UK Double Taxation Treaty
Skriven av indrenp den 5 maj, 2010 - 14:16
I am a UK citizen who moved to Sweden in June 2008. I own a property in the UK (since 2000) which I lived in until February 2004, since then it has been rented. Since moving to Sweden I have continued to declare the rental income in my UK tax return.
I now want to sell the property and use the some but not all of the proceeds to buy a property in Sweden. I know that I am liable to pay Capital Gains Tax in the UK at 18% on a portion of the profit. What are my tax implications in Sweden?
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Without knowing the specifics, I assume that you are a resident in Sweden according to Swedish tax legislation and that you are considered to be a treaty resident in Sweden under art. 4 of the UK - SE Double Tax Treaty. I also assume that the property is in fact a house.
To be correct, you should have been reporting the rental income in Sweden as well. The rental income is taxed at 30 % in Sweden, though you are entitled to a general deduction of SEK 12 000 per property and a deduction of 20 % of the rental income. You are also entitled to a credit for taxes paid in the UK.
To answer the question asked. Proceeds from sale of properties are taxable at 22 % under Swedish tax legislation. Since the property is located in the UK, UK will have the right to tax the property sale as state of source. Sweden will also have the right to tax the proceeds as state of residence, but will once again have to give you a credit for the taxes paid in the UK. Since you stated that you are liable to pay 18 % in tax on a portion of the proceeds in the UK, it might be that the sale will be subject to a higher tax rate in the UK. If so, obviously, no taxation will take place in Sweden.
Under Swedish tax legislation you can in some cases apply for a deferral with taxes due on a property sale. However, these rules will not be applicable since you are not residing in the house.
Thanks for the information. Just one question, will the Swedish tax authorities tax the whole profit on the house sale or do they apply a pro-rata calculation base on length of ownership and length of residence in Sweden?