How will the taxes be for a Danish citizen living in sweden- selling a house in Denmark?
Hi, I have a situation I hope you can help me with. I live in Denmark and would like to move to Sweden in the near future. My parents have a beachhouse (sommerhus in Danish) that they would like to sell to me and my brothers. If I move to Sweden after I bought the house, I will have to pay income tax if I sell it, however, what if I move back to Denmark after a number of years? Will I then have to pay tax as well when I move or if it is eventually sold many years after? What if the house was bought after I moved to Sweden? Would I then have to pay any taxes if I moved back to Denmark, or when I sold it many years after? My parents also wants to give their children a monetary gift every year, some of that will probably be used to repay what is owed to them for the beachhouse. In Denmark you can give 67k DKK per year to family members without paying taxes on it, but what happens when my parents give gifts to me when I am living in Sweden?
Hi and thank you for choosing Lawline for your question!
I want so start by saying that I am sorry for my far from perfect English, but I really hope that you will understand my answer, if not- do not hesitate to contact me by email to clarify what is unclear to you. You will find my email at the bottom of my answer.
The relevant law for your question is Inkomstskattelagen (IL).
In Sweden you can be defined as either an unlimited- or a limited taxpayer. Which one of the two that you will be defined as will determine which rules that apply to your situation.
If you live in Sweden, have your "real" home here and is nationally registered (folkbokförd in Swedish) at the address for your home in Sweden you will most certainly be defined as an unlimited taxpayer (3 kap. 3§ IL). If you are an unlimited taxpayer you will have to pay taxes for all your incomes. Even those who comes from other countries (3 kap. 8§ IL).
Based on the facts that you give in your question my assessment is that you will be defined as an unlimited taxpayer, with the exception if you only live her for a few months (less then six months).
What will happen when you sell the house?
If you still live in Sweden?
So if you sell your house in Denmark while you live here and is defined as a unlimited taxpayer, you will have to pay Swedish taxes if you sell with a profit (3 kap. 8§ IL), just as you say in your question. Therefore it is important for you to look up if you will have to pay Danish taxes as well, so you can estimate how much tax you will have to pay.
If you have moved from Sweden recently – the five year rule?
If there is less then five year since you moved from Sweden there is a rule called "the five year rule" that may apply on you (3 kap. 7§ IL). The rule implies that if you have an "essential connection" to Sweden you will still be defined as an unlimited taxpayer, even though you have moved back to Denmark. The first five year it is up to you to prove that you don't have an "essential connection" to Sweden , if you don't do that you will be defined as an unlimited taxpayer. After the first five years it is up to the tax government (skatteverket) to prove that you have an "essential connection" to Sweden, if they can't prove that- you will not be defined as an unlimited taxpayer.
The things they will value to decide if you have an "essential connection" to Sweden is:
-If you are a Swedish citizen
-How long you lived in Sweden
-If you haven't been living permanent on another foreign place
-If you have been abroad because of your studies or your health
-If you have a resident here in Sweden that can be used year round
-If you have your family in Sweden
-If you have a company in Sweden
-If you are financially engaged in Sweden by having assets that in direct or directly, gives an essential influence in the company here
-If you have a real estate here
-Or similar circumstances
All the circumstances of significance in the individual case must be considered, otherwise it is not possible to determine if the person has an essential connection to Sweden or not, with other words a concerted assessment must be done in every case. There is no hierarchy between the different factors, but if you look at the tradition you can see that they are valued differently. The ones that the tax government seems to pay the most attention to are if you have a resident, your family or financial engagement here in Sweden. But it is important to know that you do not have to have all the factors to be considered to have an essential connection to Sweden, even if only one of the factors checks out on you- you can be considered to have an essential connection to Sweden. Another important thing to know is that even though you have an essential connection to another country, for example Denmark you can be considered to have an essential connection to Sweden as well, with other words you can have essential connection to multiple countries- one of them does not exclude the other one.
So if you recently moved from Sweden and then sell you house in Denmark you risk the chance to have to pay taxes for the profit in Sweden as well. It all will come down to if you are considered to have an essential connection to Sweden even though you moved back to Denmark.
It is impossible for me to say how the outcome would be in your case without knowing more than I do. But if you only move back to Denmark for a short period of time to only sell your house, and keep your residence in Sweden, and have other commitments here- I would say that it is a big risk that you will be considered to have an essential connection to Sweden and then have to pay taxes here as well. But if you have lived in Denmark for many years and have no commitments or residence here in Sweden I would say that the risk that you will be considered to have an essential connection to Sweden is very low if it even exits. The longer you lived in Denmark (or steadily another country) and if you have no other connections to Sweden – the lower the risk is if it even exists by then.
Does it matter if you buy the house before or after you move to Sweden=
It doesn't matter at all if you buy the Danish house before or after you move to Sweden. The only rules that will decide if you have to pay taxes when you sell the house is the rules I explained above. So if you do not live in Sweden and is not considered to have an essential connection to Sweden and therefore is an unlimited taxpayer- you will not have to pay taxes in Sweden when you sell the house, even though you bought the house while you lived in Sweden.
Do you have to pay taxes on gifts in Sweden?
In Sweden we have no taxes on gifts, so your parents can give you how much they want without you having to pay taxes because of the gifts. These rules applies if the gifts really are gifts, if they actually do have another meaning there can be other rules that applies. But as long as it truly is a gift from your parents and not something else disguised as a gift- there will be no taxes on it.
I hope you feel that your questions has been answered, otherwise or if it is anything else connected to the question, feel free to email me on firstname.lastname@example.org and I will answer your follow up questions.
Best regards,Elin Englund