Sweden Proposes Reduction of SINK Rate to Enhance Tax Neutrality

Date: June 16, 2025
Author: Victoria Robinson, KPMG Sweden

In a recent memorandum released on May 19, 2025, the Swedish government has put forth a proposal to lower the special income tax rate for non-residents from 25% to 20%. This change is set to take effect on January 1, 2026, and will impact an estimated 90,000 individuals currently subject to the special income tax laws.

Overview of the SINK Tax

The Special Income Tax Act for Non-Residents (1991:586), known as SINK, allows non-resident individuals with limited tax liability in Sweden to be taxed at a flat rate on specific Swedish-sourced income, including employment income and pensions. Currently, this flat rate stands at 25%, unchanged since 2018. The structure of the SINK regime requests no formal Swedish tax return filings, making it convenient for non-residents. Moreover, under this regime, no deductions for expenses are permitted, making the tax rate final.

The Swedish government is proposing this adjustment as a move towards restoring tax neutrality, especially in response to decreased income tax rates for individuals with unlimited tax liability in recent reforms.

Policy Objectives and Fiscal Impact

The Ministry of Finance has projected that the reduction in the SINK rate will lead to an estimated annual revenue loss of SEK700 million. However, officials believe that maintaining fairness within the tax system justifies this measure. This reduction is anticipated to boost Sweden’s appeal to international talents and workers, particularly in sectors characterized by short-term assignments and remote working arrangements.

From a policy perspective, the proposed SINK reduction aligns with Sweden's broader goal of maintaining a competitive and efficient tax framework. The SINK regime specifically simplifies tax compliance for non-residents and aids in the efficient collection of taxes via withholding at source. The introduction of the lower rate may motivate compliance and minimize informal tax arrangements.

Implications for Employers and Global Mobility Professionals

Employers who employ internationally mobile workers should evaluate how this proposed rate change might impact their payroll systems and overall staffing costs. While the reduction is likely to alleviate the tax burden for affected employees, organizations may need to update internal policies, including estimates for assignment costs and gross-up calculations.

Global mobility professionals must prioritize proactive tax planning and maintain open communication with non-resident employees about these changes. The time leading up to the effective date of the new tax rate will present an opportunity to reassess current SINK applications, check eligibility, and adjust payroll systems accordingly.

Conclusion

The proposed reduction of the SINK rate to 20% signifies a significant pivot towards achieving tax neutrality and enhancing Sweden’s competitive edge in attracting talent. While the financial implications of this policy change are noteworthy, it reflects Sweden’s commitment to an equitable and efficient tax landscape. Stakeholders, including employers and tax advisors, should closely monitor the legislative developments and prepare for the implementation ahead of the new rate's effective date in 2026.