Does Sweden have any tax friendly ways to save money?

Question:

Does Sweden have any tax friendly ways of saving money like the 401Ks or the RRSPs (the US and Canadian versions of this)?

We both do and we don’t 🙂 . In Sweden, there is a retirement-scheme that employers can choose to contribute to. It will not be subject to income tax until the day you as an employee retire and are able to access this fund (at which point you pay normal income tax on it, up to 57% marginal tax).

However I, as an employee, have no way of choosing whether to contribute to this or not. It is not considered a part of my gross salary put into a pension/401k-fund. Rather looked upon as an income you will never see and that is not counted towards you salary the way you would normally measure it. A good comparison would be with your employer paying for your health care in the US; you don’t consider it income, but rather a benefit. The same way this is considered a future benefit and not real, accessible money.

A big reason for this is that you have no right to touch this fund until you are around 61 (this could vary with a few years) and you can also not choose freely where to invest it but need to go via the broker your employer choose.

So, what do I do?

If I want to have the right to use my money before ~61 I have no other option than to pay the hefty income tax (I am not bringing up the HUGE benefits you do get from the state from living in a country like this here, that will be another post. Bear in mind that I have still chosen to live in Sweden and its crazy income taxes – there are things weighing up the apparent downside).

In addition to the income tax, there is also going to be a capital gains tax that will be added to any profit I make from the financial markets (yes, even keeping them in a savings account). This tax is currently 30% and quite tricky to declare each year when you file your tax report.

That doesn’t sound very good, what do now dear fire viking?

Don’t fear! There is always a solution to tax friendly ways of saving money. See my blog post My first monthly income and expense report! to see how much you can save.

There is something called an “Investment Savings Account” that all banks are obliged to offer their customers. If you trade or save under this specific account, there is no 30% capital gains tax on your profits. Instead a proxy value of the full amount you have had in this account will be taxed to a much lower tax rate.  Fluctuates depending on how much you had on the account at given points in time.

The downside with this account is that you pay taxes no matter if you make profit or not. Upside is that the taxation amount is very low.

Google “Investeringssparkonto” and you will see the exact calculation of this.  Or just trust me when I say it is definitely the way to go if you want to invest your money from an account in Sweden.

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