F-tax: New rules for foreign companies

The Swedish Parliament has now adopted the government’s proposal to change the rules regarding approval and revocation of F-tax. The new rules were prompted by a request from the Swedish Tax Agency, with the aim of implementing changes that help reduce tax evasion and avoidance, as well as better contribute to fair competition. The new rules state that if specific information is not submitted to the Swedish Tax Authority an application for F-tax should not be approved. Lack of submitting specific information can also cause a previously approved application to be revoked. The new rules, which will affect foreign companies applying for F-tax due to temporary activities in Sweden, will come into force on November 1, 2025.

Current regulation of F-Tax  

Anyone conducting or intending to conduct business activities in Sweden can be approved for F-tax. Being approved for F-tax means that you are responsible for paying your preliminary tax and social security contributions on your work-related income through debited preliminary tax.  

Obligation to make tax deductions  

In January 2021, Sweden introduced a requirement for tax deductions on payments for work performed in the country, applicable even to foreign companies without a permanent establishment in Sweden. If the payment recipient is not registered for F-tax, the payer, whether Swedish or foreign, must make tax deductions on the part of the invoice that regards work in Sweden.  

Obligation to submit income tax returns or specific information  

An obligation was also introduced for foreign companies without a permanent establishment in Sweden to submit specific information so that the Swedish Tax Agency can assess whether the company has a permanent establishment or not, and whether the foreign company is instead required to submit an income tax return in Sweden. Foreign companies conducting activities from a permanent establishment in Sweden must submit an income tax return and not specific information. This requires companies to assess whether they should file an income tax return or provide specific information. Legal entities must submit this specific information to the Swedish Tax Agency no later than the deadline for filing an income tax return.  

Provisions on denied approval and revocation of F-Tax  

There are currently certain provisions on denied approval and revocation of F-tax. However, there has not been any basis for revocation when foreign companies without a permanent establishment fail to submit specific information for the assessment of tax liability according to the Income Tax Act, despite the obligation. This inconsistency has been problematic, allowing foreign companies to retain F-tax approval until they choose to revoke it, even in cases of non-compliance.  

The new legislation in brief  

The new legislation means that an application for F-tax should not be approved and an already granted decision on F-tax should be revocable if the applicant or the one approved for F-tax has not fulfilled the obligation to submit specific information or if the information submitted is so deficient that it cannot be used as a basis for assessing tax liability according to the Income Tax Act.  

Consequences  

The new rules regarding revocation and obstacles to F-tax registration means that foreign companies without a permanent establishment will be treated in the same way as Swedish companies or foreign companies with a permanent establishment in Sweden. The introduction of the new grounds will simplify and equalize the rules, making the legislation competition neutral. The companies directly affected are those that do not fulfill the obligations that apply to all companies. The new legislation will not affect companies that already fulfill their obligation to submit specific information.  

Comments  

In May 2025, the European Commission announced that they have decided to bring a case against Sweden in the European Court of Justice. The background is that Sweden has not adjusted the rules on preliminary income taxation for foreign companies to meet the requirements of EU legislation. The Commission argues that the obligation for Swedish entities to withhold tax on payments to foreign companies without a permanent establishment in Sweden contravenes the freedom to provide services within the EU. The new legislation reflects an adjustment and development of the F-tax rules rather than their dismantlement, and we do not find it likely that the government has further ambitions to propose changes to meet the European Commission’s demands in this regard.   

We will monitor the ongoing dispute between the European Commission and Sweden regarding F-tax and tax withholding requirements for foreign companies without a permanent establishment in Sweden, as well as developments in Swedish F-tax regulations.