Swedish Taxation of Crypto Income, and How to Legally Avoid the Tax

Crypto assets are becoming increasingly common among the general public, both as an investment and as currency, and in Sweden a recent study showed that six percent of Swedes own crypto assets. At the same time, legal and financial systems have struggled to classify crypto, including for Swedish tax purposes, although the legal situation has become clearer in recent years. In this article, we cover the basics of crypto taxation in Sweden and the potential possibilities of avoiding Swedish tax on crypto income.

Swedish Tax Liability on Crypto Gains and Income

Do Swedish Tax Residents Pay Tax on Crypto?

Sweden has a global tax claim on its tax residents, meaning that Sweden seeks to tax all income, regardless of source, of a Swedish tax resident. This tax claim includes crypto income and gains. Without going into detail, a person who is living permanently in Sweden is almost always considered tax resident in Sweden. Therefore, all persons living permanently in Sweden are usually subject to Swedish tax on their crypto income and gains.

Can Foreign Nationals in Sweden Avoid Swedish Crypto Tax Under a Tax Treaty?

Foreign (non-Swedish) nationals living in Sweden can sometimes claim benefits under a tax treaty that can prevent Sweden from taxing their crypto income. If the claim is successful, this means that the crypto income of that individual is tax free in Sweden.

In general, this requires that the individual is considered tax resident in another country than Sweden, and that the person has assets and family members in that country. Please do not hesitate to reach out to us if you would like to explore whether this option could be available for you.

How Crypto Is Taxed in Sweden

Legal Classification of Crypto Assets Under Swedish Tax Law

For a long time, the Swedish tax treatment of crypto income was unclear. However, the legal situation was clarified to a great extent by a verdict from the Swedish Supreme Administrative Court (HFD) in 2018. In the verdict, the court established the following defining principles for the taxation of crypto assets.

Crypto Is Not Treated as Currency or Securities

Crypto assets are neither classified as securities nor currencies under Swedish tax law.

Crypto Is Classified as Other Capital Assets

Crypto assets are instead classified as Other Capital Assets under Swedish tax law (Chapter 52 of the Swedish Income Tax Act).

By classifying crypto assets as Other Capital Assets, capital gains on crypto assets are subject to Swedish capital tax at 30 percent. Capital gains are calculated using the Cost Average Method, which means that an average acquisition price is determined based on every acquisition of the asset.

Deductibility of Crypto Losses

Capital losses on crypto assets are only deductible against capital gains to a limitation of 70 percent. According to the Swedish tax rules on capital deficits, a person who has an overall negative capital result can reduce employment income tax with part of the capital deficit. This is a relatively unique regulation from an international tax perspective and can be used in a planned manner.

How to Potentially Avoid Swedish Tax on Crypto Gains

Using Tax Treaties to Limit Sweden’s Tax Claim

As mentioned, the Swedish tax claim can be limited by applying provisions of a tax treaty. Consequently, if someone intends to sell a larger amount of crypto assets that would trigger a significant tax bill in Sweden, there are ways to ensure that the gain is not taxable by Sweden.

Tax Treaty Residency Planning

In order to succeed, a tax lawyer should properly assess the possibility of attaining tax treaty residency in another state that preferably does not tax crypto income. To stay clear of tax anti-avoidance rules, a clear strategy must be formed regarding how to carry out the proposed actions.

Holding Crypto Through Foreign Companies

In some cases, special Swedish tax rules have been used to transfer holdings of crypto assets to foreign holding companies. By combining Swedish tax rules, EU tax law, and the domestic legislation of another state, crypto income can be entirely tax free.

However, this would usually require the individual to drop his or her ties to Sweden, at least partly. With legal structuring, a skilled lawyer can establish a strategy that allows the individual to still spend time in Sweden and own assets in Sweden.

Crypto Tax Planning and Disclaimer

This article was prepared by Felix Schöttle, Swedish lawyer (LL.M.) and founder of nomadtax, a Swedish firm specializing in Swedish and international tax law. The content is provided for general informational purposes only and does not constitute tax or legal advice. Tax outcomes depend on individual circumstances, and professional advice should always be obtained before taking any action.

Contact us if you have any questions regarding this tax planning opportunity.