Creation of Permanent Establishment due to reoccurring short-term activities in Sweden

Permanent Establishment due to short-term activities

A Swedish Administrative Court of Appeal has issued a decision in a case regarding Permanent Establishments.



Louise Hemmestad

Partner & Head of Markets Tax & Legal

KPMG i Sverige


A Swedish Administrative Court of Appeal has issued a decision in a case regarding Permanent Establishments. The case concerns a German company which develops and sells software for tire inflation pressure systems. The company annually performs tests in winter conditions in the north of Sweden and brings all of the equipment (e.g. cars) from Germany. The test results are then used for software development in Germany. The annual testing period is around three to four months but the company is only on site for a few weeks at a time.

The findings of the Court were that the company regularly conducts business from the same place in Sweden. The Court also stated that the tests in Sweden cannot be considered to be of a preparatory or auxiliary nature, therefore the company was considered to have a fixed place of business in Sweden through which part of the company’s core business is carried on (i.e. a Permanent Establishment).

The income tax payable in Sweden in this case was very limited in relation to the company’s size. However, being deemed to have a Permanent Establishment and being liable for tax in Sweden also brings a high administrative burden such as registration and filing requirements both for the company and its employees (e.g. tax liability from first day of work in Sweden).

To ensure tax compliance, we recommend that foreign companies with annually reoccurring activities in Sweden analyze whether these activities give rise to a Permanent Establishment in Sweden.

KPMG Sweden’s Permanent Establishment team covers all tax areas (among others income tax, transfer pricing, VAT, employer tax) and are ready to assist with all tax aspects in situations like the above. Please do not hesitate to contact us should you have any questions or need any further assistance.

Louise Hemmestad

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