Non resident LANDLORD - double taxation treaty Question

thenap80

Hi

I am due to move to Sweden this year. I have a house that I let out and do a normal Self Assessment each year.

Moving abroad, I am aware I need to make HMRC aware and that they have first dibs on the income I generate from my UK based property. But what is proving hard for me to fathom, is how much then will Sweden be entitled to, if any.

Reading the .gov's website, I find a detailed document that explains in very hard to understand language, just what happens with regards to the tax. Can someone explain in simple terms, how much Sweden will be able to tax me after I've already paid my 20% in this country.

Sweden's tax rate is 30percent. My income would be solely from the UK property and earns me about 15k a year. SO most of that is Personal Allowance anyway. Is my PA still safe and that portion untouched by Sweden?

Thanks so much to anyone who can help. And for info, the below is an excerpt from the treaty...


Elimination of Double Taxation
1. In the case of Sweden, double taxation shall be avoided as follows:
a) Where a resident of Sweden derives income which under the laws of the
United Kingdom and in accordance with the provisions of this
Convention may be taxed in the United Kingdom, Sweden shall
allow - subject to the provisions of the laws of Sweden concerning credit
for foreign tax (as they may be amended from time to time without
changing the general principle hereof) - as a deduction from the tax on
such income, an amount equal to the United Kingdom tax paid in respect
of such income.
b) Where a resident of Sweden derives income which, in accordance with
the provisions of this Convention, shall be taxable only in the United
Kingdom, Sweden may, when determining the graduated rate of Swedish
tax, take into account the income which shall be taxable only in the
United Kingdom.
c) Notwithstanding the provisions of subparagraph a) of this paragraph,
dividends paid by a company which is a resident of the United Kingdom
to a company which is a resident of Sweden shall be exempt from
Swedish tax according to the provisions of Swedish law governing the
exemption of tax on dividends paid to Swedish companies by companies
abroad.
2. Subject to the provisions of the law of the United Kingdom regarding the
allowance as a credit against United Kingdom tax of tax payable in a territory outside
the United Kingdom or, as the case may be, regarding the exemption from United
Kingdom tax of a dividend arising in a territory outside the United Kingdom or of
the profits of a permanent establishment situated in a territory outside the United
Kingdom (which shall not affect the general principle hereof):
a) Swedish tax payable under the laws of Sweden and in accordance with
this Convention, whether directly or by deduction, on profits, income or
chargeable gains from sources within Sweden (excluding in the case of
a dividend tax payable in respect of the profits out of which the dividend
is paid) shall be allowed as a credit against any United Kingdom tax
computed by reference to the same profits, income or chargeable gains
by reference to which the Swedish tax is computed;
b) a dividend which is paid by a company which is a resident of Sweden to
a company which is a resident of the United Kingdom shall be exempted
from United Kingdom tax when the exemption is applicable and the
conditions for exemption under the law of the United Kingdom are met;
c) the profits of a permanent establishment in Sweden of a company which
is a resident of the United Kingdom shall be exempted from United
Kingdom tax when the exemption is applicable and the conditions for
exemption under the law of the United Kingdom are met;
d) in the case of a dividend not exempted from tax under subparagraph b)
above which is paid by a company which is a resident of Sweden to a
company which is a resident of the United Kingdom and which controls
directly or indirectly at least 10 per cent of the voting power in the
company paying the dividend, the credit mentioned in subparagraph a)
above shall also take into account the Swedish tax payable by the
company in respect of its profits out of which such dividend is paid.
3. For the purposes of paragraphs 1 and 2, profits, income and gains owned by a
resident of a Contracting State which may be taxed in the other Contracting State in
accordance with this Convention shall be deemed to arise from sources in that other
State.
4. here a resident of a Contracting State derives gains which may be taxed in the
other Contracting State under the provisions of paragraph 6 of Article 13, and those
gains are in respect of:
a) shares or comparable interests referred to in paragraph 2 of Article 13,
and the immovable property in question is situated in the first-mentioned
Contracting State, or
b) shares referred to in paragraph 7 of Article 26, and the rights in question
are to assets to be produced by the exploration or exploitation of the seabed and subsoil and their natural resources situated in the first-mentioned
Contracting State that other Contracting State shall allow, under the
provisions of paragraphs 1 or 2, as the case may be, a deduction of, or a
credit for, the tax paid on that gain in the first-mentioned Contracting
State.

Housebuy12345

You will be living in Sweden for over a year? You pay tax in Sweden for worldwide income. However because it’s EU you will need to see what rules the Swedes have when UK unjoins.

thenap80

I read that because the treaties are all signed between separate countries and not UK and EU, then BREXIT will not affect that taxation treaties.

jennifernil

My OH is Norwegian, lives in UK but has some Pension income from Norway, so we have some experience of how this works between Norway and UK.

The way the double taxation agreement works is that governments have agreed where income should be taxed in certain circumstances and what happens if both countries are able to tax that income.

In most cases, you pay tax in the country in which you reside, which is what happens with my OH's pension, so he pays no tax in Norway, but he does have to prove to Norway that he has paid the tax in UK.

In your case you are liable to tax in Sweden, so all your income will be taxed as if it was earned in Sweden and you should be entitled to any tax allowances available there.

If the income is £15000 and the Swedish personal allowance, if there is such a thing, is say equivalent to £10000, then you are taxed on £5000, so if the rate is 30% you would be due to pay £1500.

If HMRC are also allowed to tax this income then presumably you would be entitled to the UK personal allowance and taxed on the rest, so say £15000-£12000=£3000@20%=£600.

If this income is handled under a double taxation agreement then
the Swedish tax authorities would then allow you to set that £600 against your £1500 liability there, so would charge you only £900.

However, if the tax paid in UK turned out to be more than your liability in Sweden, you cannot claim back the difference anywhere.

jennifernil

thenap80 wrote: »

I read that because the treaties are all signed between separate countries and not UK and EU, then BREXIT will not affect that taxation treaties.

Yes, I would agree that this is correct.

thenap80

Swedish personal allowance is approx. £1500, then circa 32percent on income. Shocking!!! But thanks for your reply. I'm understanding a bit more every day. Doesn't help either that their tax year runs from Jan to Dec and not April to April like ours!

00ec25

jennifernil wrote: »

In your case you are liable to tax in Sweden, so all your income will be taxed as if it was earned in Sweden

are you sure?

Sweden applies the concept of a "limited tax resident"
http://taxsummaries.pwc.com/ID/Sweden-Individual-Taxes-on-personal-income
in determining if someone is tax resident and therefore liable to tax on worldwide income. Note the 10 year rule for a non Swedish citizen

http://taxsummaries.pwc.com/ID/Sweden-Individual-Residence

jennifernil wrote: »

If this income is handled under a double taxation agreement then the Swedish tax authorities would then allow you to set that £600 against your £1500 liability there, so would charge you only £900.

the tax treaty clearly defines what is the source of the income

rental income from property in the UK is always treated as UK source subject to UK tax

the associated tax credit is only relevant if you become Swedish unlimited tax resident and therefore subject to tax on worldwide income, at which point sweden treats property income as a "capital income" taxed at 30% - against which you would claim the UK tax credit

http://taxsummaries.pwc.com/ID/Sweden-Individual-Income-determination