Due to the fact that the economic situation in Sweden is very advantageous now, we see an increased interest on behalf of foreign companies in starting up operations here. If you have a company in another country and are considering starting up operations in Sweden, there are a number of different types of questions you need to address and have control over.
Choice of corporate form
Firstly, you need to decide on the type of corporate form you want to establish. When a foreign company starts operations in Sweden, the operations can be seen to comprise a permanent establishment, which implies liability for income tax in Sweden. A foreign company wishing to start a line of business in Sweden should, therefore, register a branch here. If a branch is registered, the results of the branch are included in the foreign company’s accumulated results.
One alternative to a branch is a Swedish limited liability company who takes care of the Swedish operations. If a Swedish limited liability company is registered, the difference with a registered branch is that the limited liability company’s results are not included in the foreign company’s results.
Depending on the type of operations you choose to start in Sweden, there can be a requirement that you register with the Swedish Tax Agency for VAT and income tax. The obligation to register for VAT can exist, in spite of the fact that you have no permanent establishment in Sweden. Registration for F-tax (preliminary tax paid in by self-employed) is particularly important if the services are executed in Sweden.
A foreign company undertaking business operations in Sweden can also be liable for registration with the Swedish Tax Agency as an employer. This applies if the company is going to have employees in Sweden for whom they will pay employer’s contributions.
Furthermore, if you plan on having employees in the Swedish operations who are not EU citizens, you are required to apply for work and residence permits with Migrationsverket (Swedish Migration Agency) for your employees.
In addition to the above-mentioned registration requirements, there can be the need, depending on the type of operations to be established in Sweden, to apply for other forms of permits. For example, this can apply if you are going to start operations pertaining to financial services, health and hospital care, or operations having an environmental impact.
Tax liability for operations in Sweden varies depending on the type of operations to be established, how they are financed and how the profit is to be distributed. Currently, the corporate tax rate for income in Sweden is 22 percent, and this applies to both limited liability companies and branches in Sweden.
The general VAT rate in Sweden is 25 percent, but for certain services the tax rate is 12 percent (restaurants, food and catering services) and 6 percent (books, newspapers and transport of persons). At the end of the year, companies can receive VAT refunds on the surplus paid in.
The income tax rate for employees in Sweden is dependent on whether the employee incurs limited or unlimited tax liability in Sweden. The income tax rate for unlimited tax liability is progressive and varies between 29-59 percent. If an employee incurs limited tax liability in Sweden, one can, instead choose to be taxed according to SINK (state income tax for non-residents) with a tax rate of 20 percent. As an employer with one employee in Sweden, you also need to pay employer’s contributions of a maximum of 31.42 percent of the employee’s gross salary.
If the operations are comprised of the importation of goods to Sweden from countries outside the EU, this implies, according to the major rule, the obligation to pay both customs and VAT on those goods, but there can be exemptions to this rule.
If the operations imply that cross-border transactions arise between group companies, it is important to have a market-based pricing of these transactions and to have control over the extent of required transfer pricing documentation.
Compensation to employees
According to law, there is no minimum salary requirement for employees in Sweden. Minimum salaries are, instead, regulated according to co-called collective agreements established between employers and labour unions.
In Sweden, there are requirements stipulating, both legally and according to collective agreements, that employment contracts shall be prepared between employees and employers. Employment contracts are to include, amongst other things, information on salaries, benefits, working hours, type of employment, notice period, etc.
Foreign employers having a permanent establishment in Sweden are required to pay preliminary tax in Sweden each month. The employer is also liable to, on a monthly basis, pay in employer’s contributions to the Swedish Tax Agency for employees covered by the Swedish social insurance system. According to law, an employer is to send in statements of earnings and deductions for employees where the salary paid to the employee during the year is stated, as well as the amount of preliminary tax deducted during the income year.
Swedish companies and foreign companies with a permanent establishment in Sweden are liable to present income tax returns to the Swedish Tax Agency on no later than 1 July if the financial year is the calendar year.
Swedish companies or foreign companies with branches in Sweden are also liable to book all business transactions in accordance with the Bookkeeping Act. Depending on the corporate form in which the operations take place, there can also be a requirement that annual financial statements shall be prepared at the end of the year.
In certain cases, a company in Sweden, or a foreign company’s branch in Sweden, must, according to the law, appoint an auditor to audit the accounts.
Örjan Berg och Lisa Johannesson arbetar som skatterådgivare på PwC:s kontor i Göteborg. Örjan arbetar med internationell personbeskattning och global mobilitet och Lisa arbetar med internprissättningsfrågor.
Örjan: 010 21 24 75, firstname.lastname@example.org
Lisa: 010-212 55 78, email@example.com