This year, Q2 also brings with it new considerations for foreign-owned businesses in Sweden. These include a major upcoming change to Value Added Tax (VAT) management, thanks to the confirmation of ViDA for 2030.

What is ViDA?

Short for ‘VAT in the Digital Age’, ViDA is a new European Union (EU) initiative. It aims to combat VAT fraud by introducing EU-wide e-invoicing, plus other measures to facilitate a simpler, more transparent, and more streamlined approach to VAT management.

It is hoped that ViDA will close the gap between the correct VAT revenue and the actual amount collected, known as the ‘VAT compliance gap’. In 2022, the EU VAT compliance gap amounted to approximately €89 billion, or 7% of the VAT total tax liability (VTTL). While Sweden’s VAT compliance gap is below average at 5.5%, this still resulted in a loss of €3,039 million in 2022.

What are the 3 Key Components of ViDA?

1. Real-time digital reporting. ViDA will ultimately introduce mandatory, standardised e-invoicing across EU member states. By promoting greater transparency, it is hoped that the move to digital reporting for cross-border trade will reduce VAT fraud by up to €11 billion annually.
2. Updated platform economy rules. Under ViDA, online platforms that facilitate passenger transport and short-term accommodation services will be responsible for collecting and remitting VAT when their users do not.
3. Single VAT registration. This will allow businesses to manage EU-wide tax obligations through one VAT registration system, simplifying and streamlining tax administration for companies operating across multiple borders.

When Will ViDA Come into Force?

ViDA was formally confirmed by the EU on March 11, 2025, and while various changes are planned over the next five years, ViDA’s mandatory e-invoicing regulations will not come into force until July 1, 2030.

What Does this Mean for Foreign-owned Businesses in Sweden?

ViDA is good news for EU businesses. As well as cracking down on VAT fraud, it has also been estimated that this initiative will slash administrative and compliance costs for businesses by upwards of €4.1 billion over the next decade. It is hoped that simpler reporting and clearer guidelines will result in fewer costly mistakes by businesses.

While ViDA will not become mandatory until 2030, now is the time to get prepared and make the transition to e-invoicing. If you are ready to upgrade to e-invoicing or want to switch to a new paperless system, choose one that meets current EU standards (e.g., PEPPOL). This way, you are much less likely to need to sink additional funds into converting again in a few short years. If you are unsure about how to set your business up for ViDA, arrange a consultation with one of Leinonen’s Swedish tax experts.

Other Swedish Accounting News for Businesses in Q2

• Changes to K1 Regulations
  The Accounting Board has altered K1 regulations for sole proprietors who prepare simplified annual accounts. As well as introducing alterations to the depreciation basis for machinery and equipment, the K1 regulations now have the same structure as the other K regulations for easier understanding and readability. To find out more on important changes to K2 and K3 regulations, read our article here.
• Proposal of a General Reverse Charge for VAT
  SRF consultants have called for a general reverse charge as a measure to reduce VAT fraud. If this was introduced, buyers would always be liable for VAT – not suppliers.

Leinonen are Helping Foreign-owned Businesses in Sweden Prepare for ViDA

While e-invoicing is not yet mandatory in Sweden, getting started in advance is highly recommended. Switching from paper invoicing to e-invoicing is a complex process that should not be rushed. By getting it right the first time, you will avoid headaches and unexpected costs to your business down the line.

Thankfully, you can streamline the process and save money by seeking advice from Swedish cross-border tax experts. With clients across 18+ EU countries and over a decade in the Swedish market, Leinonen’s accounting, payroll, and tax consultants are fully equipped to help foreign-owned SMEs in Sweden prepare for ViDA.

Contact us today to arrange a consultation with a local tax and accounting specialist.

The post ViDA Confirmed for 2030, and Other Swedish Accounting News for 2025 Q2 appeared first on Leinonen Sweden.

K2 and K3: What are They?

K2 and K3 are two of four ‘K regulation’ categories used for annual reporting in Sweden. A company’s size and operations affect which categories they are able to use for their annual accounts. K2 and K3 are the most commonly used.

• K2 is used by smaller companies with simpler operations. These companies must earn less than SEK 80m in annual revenue.
• K3 is for consolidated accounts and legal entities. Companies using K3 are typically those that have more than SEK 40m in total assets, generate more than SEK 80m in annual revenue, and have an average of 50 employees. However, smaller companies that are not eligible for K2 must also follow this standard.

Under current regulations, a smaller company can choose to report in accordance with K3, but larger companies cannot choose to use K2.

What Changes are Being Proposed by The Accounting Board?

A number of changes are being proposed, mostly affecting companies currently using K2. While the smallest businesses exempt from auditing will be able to continue using K2, the ultimate goal is for more companies to move to K3.

The following companies currently using K2 will soon be required to use K3:

• Those with significant deferred tax items or buildings with varying useful lives.
• Condominium associations (regardless of size), to ensure fair and comparable accounting.
• Companies of any size that have at least one foreign branch.

K2 regulations will also be refined and clarified where needed.

These clarifications and changes include:

• Clearer rules on what should be included in the ‘raw materials and supplies’ item.
• Clarifications on when shareholder contributions can be reported.
• Clarifications on the accrual of rent.

What Does This Mean for Businesses Accounting in Sweden?

Businesses currently using K2 that do not have an accounting consultant will need to reassess whether they still have simpler conditions that allow them to continue using K2 (e.g., not having one or more foreign branch). If it is determined that the company needs to start using K3, preparations should be made for this shift.

When Will the Changes Come Into Force?

A final decision is expected to be made during the second quarter of next year, and changes will likely come into force for financial years after December 2025. Now is the perfect time to find out how these proposed changes will affect your company, and start preparing for a smooth and swift transition.

How can Leinonen Help With Accounting in Sweden?

Adapting to ever-changing accounting regulations like those proposed for 2025 onwards can be both confusing and time consuming, and this is especially true for foreign-owned businesses. Leinonen’s experts have been supporting foreign businesses accounting in Sweden for upwards of ten years, ensuring they conform to current regulations and seamlessly assimilate with new ones.

Outsourcing payroll and accounting in Sweden can boost growth, prevent avoidable hassles, and even reduce costs. Get in touch today to arrange a virtual meeting with one of our staff experts.

The post 2025 K Regulation Changes for Businesses Accounting in Sweden appeared first on Leinonen Sweden.

Changes Have Been Made to:

• The Accounting Act
• The Annual Accounts Act
• The Auditing Act
• The Limited Liability Companies Act
• The Economic Associations Act

Here are some of the most significant recent amendments to Swedish accounting and employment laws in 2024.

Key Accounting Changes in Sweden

• Paperless Information Storage. This much anticipated amendment to the Accounting Act means businesses need no longer retain paper records, providing the information is securely stored in an electronic format. Leinonen explored what this means for businesses in practise in a recent article.
• Sustainability Reporting. Greater detail is now required, and a company’s sustainability report must be reviewed by an auditor. More companies are now required to submit a sustainability report, too (most companies listed on a regulated market).
• Annual Report Dates. Annual reports must contain two dates going forward. As well as the date of signing, the report itself should now be dated.
• Combined Assignment. This change to the Auditing Act, the Limited Liability Companies Act, the Economic Associations Act and the Foundations Act means that anyone who professionally assists a company with their accounting cannot also be an auditor for the company.

Key Employment Changes in Sweden

• Compensation for Employees Born in 1957. People born in 1957 must receive compensation for tax relief lost when they were made to wait an additional year for the increased basic deduction. The age at which they can claim this was raised simultaneously with retirement age in 2023 (which is now 66).
• Parental Insurance. Parents can now take up to 60 ‘double days’, where both parents take leave together and both receive parental allowance. This has doubled from 30 days, and now applies to parents with a child under 15 months instead of 12 months.
• Abolishment of High Sick pay Cost Compensation. Employers can no longer receive compensation for high sick pay costs.

Keep up to date on ever-changing Swedish accounting and employment laws with the reliable support of Leinonen’s local accounting, tax and payroll experts.

The post Key Updates to Swedish Accounting and Employment laws in the Second Half of 2024 appeared first on Leinonen Sweden.

Ultimately, it is hoped that these simplifications will promote entrepreneurship in Sweden, while also helping small and medium sized enterprises (SMEs) to grow and build capital.

What are 3:12 Rules?

3:12 rules are concerned with the taxation of dividends from family-owned and closely held companies. These rules prevent these businesses from paying preferentially taxed dividends to their owners, rather than higher taxed employment income. This is done by calculating a threshold amount that determines how much of a dividend or capital gain is taxed at 20%.

What Changes to the 3:12 Rules Have Been Proposed?

• Introduce a common rule for calculating limit amount, replacing the current simplification rule and main rule.
• A wage-based amount to be added to the owner’s basic threshold amount. This amount would remain the same (50% of cash-paid gross wages and subsidiaries distributed among the owner’s shares in the company). However, a deduction of eight income base amounts per shareholder must be made first.
• Removal of wage withdrawal and capital share requirement of 4% ownership. This would give all shareholders the same opportunity to account for a wage-based amount.
• Indexation of share acquisition cost would only remain for costs exceeding SEK 100,000.
• Changing cap amounts, combining the current two cap amounts into a single cap amount of 90 income base amounts. This would apply to both dividends and capital gains for the current tax year and two preceding years for the shareholder and their relatives.
• Reduce qualification period from 5 years to 4 years.
• Narrow the definition of related parties. In the new proposed regulations, siblings, spouses of siblings, and children of siblings would not be considered relatives.

When Could the new 3:12 Rules Come Into Effect?

If approved, they may come into effect as early as January 1, 2026.

What Concerns Have Been Raised Over the Proposal?

Overall, our Swedish tax and accounting professionals hold a positive view on the proposed 3:12 rule simplifications. However, some concerns have been raised regarding the impact of the proposal on shareholders with a lower salary base, and of removing unused dividend space updates. The proposed new regulations would also require closely held companies to provide an annual control statement on shareholdings.

To find out more about the proposed changes and how they could affect your closely held company in Sweden, arrange a consultation with one of Leinonen’s Swedish tax and accounting experts today.

The post What Could Newly Proposed 3:12 Rules Mean for Closely Held Businesses in Sweden? appeared first on Leinonen Sweden.

This bill is great news for businesses in Sweden looking to modernize their accounting processes, while also improving security and data protection.

How Could Paperless Receipts Benefit Your Business?

Paperless receipts are a sustainable option that could significantly reduce administration work for your team. Ultimately, it is estimated that the passing of this bill could save businesses up to SEK 3.9 billion each year.

Paper receipts are difficult to manage; they are easily lost and can take up a huge amount of storage space. This may be particularly true for large companies dealing with thousands of receipts each year. Switching to digital receipts will eliminate this issue entirely.

Perhaps the key benefit of working solely with digital receipts is improved security. When this new bill comes into effect, you will still need to save receipts for seven years. But a streamlined system can keep paperless receipts securely stored and backed up – something that is difficult to achieve with paper receipts.

How to Store Digital Receipts

1. If the original receipt is a paper one, take a photograph of it before discarding.
2. Save the digital receipt or photograph to your accounting system or a secure hard drive.
3. Make sure to keep a backup copy of all your digital receipts. The Tax Agency might request to see them, so it is vital they do not get lost.

When Does the Bill Come Into Effect?

The new bill comes into effect on July 1, 2024.

How can Leinonen Help With Paperless Receipts?

If you are interested in setting up an automated, time-saving system to securely store paperless receipts following the passing of this bill, Leinonen can help! With ten years in the Swedish market, our team have the expertise and local knowledge to streamline your foreign-owned business’ financial procedures.

Get in touch today to arrange a consultation with one of our accounting, tax, and payroll experts.

The post Swedish Parliament Gives Paperless Receipt Handling the go-Ahead appeared first on Leinonen Sweden.

E-invoicing, as the name suggests, is invoicing but in an electronic format. It has become an integral invoicing method for companies and businesses in Sweden, driven by legislative mandates, standardization efforts, and the pursuit of efficiency gains. Read to the end to discover how Leinonen can help you transition seamlessly to e-invoicing.

Introduction to E-Invoicing

In electronic invoicing, the supplier and the buyer use an electronic system to exchange documents. The invoice is automatically sent, received, and processed. An important point to note is that the invoice should be sent in a structured electronic format and not just by email. In Sweden, it involves sending invoices as PDF (“Portable Document Format”). Traditional paperwork does not need to be done in this case, and the invoice will arrive immediately.

Navigating E-Invoicing in Sweden

In Sweden, there are no industry-specific needs when it comes to e-invoicing. In Sweden, standard invoicing practices require an invoice to contain information such as invoice number, invoice date, due date, organization number, account number/bank giro number for payment, etc.

E-invoices in Sweden are safer instead of paper invoices because they are digitally signed and can be checked against paper invoices that might get lost in the mail.  If you have the correct e-invoice address or e-mail address, it will be entered directly into the accounting system. As long as you have a modern accounting program, it is easy to use e-invoices. There is no need for any additional software.

E-Invoicing from a Business and Accountant’s Perspective

As an accountant or business owner, audits become more manageable with e-invoices as you can easily track information and don’t require conventional paper invoices. Invoices go directly to the accounting software, where AI can provide accounting suggestions or even automatically post them. It requires a good modern accounting program. Accountants still need to check the accounting, but it saves a lot of time and makes it easier to have an overview of received invoices instead of having hundreds of paper invoices in binders to review. The overall accounting process becomes much faster and more efficient.

Advantages of E-invoicing in Sweden

E-invoicing simplifies the invoicing process and saves time. From an operational standpoint, it automates the processes for receiving and paying invoices, resulting in enhanced efficiency. Since paper invoices are no longer needed, it also saves space (no need for archives) and is environmentally friendly.

From an accountant’s point of view, it’s a safer, more efficient approach to handle bills with less room for human mistakes. E-invoicing is a time- and cost-saving technology, as it allows accountants to work faster. All government organizations and municipalities in Sweden are also obliged to accept e-invoicing. Some municipalities have already switched to only using PDF and no longer accept paper invoices. If a company wants to sell its services to the public sector, e-invoicing is a must.

Making the shift from paper invoicing to E-Invoicing in Sweden

It is relatively easy to switch from paper invoices to e-invoices in Sweden. The Swedish market has many accounting software such as Fortnox, Hogia, Visma, etc. As a rule, these programs do not have pre-programs such as Assendo “attest.nu”, Basware, etc., where there is a cost to interpret “AI” for this.

Nowadays, most accounting programs can automatically understand incoming invoices, so all you have to do is manually input the amounts, and the program will automatically calculate the cost. It makes the registration process a breeze. Under electronic invoicing, the system allows you to automate the accounting process or learn your accounting preferences from previous invoices. So, you need to inform all suppliers that you would prefer to get PDF invoices.

The interpretation checks the invoice to see if it has all the necessary information. If it doesn’t, you have to either fix the source or make a new one. It can take cost centres or project numbers, and most of the time, all that needs to be done is checking the data. This is a more efficient way to work. If you don’t know enough about accounting to check, the invoices that you know are for the same booking will be made immediately.

Making an easy switch to E-Invoicing

To receive an electronic invoice, a firm may easily do so using the invoicing programs offered in Sweden. The invoice is generated as a PDF file or delivered as a PDF invoice, with user-friendly options. We can then send by regular email or directly from the invoice program to all customers who receive PDF invoices or submit them in portals.

Leinonen has been assisting businesses in Sweden for almost a decade, giving us invaluable cross-border business knowledge. When you choose us, you can feel confident you have a stable, long-term partner supporting you in Sweden.

Digitization in Sweden has progressed rapidly, and all customers with modern accounting systems can submit their documents directly to the system. Digital verification dates are available for both in and out.

Conclusion

The Swedish government has rolled out many initiatives to make e-invoicing an integral part of businesses to ensure higher efficiency. Many large corporations and government bodies have already transitioned to electronic invoicing, while smaller businesses are gradually following suit. In addition to the primary advantages of e-invoicing, companies should make a switch to this method to remain relevant and conform to overall industry standards.

For more information on how we can help you get started with e-invoicing in Sweden and for advice on what practical steps you can take towards automation please contact us today.

The post E-Invoicing in Sweden appeared first on Leinonen Sweden.

Here are some key considerations for managing accounting in the Swedish construction sector:

Project accounting and accuracy:

In the construction sector, project accounting is paramount. Every detail, from material costs to labor expenses, must be meticulously tracked. Accuracy from the outset ensures that projects remain financially viable and on track for success.

Building the right company structure:

A well-structured company is the cornerstone of successful accounting. Proper organization and allocation of resources are essential to maintaining profitability and ensuring compliance with Swedish accounting standards.

Laws and regulations:

Several crucial laws and regulations govern accounting practices in the construction sector. Notable among these are ROT (Renovation, Repair, and Construction Work Tax Deduction) and the Reverse VAT for construction services. Additionally, compliance with ID06 registration, the use of A1 certificates (social insurance certification from the home country) and considering the SINK and 183-day rules for foreign employees are vital aspects.

Project accounting as best practice:

Project accounting emerges as the standard practice in the industry, offering a comprehensive approach to financial management, enabling accurate cost allocation and monitoring.

While not mandatory, certain projects may require senior employees to possess specific certifications. This depends on the client’s size and workflow, highlighting the importance of a tailored approach to each project.

Accountant’s perspective & salaries in the sector:

From an accountant’s viewpoint, precision at the outset is key. Establishing a structured workflow ensures that accounting remains accurate, reducing the likelihood of costly errors down the line.

When it comes to employee compensation in 2023, then wages in the construction sector are contingent on collective affiliations and agreements. For instance, under the collective agreement for building in 2023, welders command an hourly rate of 186 SEK, while project managers earn 235 SEK per hour.

The role of controllers and financial managers:

To optimize operations and enhance profitability, companies may opt to have a controller or financial manager oversee the balance sheet and Profit and Loss statements. This strategic approach allows for a more streamlined cost structure and improved sales performance.

In conclusion, the construction sector in Sweden presents both opportunities and challenges. By adopting pedant accounting practices, staying informed of legal requirements, and structuring their operations efficiently, companies can position themselves for success in this thriving industry.

With Leinonen’s expertise and a clear understanding of the nuances involved, businesses can navigate the Swedish construction sector with confidence and precision, ensuring not only compliance but also sustainable growth and profitability.

The post Navigating Swedish Payroll and Accounting in the Construction Sector: Expert Insights appeared first on Leinonen Sweden.

The total cost of an employee in Sweden consists of cash costs, future cash costs, and other indirect costs. Cash costs refer to the total compensation paid to the employee, including their salary and taxes paid. Future cash costs include provisions for pensions, vacation compensation, and insurance that will be due in the future. Other indirect costs are expenses related to the employee, such as workplace benefits or training.

Unlike some countries, Sweden does not have a legal minimum salary. Instead, minimum salaries are determined through labor unions and collective bargaining agreements. The specific minimum wage varies depending on the relevant collective bargaining agreement.

Overtime regulations in Sweden

Overtime regulations in Sweden are governed by the “Arbetstidslag (1982:673)” law. The regular work time is typically 40 hours per four weeks, although this can be modified by a collective bargaining agreement or contract. Overtime is defined as time worked in excess of regular work time.

Employers can impose regular overtime up to 50 hours per month or 200 hours per year. Additionally, in special circumstances, employers may impose an extra 150 hours of overtime per year. However, it is worth noting that in practice, overtime rules are not always strictly enforced, especially for white-collar positions.

Regarding work on public holidays, Sweden has 12 public holidays defined by the “Lag (1989:253) om allmänna helgdagar” law. Sundays also count as holidays. While there is no law prohibiting work on holidays, employers must abide by working time limitations. The specific regulations for work on holidays can be determined through collective bargaining agreements or contracts.

Employee benefits and how the tax should be calculated.

Employee benefits in Sweden are subject to contractual agreements between employers and employees. The general rule is that the value of the benefit is taxable, equivalent to income. However, for certain common benefits such as cars, fuel, travel, meals, and stock options, there are special rules set by the Tax Agency.

When it comes to additional benefits that employees can be provided with, the options are vast. Employers can choose to offer benefits like gym memberships, healthcare, access to parking spaces, and cleaning help. However, it is important to note that the value of these benefits is taxable, meaning they are subject to income tax and employers must make the necessary tax deductions for the employees. Employers also need to pay employer contributions on the value of the benefits.

Vacations and parental leave system

In terms of leave entitlements, employees in Sweden are entitled to 25 working days of annual vacation, equivalent to five weeks. Vacation pay is set at 12% of the employee’s gross salary. Employers are responsible for paying sick leave to employees for the first two weeks. Employees are not eligible for any compensation on the first day of sickness. Afterward, employers must compensate them for 13 days at 80% of their salaries.

Sweden also offers generous parental leave benefits. Parents are jointly guaranteed 480 days of paid parental leave per year, with at least 60 days reserved for each parent. The leave is paid at a rate consistent with most of their normal salaries. Additionally, fathers or mothers are entitled to 10 extra paid days off when a child is born or 20 days off if multiple children are born. However, it is important to note that parental leave is taxed as regular income.

Sweden has also implemented tax relief measures for key foreign personnel. Employees with specialized skills that are difficult to find in Sweden can receive a 25% reduction of taxable income, including any benefits and employer contributions to housing and living costs. This tax relief means that 25% of the compensation will be exempt from Swedish tax and social security charges during a five-year period. This measure aims to attract highly skilled workers from abroad and promote international talent exchange.

In addition, Sweden has entered into income tax treaties with 92 countries, including a treaty with the United States. These treaties help avoid double taxation and provide guidelines for the taxation of individuals or corporations with cross-border income. Sweden also has a totalization agreement with the United States regarding social security program coverage and contributions, ensuring that individuals who have worked in both countries are not subject to redundant social security payments.

Overall, payroll taxes in Sweden encompass various elements such as salary calculations, benefits, leave entitlements, and tax relief measures. Understanding these components is crucial for both employers and employees to ensure compliance with tax regulations and to make informed decisions regarding compensation and benefits.

In case of any questions on payroll taxes, it is always recommended to consult with a tax professional or the relevant authorities for the latest updates and guidance.

The post Payroll taxes in Sweden: A comprehensive overview appeared first on Leinonen Sweden.

Step 1: Decide on your Business Structure

The first step in setting up a business in Sweden is to decide on a business structure. This will depend largely on the type of business you intend to run and the services you plan to provide. Commonly, foreign investors choose to establish either a branch or subsidiary in Sweden.

A branch is an extension of your existing business and is not a separate legal entity. This type of business structure requires you to submit quarterly reports and accounts to the Swedish Register of Commerce.

A subsidiary is a separate legal entity distinct from your existing business. In this case, a board of directors and shareholder need to be appointed, and the annual accounts must be filed with the Swedish Register of Commerce.

Whichever option you choose, you must register the business with the Swedish Tax Agency in order to open a bank account and apply for a business registration certificate. You must also notify the social insurance office of your business and the chamber of commerce.

Step 2: Determine Your Operating Preference

The second step in setting up a business in Sweden is to decide on your operating preference. Foreign companies can either operate in Sweden as a registered business or as a branch office.

Registered businesses must register with the Swedish Chamber of Commerce and Industry, the Swedish Tax Agency and the Swedish Companies Registration Office. A board of directors and shareholder must be appointed, and the annual accounts must be filed with the Swedish Register of Commerce.

Branches of a foreign company do not have their own legal entity and merely represent the foreign company. However, they must also register with the Swedish Tax Agency, the Swedish Chamber of Commerce and Industry, and the Companies Registration Office in Sweden.

Step 3: E-Services

Once you have decided on a business structure and operating preference, you can begin to utilize the e-services that are available to help you navigate the process. These services provide the necessary information to help you complete the various registration forms and paperwork required.

Extra information can be obtained from:

 – Invest in Sweden is a service that provides information on business opportunities, practical guidance on setting up a business in Sweden, and a database of businesses for sale in Sweden.

 – Verksamt.se is a government site where you can register your business, pay taxes, apply for permits, and find out about the laws and regulations in Sweden.

– Skatteverket.se gathers important information for foreigners and entrepreneurs

Step 4: Find Help

Setting up a business in another country can be complicated and intimidating, and there is no shame in asking for help. There are a number of local resources available in Sweden to help you with the process of setting up a business.

Leinonen Sweden has more than 10 years of experience on the ground in Sweden and have helped scores of foreign businesses gain a solid foothold in the Swedish market. Before deciding to handle company establishment yourself, contact Leinonen Swedish team and discover how they can help.

Conclusion

Setting up a business in Sweden as a foreigner is a complex and lengthy process. However, it can be done successfully with the right information and resources.

Securing a company registration number in Sweden, onboarding key foreign staff, finding and securing an office, retail or manufacturing space and interacting with the Swedish tax agency are all time-consuming but essential parts of the process. A mistake with one of those, or any other aspects of the process, could set you back weeks or months and cost you a lot of money. The good news is that Leinonen’s company establishment services in Sweden exist to help foreign entrepreneurs and others looking to create a stand-alone enterprise on Swedish soil.

For further information visit our website and feel free to contact with Leinonen Swedish team.
https://leinonen.eu/swe/services/company-establishment/

The post How to establish a company in Sweden? appeared first on Leinonen 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.

TAXATION

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.

ACCOUNTING

Legal context

Accounting legislation in Sweden consists of mandatory accounting acts – the Annual Accounts Act of 1995 (årsredovisningslagen) and the Book-keeping Act of 1999 (bokföringslagen) being the most important. Both the Annual Accounts Act and the Book-keeping Act are general frameworks for accounting and both Acts refer to “generally accepted accounting principles”.

The Annual Accounts Act is based on an EU Directive. Credit institutions, brokerages and dealers in securities, and insurance companies, are covered by two specific accounting acts.

Setting standards

The Swedish Accounting Standards Board’s (BFN) main objective is to promote, in Sweden, the development of generally accepted accounting principles in terms of the current recording of transactions and the preparation of annual financial statements.

It issues general guidelines and information on accounting matters and practices. These general guidelines set out what constitutes “generally accepted accounting principles” in Sweden. The Swedish Financial Supervisory Authority (Finansinspektionen) is responsible for issuing standards required for financial companies.

Generally accepted accounting principles

“Generally accepted accounting principles” means conducting book-keeping in accordance with prevailing laws on the field and in line with accepted practice and in compliance with BFN’s general guidelines.

The rules of the Book-keeping Act regarding the current recording of transactions, supporting vouchers and archiving apply to all entities required to maintain accounting records. All companies that conduct business activity are required to maintain accounting records. In addition, all limited companies, partnerships and co-operatives, as well as certain foundations and non-profit associations, are always required to maintain accounting records even if they do not conduct business activity.

Rules on simplified annual accounts (förenklat årsbokslut) can be found in the Book-keeping Act. Rules on annual financial statements (årsbokslut) can be found in the Book-keeping Act and the Annual Accounts Act. Rules on annual reports (årsredovisning) can be found in the Annual Accounts Act.  

Where to find the rules

BFN’s guides, statements and general guidelines can be found under Redovisningsregler. The Book-keeping Act and Annual Accounts Act are also provided there. (In Swedish only).

EMPLOYMENT

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.

PAYROLL & TAX

There are specific rules for payroll and taxation in Sweden, depending on whether foreign national or Swedish residents are employed. The primary concerns for a foreign company that needs to comply with tax laws in Sweden: Individual income tax (IIT) for employees in Sweden, social security costs, payroll tax, sales tax, and withholding tax. 

Your Payroll Options in Sweden: 

Remote Payroll

A remote payroll in Sweden is where a foreign company, i.e. a non-resident company, payrolls a resident employee in Sweden. The only option for a non-resident company to payroll its employees (both local and foreign) in Sweden is to use fully outsourced services like a ”HUB” which will employ and payroll the staff on their behalf.

Local Payroll Administration

In some cases, a company will register their business in Sweden under one of the forms available, (ole trader, trading partnership, limited company, economic association) but prefer to have another company administer its payroll. This can be accomplished through a payroll provider. It is important to note that the company, as the Employer of Record, is still fully responsible for compliance with employment, immigration, tax and payroll regulations. But the payroll calculations, payments and filings can all be outsourced to the payroll provider.

Internal Payroll

Larger companies with a commitment to Sweden may wish to run their own local payroll for all employees, foreign and local. In order to accomplish this, they will have to complete incorporation, register the business and then hire the necessary staff. There will be a need for in country human resources personnel who have the background needed to manage a Swedish payroll, and can fulfill all tax, withholding, and payroll requirements.

This approach carries significant cost and requires some knowledge of local employment and payroll regulations. The company will need a local accounting firm and potentially legal counsel to ensure full compliance with Swedish employment laws. 

Fully Outsourced Payroll & Employment

Companies can outsource the employment and payroll of their staff in Sweden to a ”HUB”.This is possible for both foreign workers and Swedish nationals. This is the easiest, fastest and safest way to payroll staff in Sweden.

The HUB manages all aspects of payroll for workers in Sweden, including taxes, withholding, social security payments and other statutory requirements. The HUB becomes the Employer of Record and employs the staff on behalf of the client.Staff are paid monthly with tax and social security deducted at source and paid to local authorities. The HUB will invoice the client monthly in advance of the payroll date. The invoice consists of the Total Cost of Employment (Base salary + Employers Statutory Contributions + Additional statutory contributions)

BEING AN EXPAT

Residence permit 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.

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