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The background is that these countries have introduced targeted tax regulations which means that individuals moving there from Sweden will be levied very low, or no tax at all, on e.g. occupational pensions and capital gains deriving from Sweden.


The targeted rules in Portugal and Greece allows individuals who moves to these countries to pay low tax or avoid being taxed at all on certain incomes. For example, in Portugal, an individual may receive Swedish occupational pension without being levied tax on the income. Greece also adopted special rules for immigrants during 2020, stating that income from foreign countries is taxed at only seven percent. At the same time, Sweden has no taxation right of certain incomes under the applicable tax treaties.


During 2017, Sweden initiated discussions with Portugal with the aim to modify the effective tax treaty. The intention from the Swedish perspective was to prevent the possibilities to utilize these rules for tax planning. An amended protocol was signed during 2019, but Portugal is yet to ratify this.


The Swedish Government has initiated a dialogue with Greece to initiate negotiations on a completely new tax treaty.


If the Government’s proposals are accepted by the Swedish Parliament, the current tax treaties will no longer be applicable from January 1 2022.


Svalner’s comments
Under the current rules, Swedish individuals who has pension incomes and lives in Portugal or Greece may receive their private occupational pension and pay low or no tax at all. If the government’s proposal is accepted, Sweden will be able to levy 25 percent tax on Swedish private occupational pensions that are paid to individuals who have limited tax liability in Sweden. Individuals who have unlimited tax liability in Sweden will be subject to the same tax rate as if living in Sweden.


It should further be noticed that termination of the tax treaties will have implications not only for occupational pension income but also for taxation of other income for both companies and individuals. It must now be assessed whether double taxation may be eliminated under internal law, instead of applying the tax treaties. In Sweden, settlement of foreign tax is normally granted in accordance with the Settlement Act. For companies, some protection against double taxation is also offered under the Parent and Subsidiary Directive as well as the Interest and Royalties Directive.


A termination of the tax treaties, which primarily regulates taxation rights and methods to eliminate double taxation, will lead to a clearly greater administrative burden for individuals and companies that previously have been covered by the tax treaties.


Svalner will oversee the continued development. You are welcome to contact us if you have any questions.