Decided: SINK tax reduced to 20 percent in two steps

The Swedish Parliament has recently decided to reduce the SINK tax (Special Income Tax for Non-Residents) from 25 percent to 22.5 percent starting January 1, 2026. On January 1, 2027, the tax will be further reduced to 20 percent. This decision is welcome news for those residing abroad who, for example, work temporarily in Sweden, commute daily to work in Sweden, or receive pension income from Sweden.

What is SINK? 

SINK is a special income tax applied to individuals who are not residents of Sweden but have income from work or pensions sourced in Sweden. The tax rate is fixed and usually applies to temporary assignments, board renumeration, or pension income from Sweden for persons residing outside Sweden. No Swedish income tax return needs to be filed, no deductions can be made, and there is no entitlement to basic allowance or earned income tax credit. 

A person residing abroad must be considered limited tax liable in Sweden to be subject to SINK. This means they must not live in Sweden, have a permanent residence in Sweden, or significant ties to Sweden - if so, they are considered unlimited tax liable and must pay tax according to the Income Tax Act, i.e., state and municipal income tax. Even if a person is limited tax liable, they may choose to be taxed according to the Income Tax Act if that would be more favorable. In such cases, a Swedish tax return must be filed. 

The new regulation 

On January 1, 2026, the first reduction of the SINK tax will take effect, motivated by simplification and neutrality reasons in light of the decided reforms in the Income Tax Act, which include reduced taxes on earned income. This could otherwise make SINK taxation less beneficial for some. A reduced SINK tax also helps attract international labor to Sweden and creates a competitive labor market. 

Thus, SINK is reduced in two steps. From January 1, 2026, the tax rate will be lowered from 25 percent to 22.5 percent. From January 1, 2027, it will be further lowered to 20 percent, corresponding to a total reduction of 5 percent compared to the current rate. The decision affects approximately 90,000 limited tax liable individuals and results in an average increase of SEK 7,700 in disposable income per year. 

The SINK tax must be applied for each year a limited tax liable person has income from Sweden that should be taxed under SINK. We at PwC are happy to assist with SINK tax applications and to assess whether the conditions for paying SINK tax are met. Don’t hesitate to reach out and we will assist you further.