Business in Sweden
Before undertaking business activity in Sweden, it is necessary to choose which type of legal entity to form. The type of company form will influence all activity of the company, includes financial and tax reporting, customs and currency control. Therefore, an investor should pay special attention when determining the appropriate corporate form since this will help to achieve goals that are set while meeting all legal requirements. However, luckily the government has simplified the procedure of setting up a business in Sweden!
According to the Sweden Commercial Code there are 4 forms of legal entities when establishing business in Sweden. The most common ones used by foreign investors are limited company (Aktiebolag) and branch (filial).
You must have a residence permit if you are a citizen of a non-EU/EEA country and plan to work for a period longer than three months to start up or run your own business. The residence permits are applied at the Swedish Migration Agency (Migrationsverket). As self-employed it is not allowed to take employment with any employer. You apply the residence permit at a Swedish mission abroad in your native country or the country you are living in.
Foreign nationals in Sweden can act as sole proprietors. The sole ownership in Sweden doesn’t require a minimum share capital and it is the basic form of business in Sweden. The founder is taking all the decisions necessary to the good function of the entity and can use the profits after submitting the personal tax income declaration to the tax authorities.
As a standard, foreign companies that are established as a permanent entity and earn profits from Swedish sources are liable to pay 22% Swedish corporate tax on earnings. Both local and foreign companies are subject to the same Swedish corporate tax rate. However, foreign companies only pay Swedish taxes if they have a permanent organization or an administration board and earn profits from Swedish sources.
Swedish residents are liable to personal income tax on their total income received in a calendar year. Non-residents are taxed on income received from sources in Sweden. For residents the personal income tax rate is around 30% municipality tax for all types of income received, for non-residents 30%, although with few exceptions.
Standard VAT rate, currently 25% and 12% on food non-alcohol drinks. Transportation VAT rate is 6%. Medical treatment and culture arrangements are non VAT. Sales without VAT is for export. Foreign companies that provide certain cross-border services to Swedish clients, the
foreign company will be required to pay 25% VAT in Sweden.
The regulation of employment in Swedish is governed by the Labor Code , Lagen om anställningsskydd (LAS) applies only for employees and are not applicable for executives. Swedish labor laws apply to foreign nationals and foreign businesses in Sweden in the same manner as to domestic entities. All regulations related to minimum guarantees, employment benefits and compensation supersedes any agreement between the employer and employee. The employee-sided nature of Swedish labor legislation makes employment in Sweden complex.
Expats are liable to pay resident Swedish taxes and social charges only if they stay in the country at least 183 days during a calendar year. Your employer will typically arrange for your registration with the Swedish tax office and secure your social security number. Self-employed workers will need to arrange their tax registration and Swedish social security number themselves. Swedish social security payments are deducted from your gross salary by the employer.
In the condition of an employer-terminated agreement as a result of redundancy or liquidation, the rules are stipulated in LAS .
Termination of the employment agreement by the employee may be carried out by providing a notice according to LAS, the notice should be in written , LAS cannot be overridden by contractual terms.
The Highly Qualified Specialist (HQS) program was introduced in 2001 and allows companies in Sweden to employ foreign national workers with various benefits including a simplified application process and exemption from quotas.
BEING AN EXPAT
Residence premit has to be applied before moving to Sweden. Ideally the applications are done via the website of "Migrationsverket". However if the foreign national is already in Sweden and in need of a residency permit, it has to be applied at the office of "Migrationverket".
Foreigners looking to reside in Sweden will have to brace themselves for a lengthy apartment-hunting. Expats are advised to seek out real estate agencies when looking for an apartment.
Expats are obliged to pay tax on worldwide income to Sweden if living or working in Sweden for at least 183 days in a 12-month period. Usually double taxation can be avoided but this should always be checked on a case-to-case basis.