Locally engaged staff

Information to locally engaged employees at foreign embassies and consulates

As a locally engaged employee at a foreign embassy or consulate, you are required to submit a tax return and pay taxes in Sweden.

Exception: tax may instead be due in the embassy´s country under a tax agreement between Sweden and the embassy´s country.

Preliminary (PAYE) tax

You are required personally to pay preliminary tax every month in the form of ‘special A tax´ (SA tax). You apply to pay SA tax using form SKV 4314, Preliminär självdeklaration ("Preliminary income tax return").

Social security contributions (employer´s contributions or employee´s contributions)

As a general rule, the foreign embassy pays employer´s social security contributions (minus payroll tax) on your gross salary and taxable benefits if you are covered by the Swedish social insurance system.

Exception: If you have been engaged locally by the embassy of an EU country on 1 May 2010 or later, you may come under that country´s social insurance system. This will depend on whether or not the EU Member State concerned considers that you are covered by the rules on public sector employees (civil servants). If the embassy considers that you are equivalent to a public sector employee, you will belong to the social insurance system of the Member State that you are employed by. If the embassy does not consider you a public sector employee, you will belong to the Swedish social insurance system.

If you were already employed by the embassy of an EU Member State before 1 May 2010, you come under the transitional rules (see below).

Agreement on social security contributions

If you belong to the Swedish social insurance system, you can agree with the embassy to take over the embassy´s obligation to pay social security contributions. In that case, you will have to pay social security contributions in the form of employee´s contributions at a certain per cent of your gross salary and taxable benefits.

If you have an agreement on payment of social security contributions, you must state this in your preliminary income tax return. Employee´s contributions will be included in the SA tax that you pay every month.

Note that if you have entered into an agreement on social security contributions, unlike the embassy you are also required to pay payroll tax (9.21 per cent in 2012). This means it is more expensive to enter into an agreement on social security contributions than if the embassy itself pays social security contributions in the form of employer´s contributions. As a general rule, the embassy is required to pay employer´s contributions. Therefore, if the embassy is to avoid paying employer´s contributions it must be able to show that there is an agreement with the employee that makes the employee responsible for paying social security contributions (in the form of employee´s contributions).

Income statement (kontrolluppgift)

At the end of the income year, the embassy provides an income statement (kontrolluppgift), KU10, both to the Swedish Tax Agency and to you. The income statement contains information about gross salary paid, benefits and other compensation. This information is then pre-printed on your income tax return.

Salary is normally entered in box 11 on KU10. Benefits such as free meals or a company car are entered in boxes 12—18, marking boxes 41—49 with an X.

If there is an agreement on social security contributions (you pay employee´s contributions), salary and benefits should instead be entered in box 25 on form KU10.

If you have opted to belong to the social security system of the embassy´s country, in accordance with Regulation (EEC) 1408/71, salary and benefits are declared in box31with information entered in boxes 41 — 49 and 14—17.

If you are required to pay tax in the embassy´s country under a tax agreement between Sweden and that country, the embassy will provide a special income statement (KU14).

Income tax return

You are required to file an income tax return using form Inkomstdeklaration 1. The Swedish Tax Agency pre-prints the information contained in your income statement on your income tax return. If you have not received an income statement from your employer, you are still required to state your income (gross salary, taxable benefits and other compensation) in your income tax return and give the name of your employer under övriga upplysningar ("other information").

If you and the embassy have entered into an agreement on payment of social security contributions (you pay employee´s contributions), you must also submit tax return form T1 (SKV 2050). If, under a tax agreement between Sweden and the embassy´s country, you are not subject to taxation in Sweden, you must state this in your income tax return under övriga upplysningar ("other information").

Transitional rule (applies to locally engaged employees at embassies of EU Member States who were employed before 1 May 2010)

The transitional rule allows Regulation (EEC) No 1408/71 to continue to apply to a person in cases where Regulation (EEC) No 883/04 would mean that they would be subject to another Member State´s social security system. The transitional rule only applies as long as the circumstances remain unchanged, and for no more than 10 years.

Forms