Sweden’s Regulatory Compliance Checklist: A Guide for Foreign Companies

As a foreign company looking to establish operations in Sweden, navigating the country’s regulatory landscape can be a daunting task. To ensure compliance and avoid potential pitfalls, it’s essential to understand the key areas of focus. This article provides a comprehensive overview of the most critical aspects of regulatory compliance in Sweden.

Permanent Establishment or Not?

One of the first questions foreign companies must address is whether they will constitute a permanent establishment in Sweden. This determination will impact social security contributions, reporting obligations, and insight into registering a branch or not. A thorough assessment is recommended to clarify these obligations:

Determine if you have a permanent establishment in Sweden
Understand the implications on social security contributions and reporting obligations

Economic Employer in Sweden or Not?

Sweden adopted the economic employer concept in January 2021. To establish whether this applies to your company, it’s crucial to determine if you are hiring labor for an economic employer or a formal employer. This distinction will impact tax liability and reporting requirements:

Understand the difference between economic employer and formal employer
Determine the implications on tax liability and reporting requirements

Foreign Employer Payroll Obligations in Sweden

Tax, social security contributions, and reporting obligations are just a few of the key areas foreign employers must consider. The concept of limited or unlimited tax liability in Sweden is also crucial to understand, as this will determine an individual’s tax obligations:

Understand the concept of limited and unlimited tax liability
Determine your individual tax obligations

Limited Tax Liability vs. Unlimited Tax Liability

According to Swedish internal legislation, individuals can be subject to either unlimited or limited tax liability. Those with unlimited tax liability are liable for tax on all global income, regardless of its source. In contrast, those with limited tax liability only pay tax on income sourced in Sweden and may be eligible for the Special Income Tax for Foreign Residents (SINK) at a 25% rate:

Understand the differences between unlimited and limited tax liability
Determine your eligibility for SINK

Expert Tax Relief

For foreign employees considered “experts” or earning above a certain threshold (SEK 105,001 for 2023), 25% of their income is exempt from tax. Expert tax relief can provide significant benefits, but requires careful assessment and planning:

Understand the eligibility criteria for expert tax relief
Determine your potential benefits

Foreign employers must determine whether they are required to pay full, reduced, or no social security contributions in Sweden. This depends on the presence of a permanent establishment and coverage by the Swedish social security system or that of their home country:

Understand the implications of having a permanent establishment
Determine your social security contribution obligations

Employment Law Regulations

The Swedish labor market is governed by numerous laws regulating employer-employee relationships. However, collective bargaining agreements (CBAs) allow parties to deviate from legislation, creating flexibility in employment terms and conditions:

Understand the key employment law regulations in Sweden
Determine how CBAs impact your employment arrangements

Navigating Regulatory Compliance in Sweden

Establishing a presence in Sweden requires careful consideration of regulatory compliance. Aspia and Skeppsbron Skatt offer expert guidance on payroll, tax, reporting, and accounting obligations for foreign companies with employees in Sweden:

Contact us to book a consultation and ensure compliance
Access our video series featuring tax experts discussing issues related to corporate taxation and VAT, as well as employee tax, social security, and employer reporting obligations.