In two decisions, the Supreme Administrative Court (HFD) have determined as to whether visits to Sweden are to be seen to be permanent stays for income tax purposes. HFD’s decisions provide a reply to certain questions but, unfortunately, imply that current practice and interpretation no longer applies.
In the first case, Case Nr. 6736.17, a couple is planning, after moving to Portugal, to regularly visit Sweden during the summers between June and August, that is, during a period of three months. In addition to this, the couple estimate that they will travel to Sweden irregularly in order to visit relatives and friends and this will total approximately 30 days a year in Sweden. HFD determined, first, that a regular visit of three consecutive months per year would not be considered to comprise a permanent stay. HFD also deemed that the additional irregular stays totaling 30 days (a total of approximately 120 overnight stays), HFD deemed that the couple would not be seen to incur permanent stay status in Sweden.
In the second case, Case Nr. 6034.17, an individual asked if he could visit Sweden during five months during the summer, that is, between 1 May and 30 September, three weeks during the Christmas period and if he could make two visits of four days each per year, without these visits being seen to comprise permanent stay. Totally, these visits would amount to 182 days per year.
HFD determined that only the repetitive summer visit of 5 months was of such a length, and was to take place on such a regular basis, that the individual, already for that reason, would be seen to incur permanent stay status in Sweden.
The regulations regarding permanent stay are not clear and the visits implying permanent, respective non-permanent stay, have been a real headache for tax advisors and for those living abroad.
Now, with HFD announcing two decisions, our hope had been that these decisions would contribute to establishing the delineation to apply in determining permanent stay. However, it is questionable if these decisions actually provide any light on the issue.
It is true, one could conclude that an individual having a visiting pattern in which they each year regularly come to Sweden for a long stay of three months and then have approximately 30 days of irregular visits, does not incur permanent stay status in Sweden. One could also conclude that regular visits in Sweden during five months or longer, without interruption, imply permanent stay.
The Council for Advance Tax Rulings, in a, non-appealed advance ruling which we reported upon previously in Tax matters, has determined that regular visits to Sweden totaling 111 nights per year, that is, fewer overnight stays than in the first case by HFD, imply permanent stay. In the non-appealed advance ruling, the visits were more regular and greater in number, which also contributed to each stay outside Sweden being less than two months. It is probable that these varying factors contributed to this different assessment. However, fact still remains that the new case from HFD allows more overnight stays in Sweden without constituting a permanent stay compared to the ruling from the Council for Advanced Tax Rulings and it looks like the verdict and the ruling is in no way conflicting. Therefore, the new case can hardly be seen as contributing to shedding light to how many overnight stays in Sweden that constitutes a permanent stay.
When it comes to the other decision, regular visits in Sweden totaling five months were seen to imply a permanent stay. If an individual visited Sweden only five months in a year per year, then he or she would be outside Sweden during a period of seven months between his or her visits to Sweden. In its position paper, “What comprises a temporary interruption in a permanent stay?”, the Tax Agency has stated that the Agency’s view is that a stay must be in excess of six months in order to be seen to be permanent and that a six month stay outside Sweden is always to be seen to break up a permanent stay. In other words, in this case, HFD has determined in direct contrast with the Agency’s position. This implies a potential change in practice and that the Tax Agency should revise its position.
In spite of a number of statements and decisions during recent years, the legal position regarding permanent stay has not been entirely clarified. In order to create predictability as to the extent to which Swedes living abroad and individuals who have previously worked in Sweden can visit Sweden without incurring permanent stay status, it is PwC’s understanding that this question should be clarified through legislation. Such legislation should include a clear delineation whereby a maximum number of days in Sweden is defined. Currently, it is, unfortunately, extremely difficult to know what type of visiting pattern leads to permanent stay status and what type of pattern doesn’t lead to permanent stay.
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