Taxation in Sweden

Taxation in Sweden on salaries for an employee involves contributing to three different levels of government: the municipality, the county council, and the central government. Social security contributions are paid to finance the social security system.

Income tax on salaries is deducted by the employer (a PAYE system) and paid directly by the employer to the Swedish Tax Agency (Skatteverket).

The effective taxation rate in Sweden is commonly cited as among the highest in the world; see list of countries by tax rates.

Sweden has a taxation system for income from work that combines an income tax (paid by the employee) with social security contributions (employers contributions) that are paid by the employer. The total salary cost for the employer is thereby the gross salary plus the social security contributions. The employer makes monthly preliminary deductions (PAYE) for income tax and also pays the social security contributions to the Swedish Tax Agency.

The income tax is contingent on the person being taxable in Sweden, and the social security contributions are contingent on the person being part of the Swedish social insurance plan. The income tax is finalised through a yearly tax assessment the year following the income year.

27% of taxpayer money in Sweden go to education and healthcare, whereas 5% go to the police and military, and 42% to social security.

The specifics of the social security contributions (employer's contributions, also called payroll tax in English) may be found at the Swedish Tax Agency's Website.

Assumptions: income tax (direct, 32%), employer social fee (indirect, 31.42%)

For a pay of 100, the employee first pays 32 in income tax (direct, 32%); on top of that, the employer pays an additional 31.42 in employer's social fees (indirect, 31.42%). The sentence above is incorrect. Sweden has a graduated tax, just like the US. The first '100' earned is tax free in Sweden; subject to 10 percent tax in the US.

Thus, based on a pay check of 100, 63.42/131.42 (i.e., 48.3%) is paid as taxes, although the employer's contribution is a fee for the employee's adherence to the Swedish social security scheme. The effective rate may be lowered by, for example, earned income tax credits and private retirement savings contributions.

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Wikipedia