Important information for suppliers and sub-contractors performing work in Sweden
Up until December 31, 2020, foreign entities were only required to make tax deductions in Sweden for work related to work in Sweden if the foreign entity had a permanent establishment in Sweden.
From January 1, 2021 the tax reporting obligation in Sweden has increased and foreign employers can have a withholding obligation regardless of a permanent establishment or not. A tax withholding obligation could occur if the employee either;
- has a Swedish economic employer and spend more than 15 consecutive workdays or 45 work days in total in Sweden during the year,
- spends more than 183 days in Sweden during a twelve month period, or
- is considered a Swedish tax resident.
If a reporting obligation arises in Sweden, the foreign entity must register as an employer in Sweden and report monthly to the Swedish tax agency.
Obligations for the Swedish payer
Previously, Swedish companies were only required to make tax withholding on payments to a foreign entity if the foreign entity had a permanent establishment in Sweden and that entity were not approved for F-tax.
As a control mechanism for the implementation of the economic employer term in Swedish legislation, the legislator imposed further withholding obligations for Swedish companies as well. From January 1, 2021, a Swedish company is obliged to make a tax deduction on invoices for work performed in Sweden regardless of if the recipient has a Swedish permanent establishment or not unless the foreign entity has an approved Swedish F-tax or a decision from the tax agency stating that they are not taxable in Sweden. The withholding will therefore serve as a way to force the foreign entities to reach out to the tax agency.
For a payment that a Swedish entity makes to a foreign company, the withholding rate is 30% of the invoice amount and will be transferred to the Swedish tax agency. If the tax agency assess that no taxes are due, the withheld taxes will be paid out to the foreign company.
In order for Saab to comply with Swedish tax regulations, we have to withhold 30% preliminary tax on invoices related to work performed in Sweden unless you have a Swedish F-tax (registration for corporate tax) or decision from the tax agency that no taxes are due. On invoices sent to Saab where it could be questioned if the service was provided in Sweden or abroad, please therefore specify on the invoice if the service was provided abroad or not. Please also include confirmation of a Swedish F-tax registration as well as a confirmation of the Swedish TIN-number when issuing the invoice.
Useful links where you will find more information
Non-Swedish businesses with operations in Sweden
Swedish tax agency’s information regarding the new information