Tax Guide - Real Estate Capital Gains Tax in Sweden

Sweden is generally regarded as a high-tax jurisdiction, particularly with respect to employment income. The tax consequences arising from the disposal of real estate are, however, governed by a separate set of rules that are often less well understood, especially by expats. Questions frequently arise as to how capital gains are taxed when selling real estate located in Sweden, whether any possibilities for tax deferment exist, and how Sweden treats capital gains derived from real estate situated abroad.

"Sweden has a tax claim on capital gains from selling real estate located outside of Sweden. This tax claim has been an unpleasant surprise for expats living in Sweden."

How High Is the Capital Gains Tax Rate in Sweden?

Capital income in Sweden is generally taxed at a flat rate of 30 percent. However, real estate is subject to special rules, and the effective tax rate may therefore deviate from the standard capital income tax rate depending on the nature and use of the property.

Private Use Real Estate

Where real estate is held for an individual’s private use, meaning that it has not been acquired or held as an investment, the applicable effective tax rate on capital gains is 22 percent. This reduced rate applies both to an individual’s main residence and to secondary residences, such as holiday homes, provided that the statutory conditions for private use are met.

Investment Property

By contrast, where real estate is acquired and held as an investment, the tax treatment may be significantly more burdensome. In such cases, capital gains may in certain situations be reclassified in a manner that triggers both income taxation and social security contributions, resulting in an effective tax burden that can, in extreme cases, approach approximately 80 percent. This outcome is highly fact-dependent and requires careful legal assessment.

Deductibility of Capital Losses on Real Estate

If a capital loss arises from the sale of real estate held for private use, 50 percent of the loss is generally deductible against other forms of capital income, such as dividends and interest. Where the individual’s overall capital result for the year is negative, the resulting capital deficit may further be credited against tax on employment income at a rate of 30 percent, subject to a maximum credit corresponding to a capital deficit of SEK 100,000.

When Is the Point of Taxation?

Under Swedish tax law, the point of taxation for capital gains on real estate is the moment at which a legally binding purchase agreement is entered into by the buyer and the seller. The actual transfer of title is therefore not decisive for tax purposes.

As a result, an individual who signs a binding agreement to sell a house on 23 December 2026 is required to report the transaction in the 2026 income tax return, which is filed during the spring of 2027, even if the formal transfer of ownership takes place at a later point in time.

Declaring Real Estate Disposals in the Swedish Tax Return

The Swedish Tax Agency, ("Skatteverket"), is normally informed of all real estate transactions taking place in Sweden, which means that certain transactional data is often pre-filled in the annual tax return issued to Swedish tax residents in March.

Where a Swedish tax resident disposes of real estate located outside of Sweden, the transaction must, however, be manually reported in the Swedish tax return. From a Swedish domestic law perspective, capital gains derived from foreign real estate are, as a general rule, taxed in the same manner as gains derived from real estate situated in Sweden.

Relevance of Tax Treaties

In certain cases, an applicable tax treaty may limit or entirely prevent Sweden from taxing capital gains derived from the sale of real estate located abroad. This can be particularly advantageous, as many jurisdictions provide exemptions or reliefs for capital gains arising from the sale of a private residence, subject to conditions such as minimum holding or residence periods. Whether such treaty protection applies requires a careful analysis of the specific treaty provisions and the individual’s treaty residency.

How Are Capital Gains on Real Estate Calculated for Swedish Tax Purposes?

Swedish tax law contains detailed rules governing the calculation of capital gains on real estate. As a starting point, the acquisition cost of the property is deducted from the sales proceeds. In addition, certain expenses relating to improvements to the property may be taken into account.

Costs incurred for rebuilding, renovation, or refurbishment may be deductible, although the scope of deductibility is subject to important limitations. As a general rule, rebuilding costs are fully deductible without any time limitation, whereas costs relating to renovation and maintenance are only deductible for a period of five years and only to the extent that such costs restore the property to its original condition.

This distinction means, for example, that a renovation resulting in a higher standard than the original state of the property will only be deductible up to the theoretical cost of restoring the previous standard. The legal boundary between deductible rebuilding costs and time-limited renovation costs is complex and has been shaped extensively by case law from the Swedish Supreme Administrative Court. Given the potential tax exposure, professional advice is strongly recommended when assessing deductible costs.

Are There Possibilities for Tax Deferment?

Swedish tax law provides for the possibility of deferring capital gains tax arising from the sale of a private residence, meaning that payment of the tax may be postponed. Such deferment is subject to several conditions, most notably that the seller acquires a replacement residence and that the sold property constituted the seller’s main residence for a minimum period, generally at least one year.

Given the technical nature of the deferment rules and the significant amounts often at stake, professional assistance should be sought when claiming a tax deferment in the Swedish tax return.

Do I Risk Double Taxation on Real Estate Capital Gains?

As previously noted, Sweden taxes capital gains realised by its tax residents even where the underlying real estate is located outside of Sweden. At the same time, the state in which the real estate is situated will almost invariably assert its own taxing right over the gain.

In such situations, relief from double taxation must be sought under the applicable tax treaty. This requires a determination of the individual’s tax treaty residency, which is a complex legal assessment, as well as a careful analysis of the relevant treaty provisions, which vary significantly from one treaty to another.

When Should Professional Advice Be Sought?

If you are a Swedish tax resident who plans to sell, or has sold, real estate located outside of Sweden, it is strongly advisable to seek professional tax advice when preparing and filing your Swedish tax return, in order to ensure correct reporting and to mitigate the risk of unnecessary taxation.