Understanding SINK (the Special Income Tax for Foreign Residents)
The Special Income Tax for Foreign Residents, commonly known as SINK, is a Swedish tax system designed specifically for individuals who live abroad but receive income from Sweden. This form of taxation is particularly relevant for foreign residents who do not have their primary residence in Sweden but earn income from sources like pensions, employment, or certain types of compensation within the country.
The key advantage of SINK is its simplicity: with a fixed tax rate of 25% and no requirement to submit an annual tax return, it provides a streamlined taxation process.
Who can apply for SINK?
The SINK taxation scheme is applicable to individuals who are classified as non-residents in Sweden, meaning they do not live in the country permanently or stay longer in Sweden than six consecutive months.
Key Features of SINK
Fixed Tax Rate: The SINK tax is a flat rate of 25% and there is currently no restriction on how much you can earn under the scheme.
No Filing Requirement: Unlike Sweden’s standard income tax system, individuals taxed under SINK do not need to file a tax return in Sweden. The employer or payer of the income is responsible for withholding the tax at source and remitting it to the Swedish Tax Agency (Skatteverket). Note that this also mean that there are no possibilities to apply for tax deductions via an annual declaration.
Non-Residents Only: To qualify for SINK, individuals must be non-residents in Sweden. This usually applies to those living abroad and who spend fewer than 183 days in Sweden within a 12-month period. What if I have been in Sweden before? The Tax Authority usually reviews a twelve-month period to assess whether the employee has stayed in Sweden for less than 183 days in total. If it is found that you have been in Sweden for 183 days or more during that time, your SINK application will likely be rejected. This is a simplified overview of the rule, which is actually more complex and shaped by various court rulings.
No upper limit: Currently there is no upper limit to how much one can earn under the SINK rules, which is a benefit compared to the Norwegian system.
More expenses can generally be claimed via the employer: Another benefit of the system is that more expenses can typically be claimed through your employer. We provide guidance on what can legally be expensed during your assignment, offering potential tax deductions. These may include, but are not limited to, costs related to travel, accommodation, safety gear, and non-reusable items specific to the assignment.
SINK taxation scheme and Cool Company
Complete the application form. The application form is here (click on the small yellow box that says “Ansökan om särskild inkomstskatt”).
Once you have received the proof of your submitted application as well as the final decision, please send the documents to info@coolcompany.com. SINK rates will only be applied if there has been an approval from Skatteverket, until this time standard tax rate will apply as standard.
A word of caution: if there is a chance that your work period will extend beyond six months, it’s generally advisable not to apply for SINK tax. In such cases, you would be required to pay regular tax on the entire period you have already worked, which may generate a further, significant personal income tax liability.
Disclaimer: This text is provided for informational purposes only and does not constitute professional advice. Before making any decisions, it is recommended that you consult with a qualified professional. In the event of any discrepancies or conflicts, the information on the Tax Authority’s official website takes precedence.