You are considered an employer if you give remunerations (salaries and benefits) for work. For Swedish tax purposes, you are considered an employer if your employee is to be taxed in Sweden or belongs to the Swedish social insurance scheme (national insurance). This is true for both Swedish companies and foreign entrepreneurs.
This information is primarily for foreign entrepreneurs. When you pay your employee(s) for the first time you must check if you need to operate PAYE (Pay As You Earn) and register as an employer with the Swedish Tax Agency. There are two parts to the Swedish PAYE:
You should in many cases register as an employer with the Swedish tax agency before:
As an employer, you may have the following obligations in Sweden:
Salaries, or wages, are any payments to the employee made for work performed.
Benefits are all other kinds of non-monetary compensations. In principle a benefit is issued as soon as the employer funds a private expense for the employee. The general rule is that a benefit is taxable in Sweden if there are no regulation specifically exempting it from taxation, i.e. that the benefit is a tax free benefit under Swedish law. A benefit is normally valued to the market value. In some cases, the taxation of the benefit is made at a standardised value. If an employee pays the employer for a benefit, the value used for taxation is to be reduced with the amount paid.
If the employee is part of the Swedish social insurance scheme or not determines the employers obligation to pay employer contributions (social insurance contributions) in Sweden based on salaries paid out and issued benefits.
Swedish companies make tax deductions (withhold preliminary tax) and pay employers contributions at the full rate. A foreign company makes tax deductions and pay contributions at the full rate if it has a permanent establishment in Sweden. Their employees use the same A-tax certificate as employees with Swedish companies.
An employer lacking a permanent establishment in Sweden may not withhold preliminary tax on paid salaries or issued benefits.
Natural persons who are to be taxed in Sweden for their income and who are employed by companies lacking a permanent establishment are to register for special A-tax (SA-tax), and make monthly payments themselves, instead of employer tax deductions.
An employer lacking a permanent establishment in Sweden may enter into a binding agreement with an employee in Sweden that the employee is to assume the obligation to pay his/her own social security contributions. It is important that the parties agree specifically regarding social insurance contributions. It is not sufficient to state (for example) that the agreement is applicable to all taxes. Please specify that the agreement pertains to social insurance contributions (employer contributions). We recommend that such agreements are put in writing. When an agreement is in place, the employee must contact his Swedish tax office and apply for a special A-tax (SA-tax) certificate and state that he/she is to pay his/her own social insurance contributions. The obligation for the employer to submit an income statement remains, most often on a KU10 income statement form. On the KU10 form, the sum should be put in box 25 , with a supplementary note in box 67 that the sum refers to "an agreement on social insurance contributions". Please note that the employee is required to notify the Swedish Tax Agency of the existence of the agreement in his income tax declaration.
Employers lacking a permanent establishment pay employers contributions at a reduced rate, since the employer is not taxable in Sweden, and since a certain part of the contributions are (legally considered to be) a tax rather than a contribution.
The prescribed accounting periods for PAYE is per calendar month. The Swedish Tax Agency may (at our discretion) permit the employer to file per annum instead of per month, primarily when:
Also, businesses that have activities limited to certain parts of the calendar year often seek and receive permission to file only during the months of activity. An employer may request to be prescribed a per annum accounting period by contacting the Swedish Tax Agency. This does not affect the prescribed accounting period for VAT, nor any other taxes.
If you have a permanent establishment in Sweden, you are required to withhold tax on employees salaries and benefits and report them in the PAYE. Otherwise, you may not make tax deductions.
If you have a permanent establishment, it is the payment recipients Swedish tax approval status and Swedish tax status in conjunction that decides if you are to make tax deductions or not.
In Sweden, an approval for Swedish F-tax is required for a recipient taxable in Sweden to be allowed to manage his own taxes on remunerations received. You can only make payments without withholding tax if the recipient:
A legal or natural person that is taxable in Sweden who does not have an approval for F-tax has an A-tax certificate. You must withhold tax on remunerations paid to such a person as per above if the total sum paid per year is at least SEK 1000, both in regards to legal persons and to natural persons.
Most Swedish companies have approval for F-tax. Most natural persons have A-tax. It is possible for a foreign entrepreneur to get an approval for F-tax. Many foreign entrepreneurs apply for an approval for F-tax to ensure that their Swedish business counterparts can be sure that they can make payments to them without making tax deductions. If the foreign company has a approval for Swedish F-tax, their payees need not investigate if they have a permanent establishment or not. It can be very hard for the payee to know if the recipient has a permanent establishment (or will have one during the fiscal year).
Please calculate any tax deductions to be made as follows:
Please notify the recipient of the tax deducted in writing, at each payment made, for example on the slip. Please also notify the Swedish Tax Agency if a recipient fraudulently shows or makes reference to an approval for F-tax even though the recipient is obviously directly employed by you rather than contracted as an independent entrepreneur. Otherwise, you may later become liable to pay the tax not deducted.
As an employer you may need to pay employers contributions on the remunerations you give to your employees. Remunerations include not only cash amounts but benefits, such as providing your employees with company cars, free housing or free commuter cards. Many of these contributions go towards building up the employees entitlements to social insurance benefits.
The Swedish social insurance authority the Swedish Social Insurance Agency, Försäkringskassan, handles matters of adherence to the Swedish social insurance scheme. Matters of social insurance benefits are handled by Försäkringskassan and the Swedish Pensions Agency. The Swedish Tax Agency decides on what remunerations are to be a part of the basis for payments of social insurance contributions and annually determines the employees Swedish pension rights. More information is available at Försäkringskassans web site.
The obligation to pay employers contributions directly follows the employees adherence to a national social insurance scheme. If an employee is socially insured in Sweden, the employer is liable to pay contributions in Sweden on remunerations to that employee. It is therefore essential to know which states´ scheme your employee(s) belongs to, Swedish or foreign.
Regarding people living and working within the EU/EEA, the general rule is that the person belongs to the social insurance scheme of the state in which the person conducts work. A person working in Sweden may belong to a foreign insurance scheme if the person:
A person working abroad may in accordance with the rules on posting or parallel employments belong to the Swedish social insurance scheme. Consequently, a foreign employer with no establishment and no business activities in Sweden may still be required to register as an employer in Sweden and pay employer contributions. This is often the case for foreign companies employing Swedish personnel for short term work abroad during the employees vacation time or other leave from their ordinary place of work in Sweden, due to the rules on parallel employment. If one is employed by several employers in several EU/EEA countries in parallel, one adheres to the social insurance system of the state in which one is resident, in accordance with EC rules on residency for social insurance purposes.
Posting is when an employee is sent by his employer (or a sole trader posting him/her self) for a limited period of time to a another country to conduct work there on the employers behalf, and who (by being posted) selects not to enter into the work country´s social insurance scheme. For a posting to be possible, the posted person must, at the time of the posting, belong to the social insurance scheme of the country he or she is posted from.
If a person is to detract from the general rule of belonging to the insurance scheme of, and having contributions paid to, the state in which work is performed, that persons employer is required to submit a certificate of social insurance. This shows the Swedish Tax Agency that no contributions need to be paid in Sweden.
Within the EU/EEA, since May 2010, they are called A1 certificates. Certificates prior to May 2010 are called E101, E102 and E103. The certificate states: what social insurance scheme the person belongs to and why, and how long the person belongs to that scheme.
These certificates can be requested from the social security authority in the state whose scheme the person is to adhere to. In Sweden, for example, that authority is Försäkringskassan. Försäkringskassan issues A1 certificates for persons who are to belong to the Swedish social insurance scheme while working abroad. Outside of the EU, other certificates are available for the countries with which Sweden has entered into conventions on social insurance. For other countries, outside of the EU, no certificates exist, although postings to Sweden in accordance with Swedish internal law are still possible. Please note that there is generally a time limit of two years for postings, although exceptions can be made in some cases. Contact your local social insurance authority for more information on postings and on getting certificates.
Please also note that an employee may very well be taxed in one country in accordance with the rules in an applicable convention for the avoidance of double taxation (a tax treaty) and still adhere to another countries social insurance scheme, with an obligation for the employer to pay employers contributions in the second country.
If you as an employer provide an employee with non-cash company benefits or "perks" - such as living accommodations or a car - the employee may have to pay tax on them and you may have to pay social insurance contribution based on them, both most often through Pay As You Earn (PAYE) deductions made by you. This is in addition to the tax and social insurance contributions already paid on any cash earnings or benefits through PAYE. The main rule in Sweden is that a benefit is taxable if it has not been specifically excluded from taxation. It is normally valued at market value. Some benefits are valued at a flat rate. If the employee pays for the benefit, the taxable value should be reduced with the amount paid.
A taxable benefit is issued when an employee privately uses a car that he/she is in possession of due to an employment or some other contractual agreement for work. If the employer pays for fuel for private driving it should also be taxed as a benefit.
Car benefits are valued at flat rates. They can be calculated on the Swedish part of this webpage. Travel to and from work are considered private use. An employee or contractor using a company car privately less than 10 times per year with a total driving distance of1000 kilometer not taxed for a car benefit. If an owner or employee of a company has the right to use a car he or she must show that the car has been used less than this. This is normally done by keeping a detailed and complete driving chart, but all circumstances of worth are taken into consideration, for example any privately owned car.
In some cases when an employee receives free work tools no tax liability arises. Work tools that are usable privately for the employees are tax free if:
These requirements may apply to various goods and services that the employer give to the employee and are partly or fully to be considered work tools. For example data glasses, credit cards, broadband Internet access, certain phone services and education services. For tax exemption it is required that the employer pays for the work tools directly. If a cost allowance is given to the employee instead, it is fully taxable. Clothes are personal costs and employees have no right to make personal income tax deductions for private purchases of work clothes. However, the employer may offer work clothes tax free if they are specially adapted for the work and are not suited for private use. Uniforms and protective garments are tax free. If the employer offers ordinary clothes to employees, for example coats/jackets, suits, dress shirts, blouses, and trousers, that is most often a taxable benefit. For such clothes to be tax free, all requirements must be met and they are to be:
If employees temporarily borrow clothes that the employer owns and stores at the work site for the use of various employees while performing special tasks, for example performing on stage, it is tax free.
If an employer provides an employee - or one of the employees relatives - with living accommodation the employee may have to pay tax on the benefit. For the purpose of calculating the value of the benefit for a living accommodation, a flat rate per square meter is used. The value calculated is to be used both for calculating tax deductions, employers contributions and for the income statement. The rates are set yearly for various regions to an average rate per square meter living space for comparable housing. For the employee, however, the value declared in his or her income tax return should be the market value of that accommodation. Further information on rates etc. may be found here (in Swedish). The value of a benefit of free vacation accommodations are to be valued at market value for both the employer and the employee.
The benefits listed above are just a few of the most common ones.
In certain circumstances you can get some benefits without paying tax on them. Tax-free benefits may include some insurances, healthcare and employee benefits such as physical exercise and other health maintaining activities.