If your clients have a Swedish life insurance policy to which they have paid premiums after 31 December 1996, they are obliged to pay Swedish yield tax.
This annual tax means your clients’ money is taxed annually and then ready for tax-free withdrawals. Income and capital gains arising from the funds and securities underlying the policy are not taxable, and there is no obligation to declare the transactions.
Key Points of Yield Tax Calculation:
- Policy Value at the beginning of each year.
- Premium Payments:
- The total value of premiums paid up to and including 30 June will be taxable.
- 50% of the value of premiums paid from 1 July to 31 December will be taxable.
- Government Loan Interest Rate: How high the government loan interest rate was on 30 November of the previous year.
The taxation is based on an assumed annual yield corresponding to the government loan interest rate, plus 1% (from 2018, the total must not be below 1.2%). For the end of November 2024, the Swedish National Debt Agency set the government loan interest rate at 1.96%. This means the annual Swedish yield tax for the fiscal year 2025 will be 0.888%([1.96 + 1.00] x 30%).
New Tax-Free Allowance
Starting 1 January 2025, policyholders will benefit from a tax-free allowance of SEK150,000, meaning the first SEK150,000 of their policy value (together with other policies and ISK accounts they hold) will be exempt from yield tax. This exemption will increase to SEK300,000 by 2026, further enhancing the attractiveness of life insurance as a tax-efficient wealth planning tool in Sweden.
To learn more about how these changes affect your clients and to tailor these insights to their unique needs, contact your Utmost Wealth Solutions sales representative for expert guidance.