When foreign companies take on projects in Sweden, they must navigate a complex landscape of tax and employment regulations. This article is part two out of three and breaks down the key considerations foreign companies should be aware of throughout their project when working in Sweden.
This article is the second of three parts on how foreign companies operating in Sweden can navigate Swedish regulations. You find the other articles below:
Part 1: Navigating Swedish Regulations: Prior to Projcet Commencement
Part 3: Navigating Swedish Regulations: After Project Completion
Navigating Employer Obligations, Tax and Compliance — Throughout the Project
During the project it is crucial to ensure that all key factors are fulfilled to be compliant with local regulations and potential requirements set by the client to work on the project.
Employment law
The Swedish labor market entails numerous laws, which regulate the relationship between employers and their employees. Through collective bargaining agreements (CBAs) the parties may make deviations from the legislation. Consequently, the legislation constitutes a framework within which the parties may regulate the employment terms and conditions in CBAs. If you have a registered branch in Sweden, if you are a foreign company registered as an employer in Sweden or if you have posted workers in Sweden, the obligations might vary, and it can be wise to review what obligations you may have in Sweden.
PAYE reporting
The formal employer, i.e., the foreign company, may need to register as an employer in Sweden and withhold preliminary tax and possibly pay social security contributions monthly. The reporting can be submitted online if there is a registered tax return representative for the company. Payments of tax and social security contributions normally occur on the 12th the month after payment of salaries.
Changes to project periods and employee work periods
In the event of changes to prior plans, such as adjustments to the project timeline or employee work periods, it may be necessary to reassess certain areas to ensure continued compliance. For example, if an employee's work period is extended, their tax status may shift from non-resident to resident, requiring updated evaluations and actions.
Corporate tax filing
In Sweden, foreign companies operating or generating income are in some cases required to file annual corporate tax returns. Key actions for foreign companies include registering for tax, keeping accurate financial records, and submitting tax returns on time. They must also ensure compliance with Swedish tax laws, including VAT (if applicable), transfer pricing regulations, and withholding taxes on dividends or services provided in Sweden.
Specific information
Foreign companies without a permanent establishment, that conduct certain activities in Sweden must provide special information for assessing their tax liability in Sweden. This information must be submitted annually to the Swedish Tax Agency at the same time as a Swedish company or a foreign company with a permanent establishment submits its annual income tax return. This gives the Swedish Tax Agency the opportunity to annually analyze a foreign company's activity in Sweden to decide whether there is a permanent establishment in Sweden or not.
Accounting
If your Company has a corporate tax obligation in Sweden, you may need to conduct separate accounting following Swedish accounting standards.
Aspia’s Expatriate Payroll, together with Skeppsbron skatt, offer a comprehensive solution to foreign companies with project and employees in Sweden.
Note that this is not an exhaustive guide to managing projects in Sweden but serves as a foundational overview of the complexities involved in operating projects in a foreign country. We strongly recommend seeking professional guidance to ensure full compliance with regulatory requirements.
