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A Double Taxation Avoidance Agreement (“DTAA”) between the government of the Republic of India and the government of the kingdom of Sweden for the avoidance of Double Taxation and the prevention of fiscal evasion with respect to taxes on income and on capital, was signed at New Delhi on 24 June, 1997.

Purpose and applicability

The DTAA was updated by the signing of the amending protocol which mainly replaced the articles concerning exchange of information in the existing agreement between India and Sweden, so as to facilitate the sharing of banking details and tax-related information between the contracting states. The  DTAA shall apply to the following:

a. In India:

  • the income-tax, including any surcharge thereon; and
  • the tax on capital (the wealth-tax).

b. In Sweden:

  • the income-tax, including the national income-tax (den statliga inkomstskatten), tax on employees at sea (sjömansskatten) and the withholding tax on dividends (kupongskatten);
  • income-tax on non-residents (den sarskilda inkomstskatten for utomlands bosatta);
  • income-tax on non-resident artistes and athletes (den särskilda inkomstskatten for utomlands bosatta artisterm.fl.);
  • the municipal income-tax (den kommunala inkomstskatten);
  • tax on means intended for expansion purposes (expansionsmedelsskatt); and
  • net wealth-tax.

Key takeaways

  1. Income derived by a resident from immovable property (including income from agriculture or forestry) situated in the other state, may be taxed in that other state.
  2. Profits of an enterprise of state would be taxable only in that state unless the business is carried on by the enterprise through a permanent establishment.
  3. If the enterprise carries on business as mentioned, then the profits of the enterprise may be taxed in the other state restricting to that of the permanent establishment.
  4. Profits of the enterprise earned through operation of ships or aircraft in international traffic, dividends by a company, capital gains, interests and royalties for the technical services.
  5. Artists and sports person resident of a state, deriving income from the other state as an artiste, such as a theatre, motion picture, radio or television artiste, or a musician, or as a sportsperson, from his personal activity, shall be taxable in the other state.
  6. A 10% withholding tax rate has been agreed upon in the DTAA on dividends, interests, royalties and fees for technical services. Further, an exception has been granted to dividends and interests earned by the Government and certain other specified institutions.

Inference and benefits

The laws in force in either of the state shall continue to govern the taxation of income in the respective states except where provisions are in contrast to this DTAA. States may communicate with each other directly for the purpose of reaching an agreement in case any dispute relating to any provision of the DTAA arises. The DTAA that has been agreed upon is in consonance with the internationally accepted standards and with the protocol even the use of information for non-tax purposes has been allowed under the domestic laws of both the countries provided an approval has been obtained of the supplying state.

To know more about DTAA relations between India and Sweden, please download our Guide.