If you are considering sending workers to Sweden, now is the time to look through your payroll processes. Zennie Sjölund Head of Payroll from Srf konsulterna takes us through the key information you need to know.
Sweden has taken on the same regulation as many other countries when it comes to the taxation of short-term workers. Until now the formal employer has been the concept, meaning that the employer has been considered as the entity paying out the employee’s salary. From January 1, 2021, the economic employer principle is current and with that comes some other changes in legislation for foreign companies.
This will bring on extended payroll obligations for foreign employers. It will be very important not only in analysing the unique situation for each employee but also in making sure that the company is compliant with Swedish regulations. First you need to consider whether the company can be considered as an economic employer. If the work carried out in Sweden is seen as the hiring of labour to a Swedish company, well then, the company has new regulations to relate to.
The changes will require certain competence in the Swedish tax system, foremost considering that the foreign employer must register with the Swedish Tax Agency as a foreign employer, request an approval for F-tax, manage employee tax withholdings and file a monthly payroll return on an individual level.
To be able to determine if the company is to be considered the economic employer there are some questions to respond to:
Who instructs, controls, pays, supplies, plans, and decides?
If the company is considered the economic employer, it will impact on the employee’s taxation. There is an obligation to withhold Swedish tax on income related to work performed in Sweden. Usually, a person in Sweden is taxable for all the income on an annual basis and must file an annual tax return. For foreign persons, the option is as non-tax residents to apply for Special income tax for foreign residents (SINK), giving a tax rate of 25 per cent in comparison with tax residents who pay between 30-58 per cent.
The 183-day rule could ease up the situation with the employee’s taxes since the 183-day rule makes a period of working exempted from employee income tax at all in Sweden. This is liable with most tax treaties. although the remuneration must not be borne by a permanent establishment which the employer has in Sweden. The importance to identify any unreviewed risks for permanent establishment increases. However, if the company is considered an economic employer, the 183-day rule is not applicable, and the employee should be taxable as from day 1. But no laws are without exceptions, these come in the form of limits.
As a foreign employer, there are two limits to take notice on. First the 15-work-day limit. If a person works less than 15 days, there will be no tax liability in Sweden. The other limit is the 45-calendar-day limit. If the employee’s working days are under 45 in total during a calendar year in Sweden then there will be no tax liability in Sweden either. These two limits can be combined so it is very important to keep track of this. Ensure you are reviewing travel patterns and the nature of work carried out in Sweden.
Most non-Swedish companies (including sole traders and legal entities) that are employers in Sweden must declare and pay employer contributions. The level of contributions they pay depends on whether they have a permanent establishment in Sweden. The Swedish Tax Agency handles the employee tax withholdings and employer contribution. The foreign company must file a monthly payroll return on an individual level. To be able to do that the foreign employer must register with the Swedish Tax Agency as a foreign employer and request an approval for F-tax. Following that come’s management of employee tax withholdings and filing a monthly payroll return on an individual level.
Further support and information are available from Skatteverket.
If you are considering sending workers to Sweden, now is the time to look through your payroll processes. Zennie Sjölund Head of Payroll from Srf konsulterna takes us through the key information you need to know.
Sweden has taken on the same regulation as many other countries when it comes to the taxation of short-term workers. Until now the formal employer has been the concept, meaning that the employer has been considered as the entity paying out the employee’s salary. From January 1, 2021, the economic employer principle is current and with that comes some other changes in legislation for foreign companies.
This will bring on extended payroll obligations for foreign employers. It will be very important not only in analysing the unique situation for each employee but also in making sure that the company is compliant with Swedish regulations. First you need to consider whether the company can be considered as an economic employer. If the work carried out in Sweden is seen as the hiring of labour to a Swedish company, well then, the company has new regulations to relate to.
The changes will require certain competence in the Swedish tax system, foremost considering that the foreign employer must register with the Swedish Tax Agency as a foreign employer, request an approval for F-tax, manage employee tax withholdings and file a monthly payroll return on an individual level.
To be able to determine if the company is to be considered the economic employer there are some questions to respond to:
Who instructs, controls, pays, supplies, plans, and decides?
If the company is considered the economic employer, it will impact on the employee’s taxation. There is an obligation to withhold Swedish tax on income related to work performed in Sweden. Usually, a person in Sweden is taxable for all the income on an annual basis and must file an annual tax return. For foreign persons, the option is as non-tax residents to apply for Special income tax for foreign residents (SINK), giving a tax rate of 25 per cent in comparison with tax residents who pay between 30-58 per cent.
The 183-day rule could ease up the situation with the employee’s taxes since the 183-day rule makes a period of working exempted from employee income tax at all in Sweden. This is liable with most tax treaties. although the remuneration must not be borne by a permanent establishment which the employer has in Sweden. The importance to identify any unreviewed risks for permanent establishment increases. However, if the company is considered an economic employer, the 183-day rule is not applicable, and the employee should be taxable as from day 1. But no laws are without exceptions, these come in the form of limits.
As a foreign employer, there are two limits to take notice on. First the 15-work-day limit. If a person works less than 15 days, there will be no tax liability in Sweden. The other limit is the 45-calendar-day limit. If the employee’s working days are under 45 in total during a calendar year in Sweden then there will be no tax liability in Sweden either. These two limits can be combined so it is very important to keep track of this. Ensure you are reviewing travel patterns and the nature of work carried out in Sweden.
Most non-Swedish companies (including sole traders and legal entities) that are employers in Sweden must declare and pay employer contributions. The level of contributions they pay depends on whether they have a permanent establishment in Sweden. The Swedish Tax Agency handles the employee tax withholdings and employer contribution. The foreign company must file a monthly payroll return on an individual level. To be able to do that the foreign employer must register with the Swedish Tax Agency as a foreign employer and request an approval for F-tax. Following that come’s management of employee tax withholdings and filing a monthly payroll return on an individual level.
Further support and information are available from Skatteverket.