New tax regulations from 2021 regarding work in Sweden
From 1 January 2021, new regulations apply regarding payment for work in Sweden. These regulations affect you if you are employed by a non-Swedish enterprise, or if you run a non-Swedish enterprise in Sweden.
The new regulations apply to three main groups. The implications of the regulations for each group are outlined on the following webpages:
- Those who receive payment from a non-Swedish employer
- Those who run a non-Swedish enterprise in Sweden
- Those who pay a non-Swedish enterprise for work carried out in Sweden
Answers to frequently asked questions – economic employer/special income tax for non-residents (SINK)
What is the SINK 183-day rule?
Salary and benefits from employment or an assignment are exempt from taxation if the following conditions are met:
- the employment or assignment is not for the Swedish state, or a Swedish municipality or region
- the employee stays in Sweden for no more than 183 days during a 12-month period
salary and other benefits are paid by, or on behalf of, an employer that is not based in Sweden - salary and other benefits are not charged to a permanent establishment that the employer has in Sweden
From 1 January 2021, the 183-day rule is no longer applicable to workers outsourced to carry out temporary assignments in Sweden.
What is outsourcing of workers according to SINK?
Outsourcing is when a worker is hired out by his or her formal employer to carry out work under the direction and management of another employer or client (known as an economic employer).
What determines whether a worker is outsourced according to SINK?
An overall assessment is made to determine whether the work is carried out under the direction and management of an employer or client who is not the worker’s formal employer. The following factors are taken into consideration:
- Who has the authority to instruct the worker on how the work should be carried out?
- Who arranges, controls and is responsible for the place where the work is carried out?
- Does the worker’s formal employer invoice the company where the work is carried out directly for the employee’s salary and benefits?
- Who provides the worker with equipment and materials?
- Who decides on the number of workers needed, and the qualifications they require?
- Who selects the workers required to carry out the work, and can terminate workers’ contracts for the assignment?
- Who has the right to take disciplinary action in relation to the worker’s performance?
- Who decides on the worker’s work and holiday schedule?
Who can be a client?
For work to be considered as outsourcing, the client who hires the workers must be one of the following:
- a natural person or legal entity liable for tax on income from business operations in Sweden
- a partnership or legal entity with one or more owners who are liable for tax on income from business operations in Sweden (this could be either a Swedish partnership or a non-resident legal entity whose partners are liable for income tax in the country of establishment)
- the Swedish state, or a Swedish municipality or region
What is an economic employer?
An economic employer is an employer or client that hires outsourced workers.
Does the client have any obligation to deduct tax from salary paid by an employer to an outsourced worker?
No. The party that pays out salary and benefits to a worker is obliged to make such deductions, and pay the tax to the Swedish Tax Agency along with any necessary social security contributions.
Is it possible to apply for SINK on behalf of workers?
The worker can apply him- or herself or the employer can do it in his or her stead. Either via our e-service, or by filling in form SKV4350 on paper and posting it to us. The e-service will help in filling in the application so that all the necessary information is included.
Does the SINK application process include questions from the Swedish Tax Agency to assess the outsourcing arrangement?
In our e-service, we ask questions to assess outsourcing arrangements. In the paper form, under “Employment income”, we ask whether the worker have a non-Swedish employer but carry out work in Sweden for a Swedish client, and ask for the name of the client. However, the paper form does not include follow-up questions to determine whether or not there is an outsourcing arrangement. We may therefore ask for further information, which could delay the process. For faster processing, we recommend applying via our e-service.
Is it necessary to include an A1 certificate with a SINK application in order for a decision to be made?
No.
Are you required to include a copy of the passport or another approved form of ID with a SINK application?
In the e-service, yes. In the form, it is only needed if the worker does not have a Swedish personal identity number or coordination number.
How long will the SINK application process take?
Unfortunately, it’s difficult to say. It depends on how many applications we receive.
Which tax deductions should be made by a non-Swedish company without a permanent establishment, if a SINK-related decision has not been made when salary and benefits are due to be paid?
If the Swedish Tax Agency has not yet made a decision, and the SINK 183-day rule is not applicable, a preliminary tax deduction should be made at the rate of 30 percent.
Do you need a decision on tax exemption by the Swedish Tax Agency if an income is exempt from taxation under the SINK 183-day rule?
No, this will not be necessary. However, you can still apply for a decision to be made if you are unsure whether or not the 183-day rule applies.
Are there any exceptions to the SINK definition of outsourcing?
Yes. Short-term assignments are not regarded as outsourcing.
What is a short-term assignment?
A short-term assignment lasts for a maximum of 15 consecutive days, and the worker may not carry out more than a total of 45 days of work in Sweden in a calendar year.
How are days in Sweden counted in working out the 15-day and 45-day limits?
Only working days are counted. If someone works for just part of a day, it still counts as a full working day. Days off – for example, at weekends or due to sickness – do not count as working days.
What happens if a 15-day working period spans two consecutive years?
This can happen, for example, if an assignment starts in December one year, and ends in January the following year. In this case, you must look at how many days you worked in Sweden during each year to determine whether all or part of the working period can be considered a short-term assignment. If you have already exceeded the 45-day limit for the first year, then the part of the 15-day period that takes place in that year will not count as a short-term assignment. However, the part of the period that falls in the consecutive year may be considered a short-term assignment.
Does the amendment of the SINK 183-day rule affect the application of tax conventions?
Yes. The 183-day rule no longer applies to outsourced workers, and Sweden has introduced the concept of an economic employer. The term “economic employer” corresponds to the term “employer” in the 183-day rule of tax conventions designed in accordance with Article 15(2) of the Organisation for Economic Co-operation and Development’s (OECD’s) Model Tax Convention on Income and on Capital.
Does the exception for short-term assignments apply when a tax convention is in force?
No. The exception for short-term assignments applies only to SINK and does not affect the interpretation of the 183-day rule in tax conventions.
Do the new rules in SINK on outsourcing affect a person who runs a business as a sole trader abroad and comes to Sweden to work?
No. The SINK 183-day rule applies only to salary and other benefits – not to income from business operations.
Are there any exceptions to the tax deduction rules regarding payment for work in Sweden?
Tax should not be deducted from payments for work if:
- the recipient has F-tax certification
- the Swedish Tax Agency has issued a decision notice stating that tax deductions should not be made
- the 183-day rule specified in the legislation relating to special income tax for non-residents (SINK) applies
These exceptions apply regardless of whether the party receiving the payment for work is a private individual or a company.
What are the rules regarding tax deductions on payments for work in the case of multi-party contracts?
Each party to the contract should assess whether or not a payment is for work in Sweden. If a payment is for work in Sweden, tax should not be deducted if:
- the recipient has F-tax certification
- the Swedish Tax Agency has issued a decision notice stating that tax deductions should not be made
- the 183-day rule specified in the legislation relating to special income tax for non-residents (SINK) applies
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