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Double your pension by moving to Malta

By: Hans Bolander, free translation by Jakob Kegel.

Article first published in Dagens Industri

Lower taxes in other EU countries offers Swedish emigrants twice as much in pension.

An increasing number of Swedes are moving south to countries such as France, Italy, Spain and Malta. New tax regulation makes it easier to live outside Sweden on a Swedish pension. "Research suggesting that around 300 000 Swedes are going to move abroad in the next ten years. There are several reasons, such as climate, high taxes and a general distrust of the Swedish welfare system" says Göran Andersson, a tax advisor and founder of Taxzero, a consulting firm.

On behalf of Dagensi Industri, Swedens leading business newspaper, Taxzero together with Deloitte, a consulting firm, have calculated the amount of tax savings for a group of four 61 year old couples at different income levels in different countries.

Not only wealthy Swedes can gain from the tax savings, according to the study. It becomes clear when you realize that you can pay 20% tax in France instead of 57% in Sweden. With even a modest pension it is possible to save €10 000 per year in taxes. The savings will obviously increase the larger the pension.

The examples are based on people who are 61 and above since it is only from that age the Swedish state pension can be collected.

The new Swedish rules for capital gains tax when selling immovable property is making it easier for many Swedes to move abroad, since you can transfer the capital gains tax between EU countries. When you buy a permanent property in another EU country the tax must not be paid in Sweden, but can be withheld and transferred to the new property.

Generalizing which country is the best in terms of tax savings is impossible since the tax laws are complex and distinguish, among other things, between the different pension types and the treatment of capital gains tax.

"A Swedish pensioner will always get a lower tax when moving abroad. That is because Sweden has one of the world's highest progressive taxes. The tax in Sweden will be 25% or zero when a person emigrates", Göran Andersson is explaining.

One problem when emigrating might be inheritance and wealth taxes since these have recently been abolished in Sweden. It is however possible to avoid with fairly simple solutions. In Spain for instance, you can buy a life insurance where the capital will be invested and exempt from wealth tax. In France you can buy a capital insurance, Göran Andersson is explaining. Many countries are realizing that it is impossible keep such taxes. This year France has introduced inheritance tax reliefs.

One popular country from a tax perspective is Croatia because of the favorable tax agreements with former Yugoslavia, which are still valid. The state pension that is taken out in Croatia is tax free and the tax on occupational pension and private pension can be very low. Capital income is tax free in Croatia and there is no need to pay any tax in Sweden. One problem however, is the difficulty of getting a permanent resident status. "One cannot simply move there and expect lower tax", Johan Sander is saying.

Facts:


Italy
A married couple, 61 years old, terminating their renting contract in Sweden and buy a place in Italy. They keep their holiday home in Sweden. The couple are doctors and have an annual return of 8% from their stock portfolio worth 880 000 euro. The couple have each €1600 per month from their state pension, €2100 per month in occupational pension and €550 per month from a private pension.

Tax benefits:
Lower tax on the pension
Lower capital gains tax. Capital gains tax from shares is 12.5 %.
Can benefit from the country's health care system
Relieve from property tax (when selling)

Tax if they live in Sweden per year: €47 000
Tax if they move to Italy per year: €32 000
Joint tax saving per year: €15 000


Malta

A married couple, 61 years old, sell their property in Sweden and buy a new one in Malta. They keep their holiday home in Sweden. The couple have had well paid jobs in the private sector and have €1700 per month in state pension, €3000 per month in occupational pension and €550 per month in private pension.

Tax benefits:

Lower tax on the pension
No capital gains tax
Relieve from property tax (when selling)
No wealth or inheritance tax
Can benefit from the national health care

Tax if they live in Sweden per year: €50 000
Tax if they move to Malta per y
ear: €21 000
Joint tax saving per year: €29 000


France
A married couple, 61 years old, sell their house in Sweden and move to France. They get a €165 000 profit from the house. The couple buy an apartment in France and can avoid the property tax by taking advantage of relieve rules that apply in EU.The couple have €1600 per month in state pension and €200 per month in occupational pension.

Tax benefits
Lower tax on pension income
Lower capital gains tax. Holdings owned for more than 6 years get reduced tax.
Can benefit from the national health care.

Tax if they live in Sweden per year: €13 000
Tax if they move to France per year: €3200
Joint tax saving per year: €9800


Thailand
A married couple, 61 years old, sell their house in Sweden and move to Thailand. They get €165 000 in profit from the sale. The capital is placed in a foreigncapital insurance that generate 8% annual return. This makes it possible to avoid the capital gains tax. The couple have each €1600 per month in state pension, €700 per month in occupational pension and €160 per month from a private pension insurance.

Tax benefits
Lower tax on pension
No wealth or inheritance tax
Very low cost of living

Tax if they live in Sweden per year: €22 000
Tax if they move to Thailand per year: €13 0
00
Joint tax saving per year: €9000

Original article published 2008-03-29 10:18 in Dagens Industri