Regardless of their nationality, residents of Sweden are entitled to social security benefits including health care, sickness benefits, child allowances, unemployment benefits, pensions and old age care.

Social security taxes are levied on salaries, wages and the assessed value of benefits in kind and are primarily paid by the employer. Payments are made to several programs but contributions to these various programs are assessed and administered by a single authority.

Employers pay social security taxes at a rate of 32.86% for 1995. However, if earnings are not included in the base for social security taxes, a special salary tax of 21.39% is applicable. Such earnings include, for example, payments to persons over the age of 65. An employer must also pay social security tax on total annual pension contributions at a rate of 21.39%.

Employees are subject to social security taxes of 2.95% for health insurance and of 1% for pension insurance on income from employment of up to SEK 267,750 for 1995.

Self-employed individuals are subject to social security taxes on their net taxable business income. For 1995, after deducting the cost of social security taxes, the rate is 31.25% from a business conducted actively by the individual and 21.39% for other business income. The lower rate also applies to active business income earned by self-employed individuals who are over 65 years of age.

Sweden has concluded totalization agreements with a number of countries to provide relief from double social security taxes and assure benefit coverage. A typical agreement permits a non-Swede on temporary assignment in Sweden - up to one year, which may be extended to two years - to contract out of the Swedish pension scheme and pay contributions and accrue benefits in his or her home country. Individuals working in Sweden for a limited time may find such agreements beneficial. Agreements with EC and EFTA countries usually apply for one year and are renewable one time. Agreements with other countries apply for one to five years and may be renewable.

Other Payroll Taxes and Employee Benefits

In addition to the legislated social security contributions, described in Section E.2, employers must also make negotiated insurance contributions. Negotiated benefits result from bargaining discussions between top-level trade unions and the Swedish Employer's Confederation. The benefits provide supplementary pension pay, unemployment compensation and similar payments. The benefit amount differs for office workers and factory workers. The employers' contributions rates for 1995, computed on the applicable gross payroll, are 8.3% for office staff and 6.7% for factory workers.

The contents of this article are intended as a general guide to the subject matter. Specialist advice should be sought for your specific circumstances.

For further information contact Per Snellman on Tel: +468 613 9000 0r Fax: +468 791 7511; or enter a text search 'Ernst & Young' and 'Business Monitor'.