Wednesday, April 13, 2011

Swedish taxes: Take my money – Please!

Americans often sigh wistfully when they hear the tales of the crazy long Swedish parental leave, the vacations, the subsidized day care, but then they stop themselves.

“Oh, but the taxes, they must be insane.”

“In a way, yes.” I usually answer. “But mostly, it's not too bad.”

And it's the truth. Recently the Moderates (the party in charge at the moment) decided they would increase the Job Tax Deduction once again.

Now if you aren't in Sweden you might be wondering what the hell that is. It is a decrease in the amount of taxes you pay on income that you earned through working. If your income is from the state, in the form of parental leave, sick leave, pension, welfare or anything else under the sun, you pay a higher tax rate than workers.

(The American in me still wonders why any of this state money is taxed at all, and why you just don't get a lesser amount without going through the game of paying taxes – but that's just old-me talking here – to be honest I have no idea if they deduct taxes from Social Security or welfare in the States)

A few details about Swedish taxes:

-There is no filing jointly, everyone files independently
-If you fall in the lower income bracket, you only pay local taxes. This is often between 28-32%
-If you earn in the higher income bracket (this year the limit is 383 000 SEK), you pay an additional 20% state tax on anything earned above that. (There is one more income level, over 548 000, you pay 25% state tax on everything above that amount.)
-There is a VAT of 25% on most store bought items (excluded are things like food, books, newspapers – which have a lower VAT)
-Your employer pays payroll tax which is above and beyond your taxes which is a little over 31%

The truth is, as a woman in my early 30's I feel like I have gotten back a hell of a lot more than I have put into the system. And to me, that is worth paying a little extra for. I see my tax money as an investment in myself, my children, and the place where I live. This is a huge contrast to how I viewed paying taxes in the US.


  1. I have no problem with paying my taxes. All the social benefits makes it worth it :)

  2. >> -Your employer pays payroll tax which is above and beyond your taxes which is a little over 31%

    This is -at least officially- not a tax, but a fee. About a third of it goes to the pension system and the rest is mostly some insurances that benefit the employee.

    31% is the minimum you can get away with as an employer, but some trade unions have arrangements with the employers giving them extra insurances for an additional 40%. The total fee in that case is about 70% of the salary. I think the average is about 40%.

    //Just got home from another day at the entrepreneur education. :)

  3. Mazui, nah, 31% isnt minimum, u could even get payed for employing ppl. Heard of phaseIII-jobs? Employing ppl who´s having it hard to get a job is highly subsidiced.

  4. Yes, but that's an exception, not the rule.

    Besides, that's limited to two years and the employee must continue looking for other jobs while working for you. So (s)he may disappear to another jobb any day.

    If I employ someone I'd rather take one who I can rely on to do the job well and show up every day than someone who is forced to take it. Even if I get paid to take the latter one.

  5. Hi,

    I just found your blog, it's really interesting! :) I will come back again :)


  6. @ Mazui & anon - I wasn't sure how the arbetsgivareutgift is seen in Swedish tax programs - I just know that compared to the US system it is very similar to what we call a payroll tax - so I went with that name. As it is money that the company must pay the gov. based on income - it acts a lot like a tax. But I guess there are some nuances to it. I didn't realize the unions could negotiate this up - altho I know a lot of companies offer extended benefits. The 31% rate I was talking about was the one I knew only from an enskild firma

  7. I think the difference is that with a tax the authorities can use the money however they like while these money are supposed to go straight into pension funds and insurances.
    Maybe it's the same in the US. I just jumped at the opportunity to elaborate on this since I had a little newly acquired knowledge about the subject. :)

    The base percentage is the same for all sorts of companies.

  8. @Mazui - the elaboration is appreciated! It is certainly not an area I have much expertise in - I think it is interesting to look at what employers have to pay vs. what they choose to pay extra in Sweden. I often think about how much American employers have to pay towards private pension and health insurance programs for their employees and wonder how it compares to Swedish expenditures in this area - so thanks for the info....

  9. How much do American companies pay?

  10. @lucidor - I prob. know less about US taxes than Swedish, and there is no overall answer - payroll tax I think must include approx 6% in Social Security and approx. 1% to medicare (this is mandatory for all employees). Then there is an unemployment insurance fee - I think that is 2%, but not sure.

    Then there are the additonal costs if you have a full time employee. I have read that if you have someone making approx. 45,000 a year, you can estimate about 45-45% in extra costs above salary - but that would include health insurance, vacation pay, sick pay and payroll tax. But I think the percentage might go down as the salary goes up. There is a cap on how much money you have to pay SS on. And Health insurance averages around 7,000-14,000 per year, so that would be a smaller percentage as your salary goes up.

    Bottom line - it's not black and white, and doesn't look like it is cheaper than in Sweden.

  11. Oops, I used wrong nick in the last comment.

    I'm pretty sure the vacation pay is not included in the swedish payroll tax, so if we subtract it from the american PT the amount is almost exactly the same.

    I'm a little surprised, but not very. It's probably a zero-sum game, the expense is just large enough to cover the costs.

  12. I am looking for a payrolling service in the New York for my small business. Where can I find a Payroll service in the New York?

  13. I heard Sweden has terrible privay laws. Like you can find out what someone's wages are. Is that true? = =;

  14. Hi,
    I got a job offer in Stockholm for 65000 sek/month. Could you tell me how much taxes I have to pay on the end please?

    Ps. I do not know anything about Swedish job market. Could you tell me if 65k/per month in IT a fair rate for Stockholm?

  15. anon 1 - You can get the income of anyone in Sweden, it is the right to information act, you can't see their wages, but you can estimate. You can see the amount they paid tax on.

    anon 2 - that sounds like a good offer, congratulations. The tax rates are tricky, you can run the numbers on skatteverket I believe, or call and ask them. They are surprisingly helpful. But really it depends on where you live. Estimate about 30% on the first 35,000 and then about 55% on the rest. (again, don't take my word on this,. I am not a tax person) But 65,000 would put you amongst the hi-end earners, even in Stockholm. Also, there is the 'job tax' deduction, this crazy thing about how people who work pay less tax than people who get welfare or pension, to add into the mix.

  16. Yes The swedish Tax system only benefits those who are employees within a cooperation or big company, unemployed, maternity and sick leave, students.
    As a small company in Sweden you are the one paying for it. As most of the big companies avoid paying the taxes or threaten to move abroad- yet their employees have maternity /sick leave hand outs from the tax office.
    . The small companies are the ones who pick up the bill. It s always been like this yet even worse before - Early 1900 s every 100 kr made you paid 105 kr tax. work that one out.

  17. wow it's a good site. I have see another website about "Payroll,instant w2,w2 generator" this topic.

  18. I am working in saudi arabia and my wife is a swedish national. I want to send her some money to open up a small restaurant or something. What are the tax impliactions on my remittance to her.