Swedish Government Proposes New Tax Residency Day Thresholds for “Habitual Stay” (“stadigvarande vistelse”)

Under the Swedish Income Tax Act (“inkomstskattelagen”), an individual may become subject to unlimited tax liability in Sweden (“obegränsad skattskyldighet”) on any of three alternative grounds: residence in Sweden, habitual stay in Sweden (“stadigvarande vistelse”), or significant connections to Sweden (“väsentlig anknytning”). The concept of habitual stay in particular has long been unclear, but the Swedish Government is now proposing a clearer definition which, under the proposal, would enter into force on 1 January 2027.

What is habitual stay (“stadigvarande vistelse”)?

Habitual stay is one of three alternative grounds on which an individual may be considered subject to unlimited tax liability in Sweden under Swedish domestic law. The other two grounds are residence in Sweden and significant connections to Sweden following previous residence here.

Being subject to unlimited tax liability means, in simplified terms, that Sweden, under its domestic law, claims the right to tax the individual’s entire worldwide income, regardless of whether the income is derived from Sweden or from abroad. This may therefore include salary, dividends, capital gains, pensions, interest, income from foreign companies, or income from real estate abroad.

In practical terms, this means that an individual who is actually resident abroad, but who spends sufficient time in Sweden, may nevertheless be treated as subject to unlimited tax liability here. Under Swedish domestic law, the individual may therefore find themselves in essentially the same starting position for tax purposes as an individual who is resident in Sweden.

Why is the concept important?

The question of habitual stay is central because it determines whether Sweden can, in the first place, claim the right under Swedish domestic law to tax an individual’s worldwide income. This is a far-reaching tax consequence, particularly for individuals with substantial income or assets outside Sweden.

For internationally mobile individuals, the assessment may therefore have significant practical importance. This applies, for example, to individuals who work in several countries, have previously been resident in Sweden, move to or from Sweden, or spend recurring periods in Sweden without formally being resident here.

When is an individual considered to habitually stay in Sweden?

In many other countries, relatively clear rules apply for determining when an individual becomes tax resident based on the number of days spent in the country. A threshold of 180 or 183 days per calendar year is often used.

Sweden, however, currently has no express day-count threshold in the Income Tax Act. There is therefore no provision stating that an individual automatically becomes habitually present in Sweden after, for example, 183 days. Instead, the meaning of the concept has developed through case law from the Swedish Supreme Administrative Court (“Högsta förvaltningsdomstolen”, HFD).

As a result, the assessment has often had to be made based on an overall evaluation of several factors rather than through a straightforward mathematical calculation of the number of days spent in Sweden.

The current legal position under case law

In its case law, the Swedish Supreme Administrative Court has attached importance to the duration, regularity, frequency and extent of the individual’s presence in Sweden. The assessment has therefore not been limited solely to the number of days spent in Sweden, but has also taken into account how the periods of presence are distributed throughout the year and whether the presence appears recurring and systematic. Time spent in Sweden during calendar years other than the year to which the tax issue actually relates may also be taken into account.

This has meant that, in certain cases, an individual may be regarded as habitually staying in Sweden even if the number of days spent here is below what many internationally mobile individuals perceive as the conventional 183-day threshold. At the same time, the dividing line has been difficult to assess in other cases, particularly where the individual’s presence has consisted of several shorter periods in Sweden.

Particularly difficult situations

The rules have been particularly difficult to assess for individuals who commute between Sweden and another country, work in Sweden a few days per week, or spend recurring periods in Sweden without having a continuous six-month stay.

The same issue may arise for individuals who spend a few months in Sweden, then a few months abroad, and subsequently return to Sweden later during the year. In such situations, it has not always been clear whether the presence should be regarded as habitual stay.

Examples of individuals who may be affected

The issue may arise, for example, for:

• individuals who live abroad but regularly work in Sweden,

• individuals who have previously been resident in Sweden and continue to spend extended periods here,

• individuals who move to Sweden during a tax year,

• individuals who move from Sweden but return regularly,

• digital nomads and entrepreneurs who spend recurring periods in Sweden,

• individuals with family, a home, or business interests in Sweden.
  

For these groups, the current legal position has often resulted in a significant need for an individual Swedish tax analysis.

What is the Swedish Government proposing?

The Government has prepared a legislative proposal under which the concept of habitual stay would be expressly defined in the Swedish Income Tax Act. The proposal is intended to replace parts of the current, more discretionary assessment with clearer and more predictable day-count thresholds.

Under the proposal, an individual would be regarded as habitually staying in Sweden if either of two alternative day-count thresholds is met.

The proposed day-count thresholds

Under the proposal, an individual would be regarded as habitually staying in Sweden if the individual:

• spends more than 160 days in Sweden during a calendar year; or

• spends more than 120 days in Sweden during a calendar year, provided that the individual also spent more than 120 days in Sweden during the immediately preceding calendar year.
  

The proposal therefore contains both a main rule of more than 160 days during a calendar year and a supplementary rule for recurring stays, under which more than 120 days in Sweden during two consecutive calendar years would be sufficient.

What counts as a day of presence?

Under the proposal, only days on which the individual’s presence involves an overnight stay in Sweden (“dygnsvila”) would count as days of presence. This is an important limitation, as it means that not every instance of physical presence in Sweden would necessarily count in full. This is also the case today, based on case law from HFD.

In practice, the question would therefore not merely be whether the individual was physically present in Sweden on a particular day, but whether the individual stayed overnight in Sweden. This may, for example, be relevant in relation to short transit stays, travel days or other situations where the individual is only temporarily present in Sweden without staying overnight here.

How would this differ from the current assessment?

The proposed rules would represent a clear change compared with the current system. Instead of having to assess the regularity, frequency and extent of an individual’s presence in each individual case, the assessment would to a greater extent be based on express day-count thresholds.

This should reduce the arbitrary elements of the assessment and make it easier for both individuals and the Swedish Tax Agency (“Skatteverket”) to determine when habitual stay exists.

When are the new rules proposed to take effect?

The proposal is for the new rules to enter into force on 1 January 2027. It is important to emphasise, however, that this remains a legislative proposal. The rules have therefore not yet been finally enacted.

At the same time, as far as we can see, there are no clear indications of strong political opposition to clarifying the concept of habitual stay. For individuals planning their presence in Sweden from 2027 onwards, there may therefore be good reason to take the proposal into account already now, albeit with caution.

What effect could the new rules have?

The most important effect of the proposal is likely to be increased predictability. Under the current rules, it has in many cases been difficult for individuals to determine in advance whether a particular pattern of presence in Sweden will result in unlimited tax liability. This has, in turn, made tax planning uncertain, particularly for individuals with international connections.

With clearer day-count rules, it should become easier to structure time spent in Sweden. Individuals who live abroad would, to a greater extent, be able to plan their presence in Sweden by reference to concrete thresholds rather than having to navigate a more uncertain overall assessment.

Significance for Swedes living abroad, individuals moving to Sweden and cross-border commuters

The proposal may be particularly significant for Swedes living abroad who continue to spend time in Sweden. This may, for example, include individuals who have family, a holiday home, business interests or social ties in Sweden, while maintaining their principal residence in another country.

It may also be relevant for individuals moving to or from Sweden. In the case of an inbound move, the question is when unlimited tax liability arises. In the case of an outbound move, the issue is instead whether the individual, despite residing abroad, continues to spend so much time in Sweden that unlimited tax liability nevertheless arises.

For individuals commuting to Sweden for work, the new rules may also become central. An individual who regularly works in Sweden while living in another country would need to pay particular attention to the number of days involving an overnight stay in Sweden during the calendar year.

The risks of incorrectly relying on a 183-day rule

In our experience, many individuals incorrectly assume that Sweden applies a conventional 183-day rule. This is understandable, since many other countries use such rules to determine when an individual becomes tax resident.

However, such an assumption can be risky under Swedish law. Under the current rules, an individual may in certain cases be regarded as habitually staying in Sweden even if they have not exceeded 183 days during a calendar year. In certain cases, including a much-discussed judgment from a Swedish Administrative Court of Appeal (“kammarrätten”), as few as 79 days in Sweden per calendar year have even been considered sufficient.

An individual who incorrectly assumes otherwise may therefore fail to report income in Sweden even though unlimited Swedish tax liability may in fact exist.

Potential tax consequences of an incorrect assessment

If the Swedish Tax Agency subsequently concludes, following a review, that the individual was subject to unlimited tax liability in Sweden, the consequences may be substantial. These may include Swedish taxation of foreign income, interest and, in certain cases, tax surcharges (“skattetillägg”) or other penalties.

For individuals with substantial foreign income or capital assets, an incorrect assessment may therefore have very significant financial consequences. It is accordingly important to analyse the issue in advance, particularly where an individual spends recurring periods in Sweden.

Do tax treaties affect habitual stay?

Yes. Tax treaties can have a very significant impact. It is, however, important to distinguish between Swedish domestic law and tax treaties.

Habitual stay is a domestic-law basis for unlimited tax liability in Sweden. If an individual is regarded as habitually staying in Sweden, they may therefore be subject to unlimited tax liability under the Swedish Income Tax Act. This does not, however, automatically mean that Sweden will ultimately have the right to tax all of the individual’s income.

Swedish domestic law and tax treaties must be assessed separately

The analysis should normally be carried out in two stages. First, it must be determined whether the individual is subject to unlimited tax liability under Swedish domestic law, for example by reason of residence, habitual stay or significant connections.

Second, it must be assessed whether an applicable tax treaty limits Sweden’s taxing rights. If the individual is regarded as resident for treaty purposes in another country under the treaty’s residence article, Sweden may in many cases be prevented from taxing certain categories of income, even though the individual is subject to unlimited tax liability under Swedish domestic law.

Practical significance

It is therefore not sufficient merely to count the number of days spent in Sweden. Even where an individual exceeds the Swedish thresholds for habitual stay, it is still necessary to analyse whether an applicable tax treaty restricts Sweden’s taxing rights.

At the same time, it should not be assumed that a tax treaty will always eliminate Swedish taxation. Depending on the type of income and the wording of the relevant tax treaty, certain income may still be taxable in Sweden

Our comment

In our view, it is positive that the concept of habitual stay is proposed to be given a clearer definition. The issue is fundamental, since it may determine whether Sweden has the right, under its domestic law, to tax an individual’s worldwide income.

The proposal should create greater predictability for individuals who live abroad but spend time in Sweden, as well as for individuals moving to or from Sweden. It should also facilitate the Swedish Tax Agency’s application of the rules.

At the same time, it is important to emphasise that the new rules would not mean that all other issues disappear. An individual may still need to analyse residence, significant connections and tax treaties. In most international situations, it is the interaction between these rules that determines the ultimate tax consequences.

Do you need assistance assessing habitual stay in Sweden?

We regularly assist internationally mobile private individuals, entrepreneurs and executives with matters relating to Swedish tax liability, habitual stay, significant connections and tax treaties.

If you live abroad but spend time in Sweden, or if you are planning to move to or from Sweden, it may be important to assess in advance whether your presence could result in unlimited tax liability in Sweden.

Such an analysis should normally not be limited to the number of days spent in Sweden, but should also include other Swedish connecting factors, the individual’s worldwide income situation and any applicable tax treaty.

Disclaimer

This article has been written by Felix Schöttle, LL.M. The article is intended for general informational purposes only and does not constitute legal advice, tax advice or other professional advice.

The assessment of habitual stay, unlimited tax liability, significant connections and tax treaties will often depend on all the facts and circumstances of the individual case. We therefore always recommend obtaining individual advice before taking, or refraining from taking, any action based on the information contained in this article.