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Payroll & Tax in Sweden

Sweden payroll & taxation

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 a fully outsourced service like a GEO or FESCO 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, (RO, WFOE or JV) 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 GEO, like Shield GEO. This is possible for both foreign workers and Swedish nationals. This is the easiest, fastest and safest way to payroll staff in Sweden.

Shield GEO manages all aspects of payroll for workers in Sweden, including taxes, withholding, social security payments and other statutory requirements. Shield GEO 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. Shield GEO 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) and a Management Fee. Shield GEO provides the employees with payslips.

Read more about outsourced payroll and employment through Shield GEO.

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Setting up payroll in Sweden

Information Explanation
Currency ?

The official Swedish currency in the Swedish Krona (SEK), equivalent to approximately USD$0.11.

Employee Information Required ?

Personal/corporate identity number of payee/employee is obliged, either a Swedish TIN (Tax Identification Number) or co-ordination number supplied by the Tax Agency.

Documentation Required for New Employees ?

Contracts do not have to be in writing, but the Employee Protection Act stipulates that the employer must provide the employee with extensive written information about the conditions of employment within one month.
Information routines are set by the employer and sometimes in Local Agreements with the union.

Tax Figures

Information Explanation
Corporate Income Tax ?

The corporate income tax rate is 22%, a fall from the previous rate of over 26%.

Income Tax Rate ?
Grossed income Tax Rate (%)
From 0 to 430,200 0
From 430,300 to 616,100 20
Over 616,100 25

Non-residents employed in Sweden are taxed a flat rate of 20%. Non-Swedish residents employed by non-Swedish firms are exempt from paying any income tax provided they do not spend more than 183 days in Sweden over a 12-month period.

Payroll Tax ?

Payroll tax is taxed at a rate of 31.42% for employers, or 28.97% for the self-employed, although this may differ to individuals under 26 or above 66 to encourage greater labour force participation.

Sales Tax ?

Sales tax is 25%. Swedish VAT is in accordance with EU VAT directives, at a rate of 25%. 12% or 6% rates may apply for some goods and services such as restaurant services, artworks, books and newspapers and public transport.

Withholding Tax ?

Dividends paid to Swedish individuals or corporations are generally not subject to any withholding, however, non-residents are subject to 30% withholding tax of dividend payments.  Sweden does not withhold tax on interest, royalties or branch profits. Withholding tax on dividends by a Swedish company to its foreign parent company is reduced or waived under most double tax treaties. Withholding tax on dividends made to a foreign company is, however, also waived according to domestic legislation if made on shares held for business reasons. Unquoted shares are always considered held for business purposes. Quoted shares are considered held for business purposes provided at least 10 per cent of the shares are held for at least one year.

Employee Social Security (EE SS)

Employees must make a 7% contribution towards the public social security system.

Employer Social Security (ER SS)

The social security system in Sweden is comprised of several elements:

  • Health insurance
  • Benefits for work-related accidents and occupational diseases
  • Benefits for invalidity
  • Pensions for the elderly and survivors
  • Unemployment insurance
  • Parental and family benefits

The system can be complex at times, but essentially to be eligible to receive any social benefits, a Swedish personal identity number must be acquired from the Swedish Tax Agency, in addition to registration with the Swedish Social Insurance Agency often being a requirement. To ensure eligibility, registration should be undertaken as soon as possible after arriving in Sweden.

Employers are required to make a contribution of 31.42% in addition to an employee’s base salary.

Payments

Information Explanation
Payment Mode ?

The employee needs a bank account as the standard procedure is to pay salaries via electronic transfer, very rarely with cash. If bank account is unknown, the payment is settled with a money order from the bank. This would usually cost an extra fee to cash for the employee.

Frequency of Salary Payment ?

The pay frequencies which can be processed in additional to usual monthly payrolls are two-week salary and special regulations for sailors.
The most common pay date is the 25th on monthly basis, but it can differ between companies and Collective and tie-in agreements.

Invoice / Payslips required ?

There is no statutory right to a payslip, but it is customary to issue one. Collective and tie-in agreements may be established that require that payslips be issued

Minimum Wage ?

Swedish minimum wages are not regulated by law, but subject to bargaining between employers
and trade unions and form part of collective agreements

Employee Entitlements

Information Explanation
Working on Sundays ?

Working days and hours are regulated by The Working Hours Act, with Collective and tie-in agreements

Disclosure and Confidentiality of Personal Information ?

Protected disclosures – Disclosures of information in relation to legal obligations, health, safety etc.

Employee Protection and Anti-discrimination Rights ?

Protection from suffering detriment in employment – An employee has the right not to be subjected to any detriment by any act, or any deliberate failure to act, by his employer on various grounds.

Time Off Work ?

The employee’s right to have time off work depends on the reason for absence. Due to several different laws with Collective and tie-in agreements regulates, the time is paid or not paid. All employees have a statutory right to take time off work for the following:

  • to carry out duties as a trade union official
  • to carry out duties as a safety delegate
  • to look for work faced with redundancy
  • to under certain circumstances have leave of absence or permission
  • for various kinds of parental leave
  • for annual leave
Medical Leave ?

All employees are qualified to get Statutory Sick Pay, from the first day of employment, with special regulations if the period of employment is less than a month. The first day of illness is a waiting day and the employee does not receive any sick pay. The employer is responsible for the cost for the two first weeks. After the fourteenth day, the employee receives sickness benefit from the Swedish Social Insurance Agency, but the employers often have additional obligations due to Collective and tie-in agreements regulates.

Employment Termination

Information Explanation
Severance / Redundancy Pay ?

There is a right to offer alternative work if suspension from work is because of medical grounds.

Termination of Employment ?

This is regulated in several employment related laws and is a complex matter. The basic right is that an employment is indefinite, so to employ temporarily must be clear from a written agreement in order to apply. Notice is required to be given to an employer to terminate the contract of employment of a person who has been continuously employed more than 12 months during a tre-year-long period. Contracts can only be terminated by the employer when there is a reasonable cause for dismissal.
Employers must give notice corresponding to the amount of time the employee has been working for during the notice period; the employee is entitled to receive all employment benefits due during his or her regular period of employment. Fixed-term contracts end on a specific date or on completion of a task. These contracts can last a maximum of two years within a five-year period, after that the employment becomes indefinite.

 

Probation periods may be included at the start of an employment contract, and, if either the employee or the employer wishes to terminate the employment, notice must be given before or upon the expiry of the probation period.

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