Capital gains tax must be applied when foreign currency and receivables in foreign currency are divested. The current regulations encompass all types of receivables, such as bonds, debentures, deposit accounts in foreign banks (bankbooks), private debt instruments/promissory notes, as well as bank notes and coins in foreign currency.
The regulations also encompass convertibles, participation certificates and equity certificates if they are issued in a foreign currency, as distinct from those that are issued in SEK, and which are taxed in the same manner as partial-ownership rights (shares etc.).
This group of financial instruments also comprises forward contracts, options and similar agreements where the underlying property can be linked to foreign currency or receivables in foreign currency or a currency index.
Foreign-exchange gains and losses on liabilities in foreign currency are also taxable or deductible as income from capital.
A tax exemption for foreign-exchange gains and losses on travel currency has been introduced for practical reasons. Currency used for personal living expenses during a temporary stay abroad is not subject to taxation and is not deductible. This also applies to traveller’s cheques and similar. A temporary stay is normally six months or less. The purpose of the expense determines whether or not it is exempt from taxation. Foreign exchange gains made on leftover currency after returning home are therefore not subject to taxation.
Anyone who conveys a payment of more than SEK 150,000 to or from Sweden on behalf of a natural person, the estate of a deceased person, or a legal entity, must submit a statement of earnings and deductions regarding the payment. A statement of earnings and deductions must also be submitted for instalment payments when the total amounts to more than SEK 150,000. In the case of natural persons and estates of deceased persons, the obligation to disclose information applies only if the party in question has unlimited tax liability. In addition, a statement of earnings and deductions must be submitted for payments made within Sweden if one of the parties has unlimited tax liability and the other has limited tax liability.
A natural person with unlimited tax liability refers to all of the following:
All other natural persons have limited tax liability, which means that only certain parts of their income are subject to taxation in Sweden.
A statement of earnings and deductions includes details of the size of any payment made, the purpose of the payment, the country to or from which the payment was made, and (in the case of payment to a country other than Sweden) the recipient’s name.
Divestment transactions are subject to taxation. Examples of these transactions include currency exchange, withdrawal of foreign currency from a bank account, payments in foreign currency, and the sale and redemption of debentures or other receivables in foreign currency.
The divestment of a liability in a foreign currency occurs when the liability is settled – i.e., each time an amortisation payment is made. If a liability is assumed by another borrower in return for payment, this is also considered a divestment. However, the renewal of a loan in foreign currency is not regarded as a divestment. The renewal of a loan refers to the extension of a loan, with largely unamended terms and conditions.
Whether it involves a loss or gain, the exchange of one currency for another constitutes a tax-liable divestment – even if the exchange does not involve Swedish kronor (SEK). For example, when exchanging euros (EUR) for US dollars (USD), the capital gain on the divestment of EUR must be calculated in SEK. The SEK value of the amount received in USD constitutes the sale price of the divested EUR. This SEK value also constitutes the purchase price of the USD. Additional transaction costs are applied in both cases.
When assets are divested in return for payment in foreign currency, taxation is in accordance with to Swedish regulations. Normally, assets are divested and payments made in the foreign currency, and the amounts are then converted to SEK. Three capital gains calculations should subsequently be made: one for the sale of the asset; one for the purchase price; and one for the conversion of foreign currency to SEK.
However, an exception applies if the purchase price of the asset is converted to SEK within 30 days of the divestment date. In this case, gains or losses resulting from the exchange rate on the conversion date should be included in the amount of compensation when calculating the capital gain for the divested asset. Capital gains or losses relating to both currency exchange and purchase price are thus included in the gain or loss made on the asset, and taxation is in accordance with the regulations that apply to the asset.
Compensation for divestment of foreign currency – or a receivable in a foreign currency – is either the amount received in SEK, or the SEK value of an asset received in exchange (another foreign currency, for example). The acquisition cost is the price paid for the asset.
In addition to exchange rate changes, the capital gain calculation for a receivable includes any change in value of the receivable itself. For example, the value of an interest-bearing bond in USD increases if the US interest rate falls. When the bond is divested, the capital gain calculation will factor in both this increase in value and the exchange rate differences.
On 1 May, Tess exchanges SEK 7,500 for NOK 7,000.
On 1 July, she exchanges NOK 7,000 for USD 1,000. The value of USD 1,000 on that date is SEK 8,000. The value of NOK 7,000 is also SEK 8,000. On 1 August, Tess exchanges USD 1,000 for EUR 1,000. The value of EUR 1,000 on that date is SEK 9,000. On 1 July, Tess makes an exchange rate gain of SEK 500 (SEK 8,000 minus SEK 7,500). On 1 August, she makes an exchange rate gain of SEK 1,000 (SEK 9,000 minus SEK 8,000).
Kalle borrows EUR 50,000 when the SEK-EUR exchange rate is 11.0. He repays EUR 20,000 when the exchange is 10.50.
Income: 20,000 × 11 = SEK 220,000
Deduction: 20,000 × 10.50 = SEK 210,000
Kalle makes an exchange-rate gain of SEK 10,000 (SEK 220,000 minus SEK 210,000) on the repaid amount.
With regard to liabilities in foreign currency, only exchange-rate gains are subject to taxation. Other gains, such as when a creditor offers a capital discount for advance repayment, are not subject to taxation.
The acquisition cost must be calculated according to the average cost method if the same type of asset – such as a particular currency – is acquired on different occasions. If a loan is taken up in instalments, the average acquisition cost must also be applied when calculating the capital gain.
If a currency exchange has taken place, the actual exchange rate is used when calculating the capital gain. If a currency exchange has not taken place, the fixed rate set by Nasdaq Stockholm AB for each banking day should be applied. Details of daily fixed rates are available on Nasdaq.com and Riksbank.se. If fixed rates for a particular currency are unavailable, the average exchange rate – between the buying and selling rate on the transaction date according to official exchange rates – may be applied.
You must declare currency and market-listed receivables in foreign currency in annexe K4, in section C. You must declare unlisted receivables in foreign currency in annexe K4, section D. Divestment of liabilities in foreign currency: see guidance form SKV 2191: “Liabilities in foreign currency – Gain and loss” (“Skuld i utländsk valuta – Vinst och förlust”). The most convenient way to submit annexe K4 is by logging into the e-service, “Income Tax Return 1” (“Inkomstdeklaration 1”) with e-identification, and filing it with your income tax return. The e-service will help you to make various calculations, and to transfer various amounts to your income tax return. It will also calculate your tax for you. If you choose not to file your tax return digitally, you will find further information under “Forms” below.
You must declare divestment of foreign currency and market-listed receivables in foreign currency in annexe K4, section C.
You must declare unlisted receivables in foreign currency in annexe K4, section D.
Divestment of liabilities in foreign currency: see guidance form SKV 2191: “Liabilities in foreign currency – Gain and loss” (“Skuld i utländsk valuta – Vinst och förlust”) – please see link below.