New rules concerning economic employer concept and new obligations for all companies having personnel in Sweden will enter into force from the 1st of January 2021.

Economic employer

According to the new rules a foreign employee employed by a foreign employer will no longer be exempted from tax in Sweden according to the Special Income Tax Act for Non-Residents (SINK) if the employee’s work in Sweden is considered as a part of a staffing arrangement with a Swedish company.

In such case, the Swedish company will be considered as the employee's economic employer and the employee will be taxed in Sweden from the first workday. The decisive factor for taxation is who the employee does the work for, and not who pays the salary.

Only work carried out in Sweden for a very limited period shall be exempted from the rules. This exemption applies for work carried out for a maximum of 15 consecutive working days or a maximum of 45 working days per calendar year.

A foreign employer will be required to withhold tax in Sweden for employees who are covered by the economic employer concept. Therefore, the foreign employer will then also be obliged to register for PAYE-purposes in Sweden.

Withholding of tax in no-employment situations

Swedish companies must withhold preliminary tax of 30% on payments to foreign companies for work carried out in Sweden if the foreign company is not registered for F-tax at the Swedish Tax Agency.

Foreign companies must withhold preliminary tax of 30% on payments for work performed in Sweden if the receiver of the payments is not registered for F-tax at the Swedish Tax Agency.

Specific information to the Swedish Tax Agency

The Swedish Tax Agency requires information from foreign self-employed individuals and companies without a permanent establishment in Sweden to assess whether there is a tax liability in Sweden or not. Information regarding time spent in Sweden and the nature of the work performed in Sweden must therefore be provided to the Swedish Tax Agency.

The Swedish Tax Agency is preparing guidelines regarding the information provided to the Swedish Tax Agency. These guidelines are not yet available. The information will be filed on an annual basis and the due date will be the same as the due date for the income tax return.

Comments

The new rules entail a significant change for foreign companies, which are doing business in Sweden. The transition to an economic employer concept requires foreign companies to identify and analyze if the employees will be taxable in Sweden from the first workday. Foreign companies and subcontractors also need to assess if they must be registered for F-tax in Sweden and what is required to comply with the new rules.

Please feel to contact us if you have any questions regarding the new legislation and how your business can be compliant with the new rules. We will be more than happy to assist you through this!