment insurance - 2.64%
  • Surviving dependants' pension insurance - 0.7%
  • Parenthood insurance - 2.6%
  • Workplace accident insurance - 0.2%
  • General salary tax - 10.72%

Freelancers must also pay for social contributions at a slight reduction: 28.97%.

If freelancers are highly skilled in a trade, education or research field, they can apply for expert tax concession which allows you to get tax credits. This reduces the total amount of tax to pay. In general, 75% of the income is taxed rather than 100%. [4]

What taxes are paid if a non-Swedish company employs you?

No matter who you work with and where they are based, at the end of the tax year, Swedish registered self-employed individuals must pay taxes that are based on the rates of their country of residence. The individual must ensure that their invoice includes their name, their address and their personnummer or company number (depending on how they have registered with the Skatteverket). Other issues such as double taxing should be kept in mind, however, most countries have clear policies and procedures to help avoid such events.

Declaring Taxes

Having a huge and unexpected tax bill after filing your tax returns can cause a lot of stress.If ever in doubt, it is always a good idea to check for a tax calculator available online. In Sweden, you can use the website called Neuvoo, but consider getting help with managing your accounts - especially if you are self-employed and dealing with multiple clients from multiple countries. Swedish council taxes can be tricky. In some countries, like the UK, most domestic properties are subject to council tax which covers local costs such as garbage collection, roads, libraries, fire and police forces. However, in Sweden, the municipality takes care of deducting the costs from your income. Income tax for residents includes both national and municipal tax. Municipal tax is deducted at a flat rate which varies from one municipality to another, but it is usually between 29-34%.[5]

Self-employed individuals must take care of their taxes themselves and must register for self-assessment. In Sweden, the skatterverket website has a page where freelancers can declare their taxes online. Remember to seek out advice and gather all the information you can in terms of going self-employed and what you are entitled to. Some freelancers still think that they can only claim costs directly involved with the business and forget that when you work from home, electricity, phone, office space & internet bills can also be deducted as expenses. A payment on account is also an option for freelancers who prefer to pay their tax bill twice over the course of a year. But be careful. For some freelancers, this option adds more stress rather than less.

Working with Flime

With all the tax declaration responsibilities freelancers and employers must take care of, Flime is here is to help lighten the load by removing what can be complicated bureaucratic processes from the list of responsibilities. These include:

  1. e-invoices;
  2. complying with national tax procedures for EU and Russian residents;
  3. easy and secure KYC upload;
  4. setting up, chatting and agreeing on tasks with employers
  5. enabling multiple payment methods;
  6. all documentation for tax returns;

Our goal is to make paperwork go unnoticed so that you can focus on your core business while at the same time being ready to file your income taxes correctly and confidently in Sweden.

Success in Sweden

Sweden is considered a great place to work and live in. Workers have strong rights, equality is key, an application for resident permits is possible, innovation is valued and the welfare system is inclusive. Not to mention, they speak English. There are jobs available and the living conditions in terms of infrastructure are well-maintained. Sweden ranks highest with 86% freelancers being happy with their work and the system.[6]

Topics: Freelancers, Business, Taxation