Swedish tax rules for foreign companies with business operations in Sweden. How to comply?
For foreign companies contemplating operations in Sweden, a comprehensive understanding of the tax legislation is indispensable. In this exploration, we delve into the specific tax regulations that apply to foreign companies engaged in business activities in Sweden, all while they do not have a permanent establishment in the country.
Sweden's tax laws for foreign entities introduce a distinctive set of considerations, especially when there's an absence of a permanent establishment on Swedish soil. Navigating these regulations becomes important for ensuring a prosperous and compliant business presence in Sweden.
If your business has signed a commercial contract with a Swedish client, you should probably know that the Swedish tax legislation requires the foreign company to pay for its employee´s social contributions when they are working in Sweden. The Swedish client, who is supposed to pay the invoice for the work done by your company in Sweden, must deduct and withhold tax at a rate of 30% of the amount of your invoices for the work done in Sweden. To ensure clarity with your Swedish clients, it's crucial to specify in your commercial contract that the 30% deduction pertains only to business operations conducted in Sweden by your foreign company. This is important in order to avoid possible misunderstanding on which amount and invoices the 30% deduction should be applied. The tax withheld by your Swedish clients will be refunded the following year by the Swedish Tax Agency.
However, you can avoid the 30% deduction by your Swedish clients by applying for one of the following :
F-tax: your company can apply for F-tax (corporate tax registration), making your company responsible for tax payments in Sweden. In this case, your Swedish client will have to pay the total amount of the invoice. Or;
Tax Deduction Exemption: Apply for an exemption from tax deductions if your company isn't liable to pay taxes in Sweden. This decision is also resulting in no deductions on the invoice you will send to your Swedish client.
The Swedish Tax Agency (Skatteverket) is the national authority in charge to handle the tax issues in Sweden for foreign companies. You can apply for F-tax online or contact them to get more clarifications on how to comply with the Swedish tax legislation when you have business operations in Sweden.
If you need assistance or legal advice on this matter, you are more than welcome to contact us.