Starting a Business in Sweden
Key Information for Foreign Companies
Helping you take the first step
Key Information for Foreign Companies
Essential Information for Establishing and Running a Business in Sweden
For foreign companies looking to establish a presence or hire employees in Sweden, understanding the business landscape is crucial. This guide covers essential aspects such as the concept of permanent establishment, types of business entities, employment regulations, and tax requirements.
1. Understanding Permanent Establishment
A permanent establishment (PE) in Sweden refers to a fixed place where a company conducts its business activities. This can include an office, a branch, or any physical presence. A company with a PE in Sweden is treated as a domestic company for tax purposes.
Criteria for Permanent Establishment:
Business Activity: The company must conduct business activities in Sweden.
Fixed Place: Activities must occur at a fixed location.
Duration: The location must be used for a continuous or intermittent period.
Economic Ownership: The company must own or control the assets used for business in Sweden.
Examples of Permanent Establishments:
Home office
Separate office space
Workspaces on another company's premises
Construction sites
2. Rules and Exemptions for Permanent Establishments
General Rules: A foreign company is considered to have a PE if it has a fixed place of business or a dependent agent in Sweden who can conclude contracts on its behalf.
Exemptions:
Independent Agents: Activities conducted by independent agents do not constitute a PE.
Preparatory or Auxiliary Activities: Non-core business activities may be exempt.
Fixed Duration Activities: Temporary activities like short-term construction projects.
Service PE Exemption: Services provided by employees for less than 183 days in a 12-month period.
3. Types of Business Entities
Foreign companies can choose between establishing a limited company or a branch in Sweden.
Limited Company:
Requires a minimum capital investment of SEK 25,000.
Operates as an independent legal entity.
Can pay dividends to shareholders.
Branch:
Functions as an extension of the foreign parent company.
Managed by the foreign company’s CEO.
No share capital requirement.
4. Employment Regulations
To employ someone in Sweden, foreign companies must register with the Swedish Tax Agency as an employer and pay payroll tax. This applies even if the company does not have a PE. Registration typically takes two to six weeks.
5. Payroll Tax and Social Security Contributions
Payroll Tax:
Calculated as a percentage of the employee's gross salary.
Paid monthly to the Swedish Tax Agency.
Social Security Contributions:
Contributions are deducted from the employee's salary and paid by both employer and employee.
Cover benefits such as pensions, healthcare, and unemployment insurance.
6. Financial Requirements and Procedures
Starting Costs:
Limited company registration: SEK 1,900 plus SEK 25,000 in share capital.
Branch registration: SEK 2,000.
Bank Account: Necessary for capital investment deposits and certain payments.
Not required for payroll purposes if not registered as a company.
Annual Financial Statements: Limited companies must file an annual report and tax return.
Branches must comply with varying reporting requirements based on their origin.
VAT Registration: Mandatory for both limited companies and branches.
Can be done through the Swedish Tax Agency at no charge.
Auditor Requirements: Required if the company meets certain size criteria for two consecutive years.
7. Practical Tips for Foreign Companies
Ensure compliance with Swedish tax laws by understanding PE rules.
Choose the right business entity based on your operations and financial situation.
Register promptly with the Swedish Tax Agency to avoid penalties.
Regularly consult with legal and financial advisors to navigate Sweden's regulatory environment effectively.
ers.
Starting a Business vs. Becoming an Employer in Sweden
The difference between becoming an employer in Sweden and starting a business in Sweden lies in the responsibilities the company undertakes and the processes required:
Starting a Business in Sweden:
This involves establishing the company itself, whether as a sole proprietorship, limited company, or branch office. The process includes registering the company with the Swedish Companies Registration Office (Bolagsverket) and the Swedish Tax Agency, choosing a company name, selecting industry codes (SNI codes), and possibly registering for VAT.
The goal is to legally establish the company and make it ready to operate in Sweden.
Becoming an Employer in Sweden:
Once the company is established and wants to hire staff in Sweden, it becomes an employer and must comply with Swedish employment regulations.
This includes registering as an employer with the Swedish Tax Agency to handle taxes and social contributions, creating employment contracts that adhere to collective agreements (where applicable), and providing mandatory employee insurance.
The focus here is to ensure the company can hire and compensate employees according to Swedish laws and standards.
