Proposal on a revised definition of the employer concept

Proposal: Revised definition of the employer concept

If the proposal becomes legislation, this would result in extended tax liabilities and reporting requirements for foreign employer and employees.



Heléne Markström

Auktoriserad skatterådgivare

KPMG i Sverige


Today on June 30, 2017 the Swedish Finance Department submitted a proposal, based on a recent memorandum prepared by the Swedish Tax Agency, for consultation. The memorandum comprises changes to the taxation of individuals working temporarily in Sweden. The Tax Agency proposes an expansion of workers liable to pay tax in Sweden. They also propose additional administrative responsibilities for both employee and employer.

Legislative changes, amongst others, that the Tax Agency proposes are:

  • That the concept of economic employer should apply in respect of Swedish taxation
  • That the 183 day-rule will not apply for hired out personnel
  • That foreign companies without a permanent establishment in Sweden should withhold tax on salary paid out to employees working in Sweden
  • An obligation for employees to register with the Tax Agency when working in Sweden

Economic employer vs. formal employer

Today, Sweden applies the concept of formal employer in the context of tax. This means that employment income related to work performed in Sweden for a Swedish company can be exempted from Swedish taxation in accordance with the so called 183 day-rule. A prerequisite for this is that the employee keeps their employment with the employer in the home country and that this employer pays the salary.

Switching to the concept of economic employer would mean that the company bearing the cost of the employee and gaining from the work that is performed should be considered the employer instead. This view is the most commonly practiced internationally. A transition to the concept of economic employer would mean that more individuals would be liable to pay tax in Sweden.

Hired out personnel

In line with Tax Agency’s proposal, the 183 day-rule would not be applied when personnel is being hired out. Thus causing the individual to be taxed from day one when hired out to work in Sweden. Generally speaking, hired out personnel are workers seconded to a client’s place of business and whilst there are an integrated part of the business.

Withholding tax and monthly reporting

The Tax Agency also proposes an obligation for foreign companies to make tax deductions when paying salary to employees to the extent it relates to work performed in Sweden. This is not an obligation for foreign companies today unless the company has a permanent establishment in Sweden. This means that the foreign company will need to register as an employer in Sweden and file a monthly payroll return.

Registration of employees

The proposal includes a suggestion that there should be an obligation for an individual performing work in Sweden to register with the Tax Agency where the individual does not already have a tax coordination number or a personal identification number.

Other proposals

The Tax Agency’s memorandum also includes a proposal that a Swedish company hiring a foreign company without a permanent establishment in Sweden should make a tax deduction from compensation related to work performed. This is on the basis that the foreign company does not hold a license to report and pay business tax (F-skatt). The memorandum further proposes that that there should be an obligation for foreign companies to submit information to the Tax Agency for the assessment of Swedish tax liability. The legislative changes are proposed to enter into effect on 1 January 2019.

KPMG Comment

As the concept of economic employer is common practice internationally it is not surprising that there is a proposal to introduce the same concept in Sweden.

The proposed changes are extensive and they will have a substantive effect on foreign employers, both in regards to administration and costs.

In particular, the proposal to introduce a monthly reporting obligation for foreign companies paying salaries to employees performing work in Sweden should be considered as it will impact on many companies. KPMG will of course continue to monitor the development.

KPMG will arrange a breakfast seminar in respect of these proposals on September 6, 2017. You are welcome to contact us should you have any questions regarding the potential consequences for your business.

Swedish version

Heléne Markström

Petter Frödeberg

Kontakta oss

Spara, organisera och dela

Spara det som intresserar dig, organisera ditt bibliotek och dela i ditt nätverk.