January 2021
Economic employer concept was introduced in Sweden from January 1, 2021
Economic employer
According to the Special Income Tax Act for Non-Residents (SINK), a foreign employee employed by a foreign employer will no longer be exempt from tax in Sweden, if the employee’s work in Sweden is deemed to be part of a staffing arrangement entered into with a Swedish company. In such a case, the Swedish company will be regarded as the employee's economic employer and the employee will be taxed in Sweden from the first workday. The decisive factor determining taxation will be for whom the employee works, and not who pays the salary.
Only work carried out in Sweden for a very limited period – defined as a maximum of 15 consecutive working days, or a maximum of 45 working days per calendar year – will be exempted from the new rules.
Foreign employers will be required to withhold tax in Sweden for employees who are covered by the economic employer concept. As a consequence, foreign employers will also be obligated 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 unless such companies are registered for F-tax at the Swedish Tax Agency.
Also foreign companies must withhold preliminary tax of 30% on payments for work performed in Sweden unless the recipient of the payments is registered for F-tax at the Swedish Tax Agency.
Specific information required by the Swedish Tax Agency
The Swedish Tax Agency requires certain information from foreign self-employed individuals and from companies without a permanent establishment in Sweden in order to assess whether there is a tax liability in Sweden or not. Information regarding the time spent in Sweden and the nature of the work performed in Sweden must therefore be submitted to the Swedish Tax Agency.
The Swedish Tax Agency is preparing guidelines regarding the precise nature of the information to be submitted to the Swedish Tax Agency. These guidelines are not yet available. The information must be filed annually and the due date will be the same as the due date for income tax returns.
Actions
The rules above represent a significant change for the Finnish companies that do business in Sweden. The transition to an economic employer concept will require Finnish companies to identify and analyze those employees that may be taxable in Sweden from the first workday. Finnish companies and subcontractors will also need to assess whether they must be registered for F-tax in Sweden and what will be required in order to comply with the new rules.
According to the Special Income Tax Act for Non-Residents (SINK), a foreign employee employed by a foreign employer will no longer be exempt from tax in Sweden, if the employee’s work in Sweden is deemed to be part of a staffing arrangement entered into with a Swedish company. In such a case, the Swedish company will be regarded as the employee's economic employer and the employee will be taxed in Sweden from the first workday. The decisive factor determining taxation will be for whom the employee works, and not who pays the salary.
Only work carried out in Sweden for a very limited period – defined as a maximum of 15 consecutive working days, or a maximum of 45 working days per calendar year – will be exempted from the new rules.
Foreign employers will be required to withhold tax in Sweden for employees who are covered by the economic employer concept. As a consequence, foreign employers will also be obligated 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 unless such companies are registered for F-tax at the Swedish Tax Agency.
Also foreign companies must withhold preliminary tax of 30% on payments for work performed in Sweden unless the recipient of the payments is registered for F-tax at the Swedish Tax Agency.
Specific information required by the Swedish Tax Agency
The Swedish Tax Agency requires certain information from foreign self-employed individuals and from companies without a permanent establishment in Sweden in order to assess whether there is a tax liability in Sweden or not. Information regarding the time spent in Sweden and the nature of the work performed in Sweden must therefore be submitted to the Swedish Tax Agency.
The Swedish Tax Agency is preparing guidelines regarding the precise nature of the information to be submitted to the Swedish Tax Agency. These guidelines are not yet available. The information must be filed annually and the due date will be the same as the due date for income tax returns.
Actions
The rules above represent a significant change for the Finnish companies that do business in Sweden. The transition to an economic employer concept will require Finnish companies to identify and analyze those employees that may be taxable in Sweden from the first workday. Finnish companies and subcontractors will also need to assess whether they must be registered for F-tax in Sweden and what will be required in order to comply with the new rules.
Legal Disclaimer
The information in this site has been prepared for general informational purposes only and it should not be used as a substitute for consultation with a professional tax, legal or other competent advisor. While we have made every attempt to ensure that the information contained in this site has been obtained from reliable sources, Effektiivi Oy is not responsible for any errors or omissions, or for the results obtained from the use of this information.
The information in this site has been prepared for general informational purposes only and it should not be used as a substitute for consultation with a professional tax, legal or other competent advisor. While we have made every attempt to ensure that the information contained in this site has been obtained from reliable sources, Effektiivi Oy is not responsible for any errors or omissions, or for the results obtained from the use of this information.
