The Swedish Parliament has approved the introduction of the economic employer concept in Sweden
Sweden introduces the economic employer concept
Today, the Swedish Parliament has approved the introduction of the economic employer concept in Sweden. The new regulations will be effective as of 1 January 2021. The regulation will have a major impact on Swedish and foreign companies that have foreign employees who work temporarily in Sweden.
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Today, the Swedish Parliament has approved the introduction of the economic employer concept in Sweden. The new regulations will be effective as of 1 January 2021. The economic employer concept has been discussed previously in several TaxNews. The most recent article was in June 2020, when the Swedish Government published its latest proposal. The process that was initiated through a memorandum from the Swedish Tax Agency to the Swedish Government in 2017 is now completed after a lot of discussions and adjusted proposals.
The intention with the change in legislation is to create competition neutral regulations as Sweden previously applied an approach where the employer is considered to be the company that pays the salary to the employee. As a result, foreign personnel who has temporarily worked in Sweden have typically not been taxable in Sweden as the employer who pays the salary has not been a Swedish company. The government also wants to protect the Swedish tax base, which is reduced if Swedish employees are taxed abroad while foreign employees in a similar situation are not taxed in Sweden. After the change in legislation, the Swedish application will be harmonized with many of our most important trading partners, such as Denmark, Norway, the United Kingdom and Germany.
In short, with the new legislation the important factor to assess if an employee is taxable or not in Sweden is which entity that is the beneficiary of the employee’s work and not which entity that pays the salary to the employee. The regulations will not impact employees working in Sweden for a maximum of 15 working days in a row to the extent the number of working days in Sweden do not exceed 45 days in total during a calendar year.
If the 45 day threshold is exceeded, only the exceeding days will be taxable if it is assessed that the economic employer is in Sweden. If the 15 day threshold is exceeded, all working days during that stay in Sweden are to be assessed.
KPMG comments
We recommend all organizations to set up a process as soon as possible to keep track of who is traveling to Sweden, how many days that are spent here and what tasks that are done when they are working in Sweden. A good start is often to make an analysis of the exposure based on historical data in order to get an idea of what impact the change in legislation will have on your organization.
Once there is a process to identify which employees work in Sweden and what they do here, the next recommended step is to analyze what is required in practice to be able to comply with the new regulations and build a process outlining who should do what. When an employee triggers taxation in Sweden under the new rules, several actions are required by the employer. Among other things, the foreign company needs to register in Sweden, withhold Swedish tax and submit employer tax returns including the salary relating to work performed in Sweden. Normally, the tax paid in Sweden can be refunded in the home country, which means the employee's home country tax return will be affected.
KPMG assists many Swedish and foreign organizations of varying sizes with both advice on the process and the practical work that needs to be done. You are welcome to contact us if you have questions about the regulations.
Read more:
The article in Swedish
Petter Frödeberg
Global Mobility Services
petter.frodeberg@kpmg.se
Johan Rova
Global Mobility Services
johan.rova@kpmg.se
Louise Hemmestad
Global Mobility Services
louise.hemmestad@kpmg.se
