Highly experienced foreign nationals get tax relief in Sweden.

• Sweden front-runner in ‘War of Talent’
• Global employers face disengaged workforce

Sweden's centre-right government painted a rosy picture of the country's economy as it presented its spring budget proposal, saying tax cuts for foreign professionals and breaks for corporate research investments were likely.

To attract talent from abroad, the government wants to reform special income tax breaks for foreign nationals with “expert knowledge”. Today’s rules are too messy and unpredictable, the government said.

Katrin Fahlgren, a senior tax manager and practice leader at auditing and consulting firm KPMG, welcomed the proposal and said that clearer rules are needed. 

“The tax relief is designed to better compete for highly experienced internationally mobile staff. If employers truly can say who is entitled to tax reductions it will naturally be easier to attract talent,” she told The Swedish Wire. “This is a step in the right direction, although we still haven’t seen the final words of the act. Questions still remain about which groups will benefit from the relief.”

The special tax relief is designed for executives, specialists, researchers and other key foreign employees. The legislation will provide a 25 percent reduction in taxable income, meaning that a key foreign employee’s income tax will be based on only 75 percent of his or her income. The general payroll tax is also reduced.

To be included, the person should have a monthly salary of more than 85,600 kronor ($13,200). Those with lower pay can also apply for the relief if their skills or knowledge are extremely rare in Sweden.

The government now wants to make the procedure easier and less bureaucratic. The rules should be “based on objective conditions” and not on subjective judgments by the Taxation of Research Workers Board (Forskarskattenämnden). It could be extended to include “all people who have a salary above a certain level”.

The government also plans to cut dividend taxes for some small businesses and allow bigger write-offs for research and development investments.

"Our main goal is to bring Sweden to full employment and thereby reduced exclusion. With a clear policy on growth, research, innovation and entrepreneurship, we are creating the conditions for a dynamic society that holds together,” the government’s four coalition parties wrote in an op-ed in Svenska Dagbladet.

Many Swedish ice-hockey clubs have welcomed the proposal, saying they hope it will be easier to attract foreign players, who may be considered experts under the legislation.

Personnel covered by current rules

• Foreign key personnel include executives, scientists, researchers, technicians, specialists and others. One main criteria for qualifying for the tax relief is that Swedes with the foreigner's skills or talents are impossible or extremely difficult to recruit in Sweden.

• Foreign key personnel include executives and managers who hold vital positions in a company. These people would be responsible for a company's general management and administration. Such personnel could be managers of a foreign-owned subsidiary.

• Other key personnel include experts, engineers, scientists, research and development specialists, and others whose unique competence is unavailable or not readily available in Sweden. Examples of such personnel are experts working with advanced product development and applications of new technology.

• Other key personnel could be specialists in rationalization, production, administration, logistics, marketing, engineering, finance and information and communication technologies.
Source: the Taxation of Research Workers Board (Forskarskattenämnden).

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This article was published in collaboration between Stockholm Business Region and The Swedish Wire.

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