New proposal on the Economic Employer Concept

New proposal on the Economic Employer Concept

On June 23, 2020, the Government once again presented a proposal to introduce the so-called economic employer concept in Sweden. It is proposed that the provisions come into force on 1 January 2021. If an economic employer concept is introduced into Swedish law, it will have a major impact on Swedish and foreign companies that have foreign employees who work temporarily in Sweden.



Petter Frödeberg

Partner & Head of Global Mobility Services

KPMG i Sverige


On 23 June, the Swedish Government once again published a proposal to implement the economic employer concept in Sweden. The economic employer concept has been discussed previously in several TaxNews. The most recent article was in September 2019, when the Government communicated then that they planned to implement the new set of regulations from 1 January 2021.

The new regulations, if implemented, will result in a shift in Sweden, by which Sweden will now consider factors beyond who pays the employee’s salary when assessing who is the employer of an employee. The entity which is considered to be the employer of an employee is of great importance when assessing if the employee should be liable to tax or not when working in Sweden on a temporary basis. 

The previous proposal did not impact employees working within a corporate group, if the employee works for a maximum of 5 days in a row or 30 days in total during a calendar year in Sweden. 

Under the new proposal, the Government has increased the day limit to a maximum of 15 days in a row or 45 days in total during a calendar year. As previously communicated, the Government intends to implement the new regulations 1 January 2021.

One question that has given rise to extensive discussions within Swedish companies is whether the Swedish entity will be able to report salary and pay taxes on behalf of the foreign entity (shadow payroll). This proposed solution would have reduced the administrative burden for companies and was requested in response to the initial proposal. The Government has not adjusted its position in relation to this feedback, and, according to the proposal as it stands today, the foreign employer will need to register as an employer in Sweden and pay withholding taxes.

KPMG Comment

The planned implementation of the regulations are in line with what the Government has confirmed previously and was expected. The change in time limits of 5 / 30 days to the extended 15 / 45 days is a welcome improvement. The adjustment will result in a significant reduction in the number of employees directly affected by the regulations.

However, the basic problem for companies remains the same, regardless of the time limits that are introduced. Companies will need to have a process for keeping track of who is traveling to Sweden, how many days are spent here and what people are doing while they are working in Sweden. For large organizations, this is an administrative challenge not least because the obligation to register and manage reporting for foreign group companies. 

Given the short period of time that remains between the proposal’s submission and the implementation of the new regulations, it is crucial for companies who are affected to review the regulations and start building processes to be able to handle this already from 1 January 2021. 

You are welcome to contact us if you wish to discuss the effect of the new regulations on your organization.

KPMG will host a webinar on 1 July 2020 at 09:00 am, where we will discuss the new proposal in detail.

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The article in Swedish

Petter Frödeberg

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