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Sweden

Why Sweden?

Located on the Scandinavian Peninsula in northern Europe, the name Sweden was derived from the Svear, or Suiones, a people mentioned as early as 98 CE by the Roman author Tacitus. The country’s ancient name was Svithiod. Swedish manufacturers produce a variety of wood products, including paper, boards, and prefabricated houses and furniture. Exports account for about one-third of Sweden’s GDP. Petroleum products and automobiles are the country’s main exports. Other top exports include medicine, vehicle parts, and communication devices. Together, Germany, the United Kingdom, Norway, Finland, and Denmark account for about two-fifths of Sweden’s export market. Sweden has been a WTO member since 1 January 1995 and a member of GATT since 30 April 1950. It is a member State of the European Union.

Advantages

Sweden is the fourth most competitive economy in Europe and often ranks as one of the highest-performing economies worldwide. A large part of this is due to the country’s free-market environment and highly developed education system.

Ease of doing business

Sweden possesses a strong and stable economy, making it an attractive location for foreign investment. Sweden offers several efficient processes that make business formation and operations easier, including online filing platforms for incorporation, taxes, property transfer, permitting, and more.

Open economy

Sweden has an open economy that fosters innovation and competition. The government proactively invests to promote growth in sectors such as biotechnology and food processing. The government is open to trade and works to support growing markets, including the Baltic countries, India, and Brazil.

Innovation hub

Sweden’s reputation as an innovation hub is evident in the country’s high placement in the Global Innovation Index, European Innovation Scoreboard, and the Bloomberg Innovation Index. The government supports innovation and growth through various agencies and investments in infrastructure.

Complex labour laws

Sweden’s labour laws are strict and offer workers protections in the form of collaborative bargaining agreements of individual labour unions. Collective bargaining exists both at the industry and company level, but bargaining takes place foremost at the industry level.

Simple Tax Regime

Individual – Taxes on personal income

Employment income tax for residents

Employment income is taxed at the following rounded taxable income amounts (2023):

  1. Income from SEK (Swedish kronor) 0 to SEK 613,900 is liable to National Incomes Tax at a rate of 0% and Municipal tax at a rate of 32%;
  2. Income over SEK 613,900 is liable to National Incomes Tax at a rate of 20% and Municipal Tax at a rate of 32%.

Employment income tax for non-residents

Non-residents working in Sweden for a Swedish employer or a foreign employer with a permanent establishment (PE) in Sweden have taxed at a flat rate of 25% at source. The same rate applies when a pension is paid by a Swedish source to a person not a tax resident in Sweden.

Non-residents working in Sweden for a non-Swedish employer without a PE are tax liable in Sweden if the beneficiary of the employee’s work is an entity in Sweden and the work is performed under the management and control of the Swedish entity. The tax rate is 25%. An exception applies if the employee is working in Sweden for less than 15 days in a row and less than 45 days in total during a calendar year.

Capital tax

Capital income is generally taxed at a flat rate of 30%.

Corporate – Taxes on corporate income

Resident legal entities are liable for tax on their worldwide income unless tax treaties or special exemptions apply. Non-resident entities are taxed on income that is deemed to have its source within Sweden.

Taxable income is subject to corporate tax at a flat rate of 20.6% applying from 1 January 2021.

All income of corporate entities is treated as business income.

Local income taxes

No municipal or local income taxes apply to Swedish corporations.

Sweden Companies

To do any type of business in Sweden, a person needs to register a company. There are different types of companies that a person can register with.

Sole Trader (in Swedish Enskild Näringsverksamhet or Enskild Firma)

The most common type of company in Sweden for entrepreneurs who want to run their business alone. A sole trader company is not a legal entity. A sole trader may have employees. Sole traders do not need to hire an accountant but, all sole trader companies should have and deliver their accounts periodically as the others.

Limited Liability Company or LLC (in Swedish Aktiebolag):

A limited liability company can be started by one or more individuals and/or legal entities. When starting a limited company, a person must have a share capital. Personal responsibility for the company’s debts is in principle limited to the share capital. However, there are situations where a person can be personally held responsible for unpaid taxes and contributions, etc.

Trading Partnership (in Swedish Handelsbolag):

A trading partnership is an alternative if at least two individuals or legal entities wish to start a business together. There is no requirement to invest capital, although the partners are personally, jointly, and severally liable for the company’s debts.

Economic Association (in Swedish Ekonomisk Förening)

Creating an economic association is an option if there are at least three people who want to run the business together. An economic association shall promote members’ financial interests. This means that members will receive a financial exchange for participation in the association. The association can also promote interests other than purely economic, as long as the economic interest dominates. Housing associations and cooperatives are examples of economic associations.

Non-profit Association (in Swedish Ideell Förening)

A nonprofit organization is formed by at least three people determining purpose and name. It is for nonprofit purposes or non-profit activities like working for members’ rights, and interests or for public purposes such as counteracting poverty. A non-profit association must not have the purpose of promoting members’ financial interests by pursuing business activities. A non-profit association is always open to new members who share the association’s goals. They do not need to contribute to capital or investment but, it is common for a membership fee to be charged.

Located on the Scandinavian Peninsula in northern Europe, the name Sweden was derived from the Svear, or Suiones, a people mentioned as early as 98 CE by the Roman author Tacitus. The country’s ancient name was Svithiod.

Author: Chandrawat & Partners

Topic: Doing Business in Sweden

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