Rules on tax registration for foreign entrepreneurs
This information has primarily been written for foreign companies conducting business in Sweden.
- Liability to pay income tax
- Permanent establishment
- Civil registration
- Preliminary tax declaration
- Income tax return
- Social security contributions and tax deductions (PAYE)
- Yearly income statements for employees
- Value added tax (VAT)
- Approval for F-tax
- Deregistration and updating registered information
- Employer issues for foreign entrepreneurs
- Issuing company benefits and perks
Liability to pay income tax
In Sweden, business may be conducted as a sole trader (a natural person), or through a corporation (a legal person).
Foreign legal persons (legal persons registered under foreign law) are limitedly liable for income tax inSweden , which means that only profits attributable to a permanent establishment inSwedenare taxable in Sweden.
Foreign natural persons are normally limitedly liable for income tax, but if they take residence or have habitual abode in Sweden, they become unlimitedly liable for income tax. A person who is limitedly liable for income tax only pays tax on incomes that are attributable to a permanent establishment in Sweden. A permanent establishment is a fixed place of business through which the business of an enterprise is wholly or partly carried on. A person who is unlimitedly liable for income tax is taxable for all incomes in Sweden and abroad. In some cases the liability in Sweden may be removed or limited by a tax treaty.
If a foreign enterprise is liable to pay income tax inSwedenis determined by whether the company has a permanent establishment in Sweden or not. If the enterprise has a permanent establishment in Sweden it is to be taxed for business income.
Civil registration is the basic registration of people residing in Sweden. Through it, who lives in Sweden, and where they live is registered. Where a natural person is civilly registered has effect on many rights and obligations, for example where he/she is to pay his/her taxes. Marital status and other personal information is registered through the civil registration. The main rule of civil registration in Sweden states that a person should be registered where he/she resides. A person is considered to be residing where he/she normally lives.
A foreign entrepreneur conducting business in Sweden, whether a natural or a legal person, may become taxable for VAT, employer´s contributions and/or income tax. The company should then apply for registration at the Swedish Tax Agency, and may apply for approval for Swedish F-tax.
As stated above foreign legal persons are limitedly liable for income tax.
The same applies for foreign natural persons, but if they take residence or have habitual abode in Sweden, they become unlimitedly liable for income tax. Note that a branch of a foreign person also have limited tax liability. A n person with limited tax liability shall apply for registration using the form SKV 4632, Tax application for foreign entrepreneurs.
- How to apply for a Swedish tax registration with the form in Swedish SKV 4632
- Information about where to send the application: International offices at the Swedish Tax Agency (in Swedish)
When registered with the Swedish Tax Agency, the foreign company receives a unique Swedish identity number. For natural persons to receive such a number they must verify their identity with a passport or another such identity card or documentation.
For a legal person it is required that the identity is verified with some form of attested certificate of registration/incorporation and that the representative demonstrates his/her authority to represent (sign) on behalf of the legal person when it requests registration for taxation.
Foreign legal persons active in Sweden should first contact the Swedish Companies Registration Office to ask if they are required to register a branch office. If such a registration is made with the Swedish Companies Registration Office, they will supply a Swedish registration number that will also be used by the Swedish Tax Agency. For contact information, see the Swedish Companies Registrations Office website.
Preliminary tax declaration
A person who is liable to pay income tax in Sweden is required to pay preliminary tax during the income year. To calculate how much tax is to be paid, the company must submit a preliminary tax return. The Swedish Tax Agency then calculates the preliminary tax and notifies the company how much tax is to be paid each month.
The year following the income year (the year of assessment) the company submits an income tax return and states the result of the income year (the tax year). Based on the income tax return, the Swedish Tax Agency calculates the final tax. The final tax is compared to the preliminary tax payments made during the tax year. If the company has overpaid it will receive a refund, and if it has underpaid it will owe an additional amount to be paid.
Foreign legal persons pay income tax of 22 % of the taxable profit. Sole traders (natural persons) normally pay both income tax and social security contributions, so-called ‘self-employed contributions´. The debited preliminary tax will encompass both income tax and self-employed contributions. Applicable EU law and conventions on social security may in some cases limit the contributions to be paid.
General and limited partnerships registered under Swedish law (Swedish partnerships) are unlimitedly liable for income tax if they have a permanent establishment in Sweden. If business is conducted by the partnership from a permanent establishment the owner must submit a preliminary tax return for the calculation of preliminary tax.
A foreign entrepreneur that applies for an approval for Swedish F-tax is required to submit a preliminary tax return, whether it has a permanent establishment in Sweden or not. Anyone who submits a preliminary tax return may, during the income year (tax year), adjust the original information by submitting a new preliminary tax return. The Swedish Tax Agency can then adjust the debited preliminary tax. See forms SKV 4313, SKV 4314 and SKV 4315.
Income tax return
If the foreign entrepreneur is liable for income tax on economic activities (näringsverksamhet) in Sweden, it is required to submit a yearly income tax return. A foreign legal person normally submits the return by May 2 of the assessment year (the year after the tax year). A natural person living abroad submits the income tax return by May 31 of the assessment year.
Social security contributions and tax deductions on salaries, PAYE
Salary for work performed in Sweden
The country in which social security contributions are to be paid is determined in part by EU law, in part by conventions on social security and in part by internal Swedish legislation. The rules in the social security conventions are superior to Swedish internal legislation, but — within the EEA — normally not to the EU legislation. If a company issues remunerations (pays salaries or gives benefits in kind) for work performed in Sweden it must normally also pay social security contributions (employer´s contributions). if the company has a permanent establishment it is required to withhold tax. This means that the company must register as an employer with the Swedish tax Agency. Please note that this also applies to salaries or other remunerations to owners of a corporation for work performed in Sweden on behalf of that corporation.
A foreign company with a permanent establishment in Sweden is treated as a regular Swedish employer with regard to social security contributions and tax deductions.
A company paying employees for work is required to pay social security contributions. The contributions are calculated on the basis of paid salaries and issued benefits. A foreign company must pay Swedish employer´s contributions for salaries/benefits to an employee for work conducted in Sweden. It does not matter if the company has a permanent establishment in Sweden or not.
- The main rule in accordance with internal Swedish law is that foreign companies do not have to pay employer´s contributions for employees posted to Sweden for work lasting less than one year.
- However, if the employer is active within the EU/EEA area and the employee is resident within that area, the employee is part of the social security system of the resident country during the time that he/she is posted to work in Sweden, if the work is not expected to last for longer than 24 months and if the person is not posted in order to replace a previously posted person. No employer´s contributions are to be paid in Sweden in such instances. The employee who is posted is to obtain a certificate on applicable social insurance scheme. This certificate is called A1 within the EU (previously called E101).
- If the employee is posted from a country with which Sweden has entered into a convention on social insurance, he or she needs to obtain a certificate of posting. The certificate must state that the employee is part of his/hers home country´s social insurance during the time he/she works in Sweden.
Certificate of the applicable social security scheme is issued by the competent authority in each member state within the EU. In Sweden, the social security authority Försäkringskassan issues A1 forms. As an employer you should request a copy of the employees certificate.
When a foreign company contracts a sole trader to conduct work, a liability to pay social security contributions may arise. The foreign company does not have to pay social security contributions if the sole trader presents a certificate of applicable social insurance, or a Swedish F-tax certificate.
A foreign entrepreneur lacking a permanent establishment may enter into an agreement with the employee in Sweden that he/she is to pay his/her own social security contributions. This agreement can be made verbally, but from an evidentiary standpoint a written agreement is clearly preferable. The agreement is to be reported to the Swedish social security authority Försäkringskassan and the employee is required to state in his/her income tax return that such an agreement is in place. The foreign company is always required to submit an income statement for the employee regarding remunerations paid out.
The amount of employer´s contributions is contingent on the salary recipients age and if the foreign company has a permanent establishment in Sweden or not. Foreign companies lacking a permanent establishment in Sweden are not required to pay the general salary fee that makes up a part of the employers contribution.
Tax deductions, PAYE
A foreign entrepreneur with a permanent establishment in Sweden is required to deduct tax on salaries to employees. The size of the tax deduction to be made is in the tax rate charts, if the employee is resident for tax purposes in Sweden.
The following rules are applicable if the employee is considered resident abroad for tax purposes:
If the person is staying in Sweden for a shorter time period than six months, a special income tax (SWE: SINK) is applicable. The employer is then required to deduct special income tax at 25 % of the gross income. To use the rules of special income tax the employee or the employer must submit an application for the application of special income tax to the Swedish Tax Agencies.
Special income tax is a definitive withholding tax and an employee resident abroad is not required to submit an income tax return for employment incomes that are subject to special income tax. As of January 1st 2005, there is a possibility to choose to be taxed in accordance with the Swedish income tax act instead of in accordance with the rules on special income tax. He/she who chooses to be taxed in accordance with the income tax act rules is required to state the income in the income tax return. Deductions may then be made for costs related to the work performed. An application for taxation in accordance with the income tax act can be made with the special income tax form for non-residents, SKV 4350. Please state at the ‘Additional information and claims´ section that you wish that the income tax act be applicable instead of special income tax, and the costs that you wish to deduct. It is also possible to submit an income tax return after the tax year and request that the income subject to special income tax instead be taxed in accordance with the income tax act.
If the employee is habitually staying in Sweden for a period longer than 6 months he/she may be considered resident for tax purposes in Sweden even though he/she is living abroad. A person deemed resident for tax purposes inSwedenpays tax in Sweden like ordinary residents. A foreign company with a permanent establishment is therefore required to deduct tax in accordance with the tax chart for such an employee, and to register as an employer in Sweden. The year after the year that remunerations for work was paid out, the foreign company is required to submit an income statement to the Swedish Tax Agency, with a copy sent to the employee.
Also, when an entrepreneur is contracted for a contract assignment it may be required for the contracting party to withhold tax on remunerations paid to the company for work performed. This is required if the company does not have approval for Swedish F-tax and has a permanent establishment in Sweden. It is not required if the company either has approval for Swedish F-tax or is a foreign company lacking a permanent establishment in Sweden.
A foreign company lacking a permanent establishment should not withhold tax. If a foreign company lacking a permanent establishment has an employee that is considered resident for tax purposes in Sweden, the employee must submit a preliminary tax return to be debited special income tax (SA-tax).
Yearly income statements for employees
A foreign entrepreneur is required to submit income statements for employees, which then becomes a basis for income taxation, pension rights and (if applicable) for tax deductions. This is required of entrepreneurs regardless if they are permanently establishmed in Sweden or not. Income statements are to be submitted no later than the 31st of January the year after the taxation year. There are different income statement forms depending on where the employee is resident and which contributions have been paid. If the employee is resident abroad, the income statement should in some cases include information on the persons foreign tax identification number.
Value added tax (VAT)
Regarding VAT issues, a ‘foreign entrepreneur´ is expressly defined as a commercial enterprise that does not have its seat nor is established in Sweden through a fixed establishment and, in the case of natural persons, is neither a resident nor habitually stays in Sweden.
Registration for VAT is normally mandatory. In certain circumstances, a foreign entrepreneur has the possibility to register voluntarily for VAT and thereby become taxable for sales that the buyer would otherwise be taxable for. This is mainly in regards to the sale of goods but also apply in some cases to the sale of services with a connection to real property situated in Sweden. A registration for VAT is always required when selling within Sweden to consumers.
Approval for F-tax
In Sweden, an entrepreneur may apply for approval for F-tax if they wish to. Approval for F-tax is relevant mainly for anyone paying remunerations for performed work. Anyone who contracts an entrepreneur who (only) has approval for F-tax is neither required to pay social security contributions nor make tax deductions when paying remunerations for work. The approval for F-tax has no effect on the taxation when paying for goods.
A foreign entrepreneur that is conducting or is planning to shortly conduct business in Sweden may apply for and receive approval for F-tax. This applies also if the foreign entrepreneur is not liable to pay income tax in Sweden. In order to get approval for F-tax, foreign entrepreneurs are also required to have complied with the rules of accounting for and paying taxes and contributions in their home countries. It is therefore required that the applicant submit a document from the home country taxation authority certifying that the applicant has no tax debts there. Such a certificate may also be required of directors with indirect or direct ownership of companies that have few owners (four or fewer owners, owning shares comprising more than half of the total share votes).
When making an assessment of how many owners a company has, close relatives such as grandparens, parents, spouses, children and childrens spouses, siblings, siblings spouses and sibilings children are counted as a single owner. ‘Children´ includes stepchildren and foster children. ‘Spouses´ include persons who have a registered (marital) partnership. ‘Spouses´ also include persons cohabiting in domestic partnerships that have or have had a child together, or persons who have previously been married to each other.
Anyone who ceases to conduct business in Sweden are to notify the Swedish Tax Agency so that the approval for F-tax can be withdrawn.
Deregistration and updating registered information
When you no longer conduct business in Sweden you are required to deregister from the tax registry, and if applicable also with the Swedish Registration Office. Deregistration and submitting new information can be done on the SKV 4639 form, or electronically on the verksamt.se website (provided you are or have a person employed with a Swedish electronic ID). A company that does not submit a deregistration but ceases to submit declarations may be fined for late filing and may be assessed and taxed at the Swedish Tax Agency´s discretion (discretionary assessment).
You may also have to submit a preliminary tax declaration when submitting the request to be deregistered, so that any debiting of taxes can be adjusted, since the business operations have ceased.