After discussions that began in 2017, last month Sweden’s parliament approved the introduction of the Economic Employer Concept in Sweden, and new regulations came in to force on January 1 2021.
The new legislation will focus on foreign employers as well as the tax liability of foreign employees operating within Sweden.
Previously, Swedish legislation applies a ‘formal employer’ definition, meaning the employer is considered to be the organization that pays the employee’s remuneration. The new Economic Employer legislation however, will instead assign the employer as the organization that benefits economically from the work. The idea of this is to prevent individuals working in Sweden while being employed by a foreign employer outside of Sweden.
In short, the new legislation’s focus is to protect the Swedish tax base, which is impacted by those who pay tax and/or social security abroad, and so will assess if an employee is taxable in Sweden or not. If an individual is under the supervision/control/management of the organization benefitting from the work then that individual will be seen as an employee. If the individual is also based in Sweden while performing the work, then the employment must also be based in Sweden too.
Based on the previous Swedish legislative employer concept, the 183-day rule applies when a foreign employee works in Sweden for a temporary period and receives remuneration from a foreign employer, even if the costs are charged to and ultimately borne by a Swedish company for whom the work is actually performed.
What do these changes mean?
The introduction of the economic employer concept will mean that the 183-day rule would not apply to short-term temporary workers in Sweden, and individuals would be tax liable in Sweden from their date of arrival in the country. Business trips and short visits of work (max 15 days in a row or 45 days in a calendar year) will be exempt from this, however anyone falling outside of this will need to be properly employed in Sweden.
What should businesses do?
Swedish and foreign companies should prepare for the potential changes, including reviewing their internal procedures to identify any categories of employees likely to be impacted by the new legislative framework.
Businesses should identify who they intend to send to Sweden, how many days are spent there and also whether the nature of the work means they should be employed.
All existing double-taxation treaties currently in place will remain so, meaning that an individual employed in Sweden (and from a country that holds a double-taxation treaty with Sweden) will not pay tax on the same salary/income twice, however they will have a Swedish tax liability from day one should they fall inside the new legislation.
How TCP can help?
Navigating the complexities of the Swedish tax system, particularly with the new rules, can be difficult. TCP have been operating as a compliant Employer of Record there for over 25 years, using our fully registered Swedish company to employ skilled workers on behalf of clients, managing the taxes and social security and making sure the employee is paid on time each month. We can smooth out all the processes and procedures necessary to making everything run seamlessly between everyone in the working relationship, while also ensuring you operate compliantly within the Swedish system.
Our team would be happy to help or answer any questions you may have. We are always aware of changes in legislations in all countries we operate, meaning we can provide the most suitable solutions for you/your workforce. Would you like to know more? Call our UK office on 0044 208 5 800800 or fill in our contact us form here and a member of our sales team will get back to you as soon as possible.