Do you live and pay tax in Sweden?
Do you want to reduce your taxable income?
Then this article can hopefully help you understand the Swedish Investingsparkskonto (ISK) Account.

What is the Swedish ISK account?

The Swedish Investingsparkskonto (InvestingSparksKonto = Investment Savings Account) account is a flat taxed investment account that was released by the Swedish Government in 2012. The idea was to create a more streamlined approach to managing financial securities, such as shares.

Unlike other traditional share trading accounts, no capital gains are taxed through an ISK account. Instead of capital gains, investors are charged a yearly standardised tax. As a result, the buying or selling of shares does not need to be recorded or reported to the tax authority (Skatteverket).

Who can open an (ISK) Investment Savings Account?

Only individuals (not companies) who have a Swedish personnummer (Social security number) are eligible to open an ISK Account. Ownership is individual, so one cannot have multiple people on the same account. There is no age limit on the account, so it can make a great investment strategy for children.

Most banks throughout Sweden are able to set up an ISK account. Some of these will have their own restrictions on what can be purchased, but generally, they all include funds and shares. For my ISK account, I use AVANZA, which is the largest stockbroker in Sweden. You can see some of my returns here.

The assets within an ISK account can be moved either within (i.e from normal account to ISK account), or between banks. An ISK account cannot be transferred

How is the Standardised ISK Tax calculated?

Tax is calculated annually based on each quarter in the month. At each quarter, the value of the assets, deposits and transfers of securities will be added up and then multiplied by the government loan rate (for the previous year) plus one percentage point. That value will then be taxed at 30%.

It sounds a bit confusing, but let’s break it down.

1. Get the total value of your ISK account

Tax is calculated on the amount in the account at the beginning of each quarter (i.e. January, April, July, October). This amount includes both the invested portion in shares and also the amount of free cash that’s sitting in the ISK account.

2. Determine the Capital base

This is worked out to be one-quarter of the total account value plus all the deposits of the year.

3. Find the Government Loan Rate (the standard income)

First, you must find the Government loan rate for the previous year. The Government Borrowing Rate can be found on the Riksgälden (Swedish National Debt Office) here

Once you have taken the Government loan rate from November of the previous year, you need to add 1 percentage point to determine the standard income. The average for the last 7 years has been 1.47%.

4. Calculate Yearly Tax Rate

The last step is to calculate the above numbers including the standard income rate, then multiply these by 30%.

Now you should have your answer. If it’s still a bit confusing, I have added an example with numbers below.

Swedish ISK Tax Example

Let’s run through an example with real numbers, to help you determine the tax payments on your ISK account.

Let’s say that this is your Account Summary for the Year:

  • In the first quarter, you started with 18,000 kr. You added 1,000 kr, and the value of your portfolio went up 2,000 kr
  • In the second quarter, you now started with a value of 21,000 (18,000 + 1,000 + 2,000). Your portfolio went up in value by 800 kr.
  • In the third quarter, you started with 21,800 (21,000 + 800), added 2,000 and the value of your portfolio went up by 1,200 kr
  • In the final quarter of the year, you started with 25,000 kr (21,800 + 2,000 + 1,200), added 1,000 kr and your portfolio didn’t grow.

This is how the above scenario would look:

QuarterInitial Value (for quarter)Deposits / WithdrawalsChange in ValueTotal (end of quarter)
Jan-01 18,000 kr 1,000 kr 2,000 kr 21,000 kr
Apr-01 21,000 kr 0 kr 800 kr 21,800 kr
Jul-01 21,800 kr 2,000 kr 1,200 kr 25,000 kr
Oct-01 25,000 kr 1,000 kr 0 kr 26,000 kr

Now lets go through the steps mentioned earlier.

1. Get the total value of your ISK account – Tax is calculated on the amount in the account at the beginning of each quarter (i.e. January, April, July, October).

The total value for the ISK account above would be 85,800 kr

Total Value = (18,000 + 21,000 + 21,800 + 25,000) = 85,800 kr

2. Determine the Capital base – This is worked out to be one-quarter of the total account value, plus all the deposits of the year.

All of the deposits of the year = 4,000 kr (1,000 + 0 + 2,000 + 1,000)

  • Capital base = (Total value + Total Deposits) / 4
  • Capital base = (85,800 + 4,000) / 4
  • Capital base = 22,450 kr

3. Find the Government Loan Rate (the standard income) – Find the Government loan rate for the previous year. Add 1 percentage point and then multiply that with the Capital Base to determine the standard income.

If the Government borrowing rate was 0.49% we add 1% on top of that. Now the rate is 1.49%.

Now we can determine the Standard Income.

  • Standard Income = Capital base x 1.49%
  • Standard Income = 22,450 x 1.49%
  • Standard Income = 334.51 kr

4. Calculate Yearly Tax Rate – Calculate taxation on the standard income rate (Final Tax)

  • Flat rate tax = Standard Income x 30% (30% is the tax rate)
  • Flat rate tax = 334.51 kr * 30%
  • Flat rate tax = 100.35 kr

In our example scenario, we would only need to pay 100.35 kr for taxation in that year.

Based on the final value 25,000 kr (average capital for the year), this means that we would only pay 0.40% in taxation.

It also means, that if you sold the whole portfolio for 26,000 (gain of 4,000kr), you would only need to pay 100.35 in tax. This is equivalent to 2.5%.

If this wasn’t in an ISK account (i.e. in a regular trading account), you would have to pay 30% taxation (or 1,200 kr)

Summary

  • Account Value = 26,000
  • Yearly Gain = 4,000
  • If you were using a
    • ISK account, taxation = 100 kr (2.5%)
    • regular trading account, taxation = 1,200 kr (30%)

By using an ISK account, you would save 27.5% in taxation in the scenario above.

When Should I open a Swedish ISK account?

It may be beneficial to open an ISK account if you believe that your returns will be higher than the government mortgage rate plus 1% from the year before.

In 2019, the limit is 1.53%. In 2018, the limit was set at 1.51%.

The average standard income for the last 7 years has been 1.47%. All of the standard incomes for the previous years (according to Skatteverket) are listed below:

Year Standard income
Declaration 2019 (income year 2018) 1.49%
Declaration 2018 (income year 2017) 1.25%
Declaration 2017 (income year 2016) 1.40%
Declaration 2016 (income year 2015) 0.90%
Declaration 2015 (income year 2014) 2.09%
Declaration 2014 (income year 2013) 1.49%
Declaration 2013 (2012 income year) 1.65%

Is a Swedish ISK account right for me?

Generally, you should choose a Swedish ISK account if you can earn a higher return during the year, than the government loan rate for the previous year plus 1 percentage point. All of the returns above this mark are “tax free” compared to using a standard trading account.

An ISK account can also be worthwhile if you do a lot of trading. Not only does it provide you with beneficial taxes on sales, but it also reduces the amount of recording that you need to do of your share trades (none through an ISK). This is a massive saving come tax time.

The benefits of a Swedish ISK account

ISK accounts are very popular in Sweden as they bring a lot of benefits for the investor:

  • No Profit Tax – Investors can buy and sell as much as you want, without having to pay profit tax on sales
  • Lower overall tax (generally less than 1% of the value)
  • No setup costs
  • Easier Tax Returns – Investors that solely use an ISK account don’t have to report any share buys or sells, its all reported to the Swedish Tax Department – Skatteverket
  • Depending on who you create an ISK account with, you may be covered by a deposit guarantee up to 950,000SEK (~100K USD)
  • Losses can be offset against standard income
  • Retain the right to attend and vote at shareholder meetings.

The risks of a Swedish ISK account

However, with everything there is risk. ISK accounts are not different. Here are some of the risks or drawbacks:

  • Tax costs regardless of profit or loss – Even if you don’t make money, you will have to pay tax.
  • Unused money in an ISK account will also be taxed.
  • Only limited to shares and funds.
  • Only for private individuals, companies cannot own ISK accounts.
  • Tax can be more complicated for individuals.

The Kapitalförsäkring (KF) Account

For those that want to look into a similar account, but for a business, the Kapitalförsäkring (KF) (translates to capital insurance) account should be investigated. The KF has many features similar to the ISK account, however there are a few key differences. The KF account is an insurance account, where in case of your death, the nominee would receive 1% more than you had invested.

The Differences Between an ISK and KF Account

The Capital Insurance account and the ISK have lots of similar features, both having a flat tax and not having to declare transactions. However, there are a few differences that you should take note of:

  1. In the ISK Account, you own the shares. In the KF account, the insurance company owns the shares.
  2. The voting rights are different between these accounts. The ISK allows you to have voting rights in general meetings, whereas he KF account does not.
  3. You can select a beneficiary on your KF account but not your ISK. If you were to die, the money from the ISK goes to your estate, but the KF will go to someone you have selected.
  4. The accounts are covered by different securities in case the platform or bank was to default. The cash in an ISK account is covered by a deposit guarantee and investor protection (~950,000 SEK from the government). The KF Account is covered under a preferential right (unlimited), with the insurance companies being required to keep appropriate debt coverage registers.
  5. A KF account can be better suited to international dividend paying shares. (see below)

Withholding Tax on KF or ISK Account

When you receive a dividend from foreign shares, you will pay withholding tax to the country from which you bought the shares (usually 15%). In the case of a normal trading account, you would pay 30%. 15% would go to the country of origin, and the other 15% would go to the Swedish Tax Agency.

With an ISK account, there is a limitation rule for how much of the foreign withholding tax you can claim back. The account holder cannot get back more withholding tax than the size of the account’s calculated standard income. Additionally with a ISK account, if you have a capital deficit in your tax year, you may not may not make a larger deduction than SEK 500. This results in the tax being at 15%.

With a KF account, the funds are in the insurance companies name. Therefore, it is the insurance company that applies for a deduction for the foreign withholding tax, which means that the holder is normally fully compensated for the withholding tax with a certain delay.

Generally speaking, this would mean tax paid on dividends is equal to 30% on an ordinary share account, 15% on ISK and 0% on KF. Obviously this depends on your own financial situation, and also on the countries that you are investing in.

Summary

The ISK account should be investigated further for those investing in shares and funds through Sweden. As long as you can earn more than ~1.50% per year, it can be more tax-efficient than a standard trading account. If you are receiving a lot of dividends from countries outside of Sweden, then you should also look deeper into a KF account.

Disclosure: I own both a ISK and KF account.

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18 thoughts on “The Swedish Investingsparkskonto (ISK) Account”

  1. can you hold international stocks in your ISK or is this exclusive to Swedish/nordic stocks. If so , are they taxed at the same rate within the isk account

    1. Hi Paul,
      Yep, at least with the Avanza ISK we are able to trade stocks on the platform from USA, Canada, Denmark, Finland, Norway, Germany, Italy, Belgium, Portugal, and the Netherlands. We can also trade others like Australia and UK, but they have to be placed through phone orders.
      They are all taxed at the same rate!
      The only difference is dividends. At least with American shares, these will get taxed in America, then will automatically be offset against your income come tax time.
      I’ll add this information to the article soon!
      Matt

    1. Hi Simon,
      Thanks for stopping by. I did research both Skatteverket and Avanza (both already linked in this article) as I was writing. Is there something specific that you are referring to?
      I would love to make it as accurate as possible.
      Feel free to email me if you prefer.
      Matt

  2. Hi Matt,

    your explanation of ISK is great, I live and work in Sweden and I have been interested in ISK since some time now, but it looks like, when using ISK, you will be forced to use Avanza or Nordnet or similars, and thus, their terrible trading platform Infront (piece of crap..)

    So, is it possible somehow to use a non-swedish broker like Fidelity, Interactive Brokers, etc which have much superior professional trading platforms…and still get the taxation benefits of a swedish ISK account?.

    And if not, what are the best alternatives in your opinion?

    Thanks.
    /Peter

    1. Hi Peter,
      ISK really seems like the most tax advantageous way to invest!
      Unfortunately, I think the main ones are Avanza and Nordnet, then also the banks (Nordea, SEB, Handelsbanken etc.). I did also come across Aktieinvest, which may be worth taking a look into. You could also look at the dutch platform DeGiro. They offer an ISK (https://www.degiro.se/isk/) but they charge 30% withholding tax on capital income from Swedish companies. It seems as though the company needs to reside in Sweden to benefit from the 0% tax on capital income. I assume this would be the same as the other external platforms (Fidelity, IB etc). Here is a list of the groups that are allowing the ISK – https://investeringssparkonto.se/
      Matt

  3. Hi Matt,

    Thanks for your answer. It seems to me like for us here in Sweden we might be forced to use Infront trading platform if we want to benefit from the advantageous ISK account.

    That is what makes me feel uncomfortable, since there are out there much superior professional platforms, in my opinion.

    /Peter.

    1. A workaround could be if you open an account through interactive brokers, use their tools, then make the final trades through a Swedish ISK provider? However, I assume the other platforms would have things highly integrated to be encouraging you to purchase through them. Especially if you want automatic trades based on certain criteria.

      If you are looking at international stocks, you could also look at the Kapitalförsäkring (KF) account, which can be more beneficial for tax.

      I do a lot of my research on international stocks using things like yahoo, finviz, stockrow, and things of that nature. The Swedish accounts are terrible for analyses.

      1. I am looking at international stocks for intraday trading, so keep changing from one platform like IB for example to Swedish ISK at the moment of the trade is not an option, need to be much faster than that, that is why I am so keen about getting a good tool other than Infront.

        But lots of thanks for the tips!

  4. What tool do you use for scanning the markets in Sweden outside trading hours (pre-market, post-market)?, all tools that I can find (tradingview, etc) do not show charts for pre-post market hours for the Swedish market…they seem to do for USA markets though. Maybe you have some suggestions?, free would be great.

    1. Hi John,
      I don’t actually look at any pre/post market data in Sweden, or know if it’s possible?
      Hopefully another reader will be able to reply with some more detailed information. You may also be able to email tradingview, or Avanza/Nordnet to find out more information.
      Matt

  5. Hi,
    I am from India. And do get lot of Dividends from Indian companies. Would ISK or KF help me ?
    With ISK are you allowed to invest in Indian Companies ?
    Also which of the ISK providers does provide all the information in English.
    eg Handelsbanken Site does not give out all the information in English which is available in Swedish.
    Appreciate your inputs.
    Thanks,
    Nilesh

    1. Hi Nilesh,
      Without knowing anything else about your tax situation, I would assume that the KF account would help with most with withholding tax from companies outside of Sweden. This may be helpful – https://blogg.avanza.se/hemberg/2015/09/24/kapitalforsakring-bast-for-utlandska-aktier/ (in Swedish, use Google translate). Potentially send an email to Skatteverket for clarification with your specific case.
      I don’t know how hard it is going to be for you to buy shares in Indian companies from those accounts in Sweden. I suggest you make contact with your bank, or one of the other share providers (such as Avanza / Nordnet etc.)
      to find out more.
      In terms of finding ISK providers who provide information in English, I have had no luck so far. I have only used Avanza and Nordnet. Banks sometimes offer information in English. But from my experience, its only been on a few pages not relating to shares.
      Hope that helps!
      Matt

  6. Hi Matt,

    Thanks for your reply.
    What I understand is :
    1) If I want to buy New International Shares, then from a Taxation point of view it makes more sense to buy them from KF account.
    2) All the Indian shares which I have already bought, prior to coming over to Sweden, if I don’t get them transferred into my KF or ISK account, then the Foreign Withholding Taxation won’t apply. I would have to take care of the Dividend income during my Taxation filling with Swedish and Indian Tax Authorities.

    Thanks,
    Nilesh.

  7. Hi,

    Thank you for the clear example of ISK taxation! I feel like I finally understand it now. It is certainly an interesting investment vehicle, however, I think it really depends on your investment strategy whether it’s the best option for you.

    You say that as long as your portfolio achieves more than ~1.5% returns each year, it can be more tax efficient than a traditional account, but I think this really depends on your investing timeline. If you invest in January, make a 7% gain in the year and sell on New Year’s Eve, then yes you make a significant tax saving by having it in an ISK. However, let’s say you are investing for the long term (as I think most people should), for 10, 20, 30+ years to save for retirement. In this case, you are paying a ~0.5% fee on your entire balance every single year. Taking into consideration the opportunity cost on that portion of the balance compounded over decades, it could end up being a much greater cost than it seems at first. A traditional account yes will incur a 30% capital gains tax when you withdraw, but that is only when you withdraw and only on the gains (plus there are deductions to bring that 30% down for example interest on loans).

    I would be very interested to see if someone has done the raw math to see which of these accounts might be more tax efficient in the long term. I think the ISK is a great option for people who want to shop around, day trade, speculate, etc. People who will buy and sell several times per year. But I’d like to see a calculation for the investor that puts, say, 5,000 SEK into a broad market index fund every month for 5, 10, 20, 30+ years. The broad market on average has returned ~7% year on average, so we could use this as a baseline. Do you know anyone who has done such a comparison? Maybe I will try to crunch the numbers when I get time 🙂

    Cheers,
    Darren

    1. Hi Darren,
      Very interesting comment and I did a very rough calculation to check the result.
      To make things easy to calculate I did not followed the tax calculation for ISK account every season but assume you get an average return rate as the same as the normal fund account, 7% as you pointed out in your comment. Here is some of the results

      Year One Capital 64k Profit 4200 tax for ISK 385 tax for Normal 1260,
      Year Five Capital 370k Porfit 70k tax for ISK 6347 (accumulated for five year) tax for Normal 21k (one time withdraw)
      Year Ten Capital 887k Profit 287k tax for ISK 26k tax for Normal 86k
      Year Twenty Capital 2.6M Profit 1.4M tax for ISK 131k for Normal 429k
      Year Thirty Capital 6M Profit 4.2M tax for ISK 391k for Normal 1.2M
      Year Thirty-five Capital 8.8M Profit 6.8M tax for ISK 621k for Normal 2M
      I put the google excel in the link so you can chnage some paremeter and try out youself.

      BR
      Ran

      1. And here is the link for Google excel
        https://docs.google.com/spreadsheets/d/17sWE-2UWNeeDx7iordwoLEL4P51tCkCRRsqj0d7I4Ao/edit?usp=sharing

  8. Hi Matt,

    Thanks for this informative read.
    I have both ISK and KF accounts as well. I think one additional advantage with KF is that for second half of year taxation is only 50%. This is in addition to the dividends advantage you mentioned.

    I am thinking to operate only KF account going forward. What do you suggest?

    Kind Regards
    Prak

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