- Sweden has adopted the so-called “10-year rule” which is a form of exit tax. According to this rule, individuals who have been Swedish residents continue to be subject to a tax liability on capital gains from the disposal of shares and other securities for a time period of ten years commencing on the date they leave Sweden. The aforementioned time limit may be reduced in accordance with some double tax treaties. Capital gains are normally taxed at a 30% flat rate.
In 2017, the Swedish tax authorities proposed a new exit tax law that was supposed to modify the “10-year rule”. The law would have taxed the unrealized capital gains of individuals leaving Sweden at a rate of 30%. The new tax would have applied only to individuals who lived in Sweden for at least five years in the preceding ten years. Gains lower than SEK 100,000 (about EUR 9,850) did not fall within the scope of the proposed tax. Furthermore, Swedish residents emigrating to countries in the European Economic Area were entitled to defer payments of the exit tax until the assets were divested.
Individuals who have been Swedish residents continue to be subject to a tax liability on capital gains from the disposal of shares and other securities for a time period of ten years commencing on the date they leave Sweden. The aforementioned time limit may be reduced in accordance with some double tax treaties. Capital gains are normally taxed at a 30% flat rate.
In 2017, the Swedish tax authorities proposed a new exit tax law that was supposed to modify the “10-year rule”. The law would have taxed the unrealized capital gains of individuals leaving Sweden at a rate of 30%. The new tax would have applied only to individuals who lived in Sweden for at least five years in the preceding ten years. Gains lower than SEK 100,000 (about EUR 9,850) did not fall within the scope of the proposed tax. Furthermore, Swedish residents emigrating to countries in the European Economic Area were entitled to defer payments of the exit tax until the assets were divested.
The legislative proposal was heavily criticized by economists and other experts. For example, Copenhagen Economics (one of the leading economics firms in Europe) noted that the law will: (i) discourage “highly productive foreigners considering moving to Sweden and Swedes living abroad, but considering returning to Sweden”; (ii) foreigners who stay in Sweden for a limited period may be incentivized to shorten their stay as the law will incentivize them to emigrate just before the exit tax becomes effective; (iii) the exit tax may result in personal bankruptcies because the government is taxing unrealized capital gains that may never be realized; and (iv) since the valuation of firms is costly, investors will get very little from their capital gains after valuation costs and taxes.
Although the adoption of the law introducing the new exit tax was suspended, the Swedish Finance Minister Magdalena Andersson noted that “the problems with the ten-year rule remain”. Thus, we can expect a new exit tax proposal in the near future.
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