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Selling a property abroad
Do I need to pay tax in Sweden?
17.Jul.2019, 12:31 AM
- Background -
I moved to Sweden in 2012 from my native (non-EU) country and have been resident in Sweden uninterruptedly since then. I hold dual citizenships, Sweden and my native country. Before moving to Sweden, I bought properties in my native (non-EU) country. I have received rental income from one of these properties and paid rental income tax in the non-EU country. There is a treaty for the avoidance of double taxation between Sweden and my native (non-EU) country but I can't understand its content fully.
Extra information: If I sell one of these properties in the non-EU country I am not liable to pay any capital gain tax there since it has been more than 5 years since I bought them and according to local laws I am exempt.
- Questions -
Question: What happens if I sell one of these properties and transfer the money to my Swedish bank account? Do I need to pay tax in Sweden? It will be around 1.000.000 kronor. This property has not been bought with any Swedish income. I owned it before moving to Sweden. I don't want to pay tax for its sale. Is there any way to avoid it?
Question 2: I never declared anything in Sweden regarding owning or renting these properties. Am I in trouble? I heard that I should have let Skatteverket know all about my assets when I first moved to Sweden (But obviously I did not know that) I have paid all relevant taxes in the local country though (rental income, property tax etc.)
17.Jul.2019, 09:00 AM
You're best finding an accountant who can guide you correctly...
Skatterverket's guidance is here for rental and selling: https://www.skatteverket.se/servicelankar/o...064694c788.html
You can see this thread on Skatter.se including the legal guys perspective: https://www.skatter.se/?q=node/6899
...but in short, if you are tax resident in Sweden (which it appears you are from what you have written) then Sweden taxes you on gobal assets. That has 2 impacts:
1) you should have been paying tax on the rental income here in Sweden. The tax treaty doesn't mean you pay tax only in one place of your choice; rather it usually allows you to reduce the tax paid in Sweden with the amount paid in the other country. But, it depends on what the treaty says. If the tax in the other country is higher than Sweden you probably owed nothing here (but Sweden is a pretty high income tax country)
2) when you sell a property, regardless of where it is, you pay capital gains tax in Sweden. Again, if the tax treaty allows you can reduce the amount owed in Sweden by the amount paid in the other country. Though that might not be so useful to you since you imply that is 0 in the other country)
When you calculate the gain, you need to use exchange rates for when purchased and when sold. Depending on how they've changed you may have a bigger or smaller gain than if you've calculated the 1MSEK using the same rate. Also not all the gain is taxed, I can't remember the exact figure, but it's something like 22/30ths.
If you move that size of money to Sweden, expect your bank to ask where the money has come from (anti money laundering rules).
17.Jul.2019, 11:06 AM
The answers you received from Temp are correct. I only want to add that not only bank will ask you about this money. The bank will send this information to Skatteverket and they will include it in your tax declaration as information they have about you. Skatteverket will also remind you that if this money is from property sale, you have to declare the sale here.
I also suggest you recalculate your profit with correct exchange rates from Riksbanken and take into account all possible expenses relating to the purchase and sale. I have seen situations where what seemed first as a profit changed into loss due to currency fluctuations and accumulation of small expenses.
If you need help with your declaration, you can contact me at www.dinvinst.com
17.Jul.2019, 01:14 PM
Thanks for all the inputs. Really appreciated!
There is one thing that I need to add regarding rental income. The rental income has never exceeded 40.000 kr per year so far. Does the 40.000 kr rule apply to rental income from foreign assets as well?
Also, does 40.000 kr rule mean that I don't declare sub 40.000 kr rental income at all? or does it mean I should have declared it but not liable to pay any tax on it?
What makes it more confusing is that in the non-EU country, sales of properties never showed the actual value on paper back in those days. So for ex. if a property would be sold for say 1 million, the registration office would advise to write down 300k. I don't want to do the same today. I want to write down the actual value but on paper it makes the profit look much bigger than it actually is.
Another question is one of the properties I mentioned earlier is owned by me but its right of use is on a first degree family member. It has never been rented out. My legal share on paper is %100. However my actual share (not legally on paper but as a gentlemen's agreement) is 1/3. This is quite a common practice in the non-EU country between family members. The taxation in Sweden creates a confusion here because 2/3 of its actual owners are not even resident in Sweden. If I transfer my full ownership on paper (not sell) to the first degree family member (who resides in the non-EU country), do I get any questions from tax office here in Sweden? (Assuming information is shared between countries)?
Overall, I understand that I get taxed for my global assets in Sweden but there must be a solution for people who owned their assets before moving to Sweden. What would happen if you owned 20-30 houses, stocks that you owned beforehand and you just happened to move to Sweden for a few years. Are such people really asked to pay tax for the profit from their assets' sales?
12.Feb.2020, 01:48 AM
You have to pay taxes if you sell property abroad, even if you acquired it before moving to Sweden.
I was in the same situation and my company provided me help by hiring a consultant to answer my questions. If you want to follow the rules, you have to declare and pay, even if the country where you sold charges no tax (my case).
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