The global solution for human resource professionals, combines custom research, strategic white papers, country primers, webinars and OnDemand educational programs, and the expert guidance...
By Marcus Hoy
Foreign employees of nonresident companies will be tax liable regardless of the length of time they stay in the country under a draft legal proposal detailed by Sweden’s Finance Ministry May 17.
If, as expected, the proposal becomes law, foreign companies employing workers in Sweden will be required to deduct personal income tax from salaries even if the company does not have a permanent establishment in the nation. Currently, Sweden applies a so-called 183-day rule, under which an employee is tax-exempt if he or she is present in Sweden no more than 183 days in a 12-month period and the employer does not have a PE in Sweden. This applies even if a Swedish company is the beneficiary of the work.
Under the proposed new rules, such employees will become tax liable upon starting work regardless of the length of time they spend in Sweden. The new rules are due to enter into force on Jan. 1, 2019.
In a May 22 statement, PWC said the new rules would require affected foreign companies to register with the Swedish Tax Authority, report withholding taxes, and file payroll returns. PWC notes an STA suggestion that foreign companies register a representative in Sweden, such as the domestic company that benefits from the work, to file the payroll return on behalf of the foreign company.
The new tax measure is aimed at creating a more equal playing field in the labor market and broadening the tax base, PWC tax adviser Cecilia Arrhenius told Bloomberg Law May 23.
“The government believes that foreign companies that operate in Sweden but do not have a PE should be subject to the same rules as Swedish and foreign PEs.” Arrhenius said. “Many other nations take a similar view.”
“Foreign companies with a PE in Sweden already have a liability to withhold Swedish tax for employees working for them in Sweden,” Arrhenius said. “The new rules will affect non PEs, including foreign staffing agencies that hire out employees to a Swedish principal, which includes foreign companies with a PE in Sweden.”
The new rules would affect not only semi-skilled and seasonal workers but also skilled professionals such as IT consultants working on short-term contracts, according to Arrhenius.
This could potentially result in employees on short-term contracts being taxed at a higher rate than they are currently, Arrhenius pointed out, since Sweden’s base income tax rate is currently 32 percent
“Companies subject to this measure should investigate if their employees will be affected as of Jan. 1, 2019, and discuss how they can handle the practical issues such as registration and monthly reporting,” Arrhenius said. “They should also look into what actions to take should their employees be subject to a higher tax burden than in their home country due to being taxed in Sweden.”
The proposal has been presented to Sweden's Legislative Council to confirm its legality, after which it will be presented to parliament, where it is likely to enjoy majority support.
To contact the reporter on this story: Marcus Hoy in Copenhagen at firstname.lastname@example.org
To contact the editor responsible for this story: Rick Vollmar at email@example.com
The proposal is available in Swedish here.
For more information on Swedish HR law and regulation, see the Sweden primer.
Copyright © 2018 The Bureau of National Affairs, Inc. All Rights Reserved.
All Bloomberg BNA treatises are available on standing order, which ensures you will always receive the most current edition of the book or supplement of the title you have ordered from Bloomberg BNA’s book division. As soon as a new supplement or edition is published (usually annually) for a title you’ve previously purchased and requested to be placed on standing order, we’ll ship it to you to review for 30 days without any obligation. During this period, you can either (a) honor the invoice and receive a 5% discount (in addition to any other discounts you may qualify for) off the then-current price of the update, plus shipping and handling or (b) return the book(s), in which case, your invoice will be cancelled upon receipt of the book(s). Call us for a prepaid UPS label for your return. It’s as simple and easy as that. Most importantly, standing orders mean you will never have to worry about the timeliness of the information you’re relying on. And, you may discontinue standing orders at any time by contacting us at 1.800.960.1220 or by sending an email to firstname.lastname@example.org.
Put me on standing order at a 5% discount off list price of all future updates, in addition to any other discounts I may quality for. (Returnable within 30 days.)
Notify me when updates are available (No standing order will be created).
This Bloomberg BNA report is available on standing order, which ensures you will all receive the latest edition. This report is updated annually and we will send you the latest edition once it has been published. By signing up for standing order you will never have to worry about the timeliness of the information you need. And, you may discontinue standing orders at any time by contacting us at 1.800.372.1033, option 5, or by sending us an email to email@example.com.
Put me on standing order
Notify me when new releases are available (no standing order will be created)