Monthly Employee Tax Reporting

Sweden changes from annual to monthly employee tax declaration for employers.

 

Sweden will from January 2019 and onwards require all employers with employees in Sweden to report all earnings and tax withholdings of individual employees on a monthly basis, instead of the previous requirement to report each employee's total earnings and taxes only at the end of the calendar year.  This system has already been tested during the second half of 2018 within the construction industry, restaurant sector and a number of other industries known for their high personnel turn-over.

The purpose of the new monthly reporting process is to give the Swedish governmental authorities a greater ability to quickly discover tax non-compliance, benefit fraud, failure to comply with Swedish labor law, and - when applicable - failures to comply with work permit conditions. The monthly reporting requirement complicates making adjustments once a monthly tax declaration has been filed since it now requires a formal tax adjustment declaration to be filed. The monthly tax declaration is also used to ensure compliance regarding statutory vacation days and benefits, which is an important criteria for persons with work permits and can be used as evidence of non-compliance in labor union, labor ombudsman, and labor court proceedings.

 

Lowered Income Tax                                       

Swedish parliament increases personal allowance on employment salary and raises tax bracket thresholds.

 

For the income year 2019, the Swedish parliament has, with short notice, voted through a number of measures which will affect the income taxes of all Swedish employees and pensioners, which is listed below. The overall effect for most private individuals will be a slight lowering of their personal income tax, compared to what they would otherwise have paid, though the changes will vary from one municipality to another since the local tax rates have in some cases undergone a slight raise.

• The preexisting jobbskatteavdraget (Work Tax Deductions), which is automatically applied to salaries and the business income of the self-employed, is increased. This will lower work-based income tax up to SEK 210 per month, with the maximum tax saving applying to incomes of between SEK 30,000 and SEK 52,500 per month.

• The threshold amount for the additional 20 % National Income Tax has been raised from SEK 40,600 per month to SEK 42,000 per month. The result is a larger portion of an individual’s salary is only subject to the tax rates of the local municipality and county, which will lower the tax by up to SEK 280 per month, with the maximum tax saving applying to incomes of SEK 42,000 per month or more.

• The preexisting grundavdrag (base tax deduction), which is automatically applied to salaries and pensions as well as the business income of the self-employed, is raised for everyone of 65 years of age or older. The exact size of this deduction varies depending on income, with a maximum tax saving of SEK 912 per month applying to incomes around SEK 45,000.

• Due mainly to enforcement problems, Sweden is discontinuing the controversial television-fee of SEK 2,400 per year, which was previously supposed to be paid by any household possessing a television-set. Instead, a new “public service tax” is introduced for all taxpayers for the purpose of financing the Swedish public broadcasting service. For most taxpayers, the new tax will be taken out at a flat rate of SEK 1,300 per year, with progressively reduced rates for individuals earning less than SEK 13,600 per month.

Supply Chain Liability Introduced in the Construction Sector

Sweden introduces liability for organizations hiring subcontractors regarding unpaid salary and employment benefits.

 

Supply chain liability is introduced for construction, demolition and refurbishing contracts entered on the end-client level after the 31st of December 2018. This means that any construction workers employed by a subcontractor, who have been unlawfully denied earned remuneration by their employer, will henceforth be able to direct their claims against the contractor that hired their employer. If necessary, such a claim can then move up the supply chain until it is directed at the general contractor responsible for the construction project. The liability does not, however, extend to the end client ordering the project. Any company which is forced to pay out remuneration and associated social fees for construction workers under the terms of this new legislation will afterwards be able to direct a claim against the affected worker’s legal employer, though the success of such a claim would depend on the legal employer’s ability to pay.

 

Free Dental Care Up to 23 Years of Age

Sweden increases age for dental benefits eligibility.

 

The Swedish program of free dental care for young residents, which previously ended after the calendar year an individual turned 22 years of age, is now extended to include the calendar year in which the individual turns 23.

 

Progressive Lowering of the Corporate Income Tax

Swedish parliament announces lower corporate income tax for 2019 and 2021.

 

On the 1st of January 2019, the Swedish corporate income tax is lowered from 22% to 21.4%, and the Swedish parliament has a preliminary plan to lower it to 20.6% before the end of 2021. Through this change, the Swedish government hopes to make Sweden more attractive for foreign and domestic companies and thereby increase its tax base.

 

New Calculation Method for Sick Pay

Sweden introduces new sick pay calculation to benefit employees with more than one employer.

 

The Swedish Sick Pay Act has for many years prescribed that no sick-pay is to be paid for the first day an employee has taken time off from work for reasons of illness. This day is traditionally called a karensdag (loosely translated “deducted day” or “waived day”), but the actual length of this unpaid period has in practice varied much more than the legislators originally intended.

In the sick-pay system applied up until the start of 2019, individuals who took ill during the workday would only lose their normal hourly rate from the moment the illness made them unable to work until the end of their workday, and could then claim a mandatory minimum sick-pay from their employer corresponding with 80% of their normal pay. An individual who worked for several different employers each week would, on the other hand, loose one day’s pay per employer.

From the 1st of January 2019 and onwards all employers shall, instead of a karensdag, deduct a sum corresponding with 20% of the sick pay an employee would have received for one week of compensated illness. For individuals working full-time five days a week for a single employer, the net result of this will still be that the employee loses one day’s salary at the start of each period of illness. For employees working part-time for several employers, or for the employers of individuals who take ill during a work day, this new calculation method will have a positive effect.