Foreign citizens with particularly specialist tasks or a salary above a certain level can receive tax relief granted by the Taxation of Research Workers Board. This is called researcher tax, expert tax, or expert tax relief. Here we describe what tax relief really involves and what requirements must be met in order to be able to use the tax relief schemes available.
Background
The purpose of the rules on researcher tax is to facilitate the recruitment of qualified labour in Sweden in order to contribute to the development of Swedish companies. The basic premise is that these people are experts, researchers, or key roles in the company. In 2012 , a simplification rule was added, which means that the conditions for a lower rate of taxation shall always be considered to be fulfilled if the salary and other remuneration that the employee receives exceeds twice the price base amount per month. This results in the tax relief being granted without any examination of the employee’s qualifications.
What does researcher tax mean for the employee?
For an employee, the decision means that the tax base is reduced by 25 percent. The remaining 75 percent of employment income is taxed according to normal Swedish rules. The tax relief also means that certain cost reimbursements that the employer is responsible for are tax-free. This applies, for example, to the cost of moving to and from Sweden, two trips per year to the employee’s home country for them and their family members, as well as fees for their children attending primary school, upper secondary school, or the like.
What does researcher tax mean for the employer?
For the employer, the tax relief means a reduction in the basis for employer social security contributions. Contributions are not payable on 25 percent of the employee’s salary and benefits, nor on the cost reimbursements that are considered by the Taxation of Research Workers Board to be completely tax-free for an employee with a valid decision.
How long is the decision valid for?
A decision on researcher tax now applies for five years from the employee’s arrival in Sweden. An application should be made to the Taxation of Research Workers Board by either the employer or the employee no later than three months after the employee starts working in Sweden. There must always be a positive decision from the Taxation of Research Workers Board in order to be able to apply tax relief in practice. Consequently, it is not possible to calculate taxes and social security contributions in accordance with the regulations described above on salaries paid before a formal decision is made by the authority. If you have paid salary before a decision is made, you can correct the previously submitted employer declarations and get back any overpaid social security contributions.
For some companies, there may be older decisions that have a three-year limit due to a change in the law on 1 January 2021. It’s important to check for how long individuals are entitled to tax relief.
Two application categories and basic prerequisites
There are two application categories to choose from to get tax relief. One means that the application is based on the employee’s level of remuneration, which means that the agreed remuneration must exceed two price base amounts (for 2022, remuneration must exceed SEK 96,600 per month). In this regard, work tasks, education, and the like are of no significance for the possibility of receiving tax relief.
If the remuneration does not reach the specified level, the Taxation of Research Workers Board can test the decision using other criteria – i.e. that the employee is an expert, researcher, or other key person within the meaning of the law – in order for them to receive tax relief. Here, a position is taken on, among other things, the skills requirements for the role or the significance of the work for the company, and the employee’s education and experience.
In addition to this, there are a lot of other formal requirements that must be met. This includes that the employee is not a Swedish citizen and has not lived or resided permanently (usually at least six months) in Sweden at any time during the last five calendar years. At the time of application, the intention shall be that the employee’s stay in Sweden shall last for a maximum of five years. There are also requirements for the employer to be domiciled in Sweden or to be a foreign company with a permanent establishment in the country.
Do you have any questions as an employer about the rules on foreign staff? Get in touch with us here at Azets. We’re experts in payroll administration, HR, and accounting, and we offer advice to companies that need help.