Voluntary Correction – Correcting Previous Swedish Tax Reporting

Swedish tax rules are complex and constantly changing. This makes it difficult, in certain cases, such as when receiving income from foreign sources, to correctly declare all income in the annual Swedish income tax return (inkomstdeklaration).

If the Swedish Tax Agency (Skatteverket) discovers that you have submitted an "incorrect statement" (oriktig uppgift), meaning that income has been concealed or incorrectly declared in a previously filed return, this can result in a tax surcharge (skattetillägg) of 40% on top of the additional tax owed, and in serious cases, criminal law investigations. By submitting a Voluntary Correction, the risk of a tax surcharges and criminal law proceedings can be entirely avoided.

Can the Swedish Tax Agency Reassess (Increase) My Tax for Previous Years?

The Swedish Tax Agency continuously reviews individuals' previously filed tax returns. The reasons for initiating a review or audit can vary, but common triggers include receiving a tip-off or another country reporting information to Sweden regarding a Swedish person's income. A concrete example is when a Swiss bank reports capital gains made in a Swiss securities account to the Swiss tax authorities, which subsequently shares that information with the Swedish Tax Agency.

How Far Back Can the Swedish Tax Agency Go?

Under Swedish law, the Swedish Tax Agency can go back six years and increase a person's taxable income through a reassessment (omprövning). Generally speaking, however, the person must have submitted an incorrect statement for the Swedish Tax Agency to have the right to reassess a return once more than two years have passed since the income year.

What constitutes an incorrect statement is legally complex to determine. The assessment is based on case law from the Supreme Administrative Court (Högsta Förvaltningsdomstolen), statements in legislative preparatory works (förarbeten), and statements in legal doctrine.

What Is a Swedish Tax Surcharge?

The Swedish Tax Agency has the ability to impose a tax surcharge when reassessing returns to a person's disadvantage, that is, when tax for previous years is increased. The surcharge can be painful, as it typically amounts to 40% of the additional tax.

Example

If the Swedish Tax Agency decides that a person must pay an additional SEK 100,000 in tax, it may additionally impose a surcharge of SEK 40,000, which essentially functions as a penalty. In cases where the Swedish Tax Agency believes the person may have committed tax fraud (skattebrott), the imposition of the surcharge is usually deferred pending the outcome of the criminal proceedings.

How Does a Voluntary Correction Work?

If an individual submits a Voluntary Correction (frivillig rättelse) of a previously filed income tax return to the Swedish Tax Agency, it has no ability to impose a tax surcharge, provided that certain conditions are met. The possibility of a Voluntary Correction exists to encourage individuals who have omitted income, failed to disclose information, or made other errors, to correct their returns without risking a penalty. It is worth noting that submitting a Voluntary Correction carries no filing fee. The only cost involved is any legal fees for professional assistance, which is nonetheless highly recommended (see below).

How Is a Voluntary Correction Filed?

A Voluntary Correction consists of a written submission containing a request for the reassessment of a person's income tax for a specific tax year. The submission must contain sufficient information for the Swedish Tax Agency to be able to make a decision on the taxation of the income. There is no standardised form for this, and the Voluntary Correction must therefore be drafted as a bespoke legal document. It is strongly recommended to engage a tax lawyer to prepare it.

What Does a Voluntary Correction Typically Include?

Depending on the nature of the income, the written submission may be supplemented by tax declaration forms, for example the K10 form in the case of shares in closely held companies. For foreign income, the following is typically required: correct classification of the income in relation to Swedish tax law, an explanation of that classification in the submission, currency conversion, and calculation of the acquisition cost (omkostnadsbelopp) in accordance with the Swedish tax method.

Why Is an "Open Disclosure" Critical?

For the reassessment to qualify as a Voluntary Correction, and thereby prevent a tax surcharge, it is critical that the submission contains what is known as an Open Disclosure (öppet yrkande). If this requirement is not met, the Swedish Tax Agency may still impose a tax surcharge despite the filing. Since an Open Disclosure places high demands on how the submission is structured and worded, a tax lawyer should always assist in its preparation. In almost all cases, the Swedish Tax Agency will also ask follow-up questions regarding the Voluntary Correction, which is yet another reason to seek professional help from the outset. If the Swedish Tax Agency disagrees with the legal assessment made in the submission, the matter can be appealed to the administrative courts (förvaltningsdomstol).

Practical Note on Additional Tax and Interest

If you expect that a Voluntary Correction will result in additional tax becoming due, it may be advisable to calculate the estimated additional tax and pay this amount into your tax account (skattekonto) in advance. Doing so can help avoid the accumulation of interest (kostnadsränta) on the outstanding tax debt while the Swedish Tax Agency processes the matter. It should also be noted that the Swedish Tax Agency can sometimes take a considerable amount of time to process Voluntary Corrections, making proactive payment particularly worth considering.

Can I Submit a Voluntary Correction Without Increasing My Tax?

In certain cases, there are good reasons to submit a particular type of Voluntary Correction whose sole purpose is to prevent a tax surcharge on income that has not been declared, without any additional tax necessarily becoming payable. This is a very favourable legal tool.

When Is This Relevant?

This type of correction is relevant when the legal position regarding a particular income is uncertain, that is, when it is unclear whether or how an income should be taxed in Sweden. A Voluntary Correction can in such cases serve as a kind of "hedge" against a future tax surcharge.

Practical Example – Foreign Trust

An example is when a person has received distributions from a foreign trust. If the trust is not considered equivalent to a Swedish family foundation (svensk familjestiftelse), the distributions may be tax-free. If it is considered equivalent to a Swedish family foundation, the distributions should as a main rule be taxed as employment income, at rates of 30–55%. If the person has not mentioned these distributions in their tax return, a Voluntary Correction can be filed subsequently, arguing that the trust does not correspond to a Swedish family foundation and that the income is therefore tax-free.

What Is Achieved?

If done correctly, this means that you need not worry about a potential tax surcharge, while your tax is not increased. However, there is always a risk that the Swedish Tax Agency disagrees with the legal assessment and decides to increase the tax, in which case the matter can be appealed to the administrative courts.

Contact nomadtax for Professional Assistance

Have you forgotten or failed to declare income from previous years, or declared income incorrectly? Take action by reaching out to us at nomadtax, so you can avoid worrying about a tax surcharge should the Swedish Tax Agency initiate a review. All staff at nomadtax hold a Swedish law degree (juristexamen) with many years of experience in tax law.

Please note that the information in this article is of a general nature and does not constitute legal advice. Always consult a qualified tax lawyer before taking any action.