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The Swedish Government is proposing a statutory definition of the concept of "permanent stay", effective from 1 January 2027.
Swedish version here.
An individual who is permanently staying in Sweden is generally deemed to be tax resident and thus subject to unlimited tax liability. This means that, as a rule, the individual is taxable in Sweden on their worldwide income. Currently, there is no statutory definition of “permanent stay” in the Income Tax Act, and determining whether such residence exists can often be complex.
In practice, permanent stay has generally been understood as a continuous stay of six months or more, provided that the individual spends their nightly rest in Sweden. However, there has been some uncertainty as to how many overnight stays constitute permanent stay.
Case law has further established that permanent stay may arise even where an individual repeatedly stays in Sweden for periods shorter than six months, with the assessment based on the duration, extent, and regularity of the stays. This lack of clarity has long created legal uncertainty for both individuals and employers.
The new definition
In a legislative proposal (Lagrådsremiss), the Swedish Government is proposing to introduce a new provision in the Income Tax Act – Chapter 3, Section 3 a. The definition is based on the number of days of physical presence per calendar year and includes two rules:
- Main rule: Permanent stay is deemed to exist if an individual is present in Sweden for more than 160 days during a calendar year.
- Supplementary rule: Permanent stay also exists if the individual spends more than 120 days in Sweden during a calendar year, provided that the number of days in Sweden also exceeded 120 days in the immediately preceding calendar year.
Only days that include overnight stays (i.e., when the individual spends their nightly rest in Sweden) are counted as days of presence. This creates a clearer and more predictable threshold – cross-border commuters who do not stay overnight in Sweden will not be affected.
Regarding the time period covered, if the conditions for permanent stay are met during a calendar year, the stay is generally considered permanent from the first day of presence until the last day of presence in that year. If the conditions are met over two or more consecutive years, the stay is instead considered permanent from the first day of presence in the first year until the last day of presence in the final year.
The legislative changes are proposed to enter into force on 1 January 2027. The new definition will not apply retroactively when assessing whether a stay constituted permanent stay prior to its entry into force.
Effects and implications
The purpose of the proposal is to clarify the concept of permanent stay. It is expected to reduce complexity, facilitate the application of the rules, and increase predictability regarding the tax consequences of staying in Sweden, for individuals residing abroad.
The proposal is also expected to make it easier for employers to determine which tax rules apply to employees residing abroad, potentially facilitating international recruitment. Overall, the legislative change represents a welcome clarification long requested by the business community, the tax authorities, and Swedes living abroad.
Authors
- Andreas Bråthe, Partner, People Advisory Services, +46 73 397 24 33
- Latifa Pham, Manager, People Advisory Services, +46 70 823 29 85
Summary
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