Sweden proposes reduction of SINK rate in move towards greater tax neutrality

International Tax Review is part of Legal Benchmarking Limited, 1-2 Paris Garden, London, SE1 8ND

Copyright © Legal Benchmarking Limited and its affiliated companies 2025

Accessibility | Terms of Use | Privacy Policy | Modern Slavery Statement

Sweden proposes reduction of SINK rate in move towards greater tax neutrality

Sponsored by

sponsored-firms-kpmg.png
Swedish flag against sunset.jpg

Victoria Robinson of KPMG Sweden examines the government’s proposal to reduce the rate of special income tax for non-residents to 20% from January 2026 as it strives to enhance tax neutrality and global competitiveness

In a memorandum dated May 19 2025, the Swedish government has proposed a legislative amendment to reduce the special income tax for non-residents (särskild inkomstskatt för utomlands bosatta, or SINK) from 25% to 20%, effective from January 1 2026. The proposed change would apply to income received on or after January 1 2026 and is expected to affect approximately 90,000 individuals currently subject to SINK taxation.

Overview of SINK and the legislative context

The SINK regime, governed by the Special Income Tax Act for Non-Residents (1991:586), provides a simplified taxation mechanism for individuals with limited tax liability in Sweden. Under this regime, non-resident individuals earning Swedish-sourced income such as employment income, pensions, and certain other remunerations may submit an application to be taxed at a flat rate, currently 25%, without the obligation to file a Swedish tax return. The tax is final, and no deductions for expenses are permitted.

The current rate has remained unchanged since 2018, despite broader reductions to other income tax rates. The government’s rationale for the proposed reduction is to restore tax neutrality, particularly in light of these recent reforms that have lowered the income tax burden for individuals subject to the regime for individuals who fall under the category of unlimited tax liability.

Policy objectives and fiscal impact

The Ministry of Finance anticipates that the proposed reduction will result in an annual revenue loss of approximately SEK700 million. However, this is viewed as a necessary adjustment to maintain the integrity and fairness of the Swedish tax system. The measure is also expected to enhance Sweden’s attractiveness to international talent and cross-border workers, particularly in sectors where short-term assignments and remote work arrangements are prevalent.

From a policy perspective, the proposal aligns with Sweden’s broader objective of ensuring that its tax framework remains competitive and administratively efficient. The SINK regime, by design, reduces compliance burdens for non-residents and facilitates tax collection through withholding at source. A lower rate may further incentivise compliance and reduce the risk of tax avoidance through informal arrangements.

Implications for employers and global mobility professionals

Employers with internationally mobile employees should assess the implications of the proposed rate reduction on their cost projections and payroll systems. While the change is expected to reduce the overall tax burden for affected individuals, it may also necessitate updates to internal policies, assignment cost estimates, and gross-up calculations.

For global mobility professionals, the proposal underscores the importance of proactive tax planning and communication with non-resident assignees. The transitional period leading up to January 1 2026 offers an opportunity to revisit existing SINK applications, evaluate eligibility, and ensure that payroll systems are configured to apply the new rate from the effective date.

Key takeaways on the reduction of the SINK rate

The proposed reduction of the SINK rate to 20% represents a significant policy shift aimed at enhancing tax neutrality and competitiveness. While the fiscal cost is non-trivial, the measure is consistent with Sweden’s commitment to a fair and efficient tax system. Stakeholders, including employers and tax advisers, should monitor the legislative process closely and prepare for implementation in advance of the 2026 effective date.

more across site & shared bottom lb ros

More from across our site

The fates of pillars one and two hang in the balance after the US successfully threw its weight around in G7 and Canadian negotiations
Rafael Tena tells ITR about the ‘crazy’ Mexican market, ditching the hourly rate, and refusing to grow his fledgling firm in an ‘unstructured way’
It should be easy for advisers to be transparent about costs, Brown Rudnick partner Matthew Sharp said in response to exclusive ITR in-house data
The sprawling legislation phases out Joe Biden-era green tax incentives for businesses; in other news, the UK will reportedly maintain its DST despite US pressure
New French legislation should create a more consistent legal environment for taxing gains from management packages, say Bruno Knadjian and Sylvain Piémont of Herbert Smith Freehills Kramer
The South Africa vs SC ruling may embolden the tax authority to take a more aggressive approach to TP assessments, an adviser tells ITR
Indirect tax professionals now rate compliance as a bigger obstacle than technology and automation; in other news, Italy approved a VAT cut on art sales
AI-powered tax agents are likely to be the next big development in tax technology, says Russell Gammon of Tax Systems
FTI Consulting’s EMEA head of employment tax and reward tells ITR about celebrating diversity in the profession, his love of musicals, and what makes tax cool
Canadian Prime Minister Mark Carney and US President Donald Trump have agreed that the countries will look to conclude a deal by July 21, 2025
Gift this article