Swedish Culture Relocation / Immigration Starting a Business Doing Business Legal System

The labor laws were some of the first regulations to be influenced by the Social democratic ideals that have dominated Sweden for much of the 20th century. Today comprehensive labor laws and strong trade unions remain an important part of the “Swedish Model”. It is therefore important for foreign professionals and employers to understand both the legal framework and the role played by the Swedish trade unions.

Regulating Intellectual Property Ownership

Under Swedish law the intellectual property rights to an invention, or any other work, belong solely to the individuals who produced it, unless otherwise agreed. If an employee is to produce any kind of intellectual property it is therefore of utmost importance to regulate its ownership in the employment contract. For a work to be regarded as a piece of intellectual property under Swedish law it must level up to a certain level of originality or artistic ambition. This requirement is in most cases easily fulfilled even by, for example, amateur photos of famous tourist attractions, but translations and short press items consisting of the merest facts are often found to be to generic to warrant protection as intellectual property.

The Termination of an Employment Contract

The termination of an employment contract must follow the rules dictated by the Employment Protection Act. Most foreign managers in Sweden are under the impression that it is almost impossible to fire an employee. The termination of an employment is of course possible, but the conditions and the grounds for termination are strictly defined, especially for the termination of permanent employment.

A-Kassa

Historically speaking, unemployment benefits have in Sweden have been provided by labor unions and guilds, and then only to their own members. Since 1935, Sweden has had a government funded unemployment insurance, but it is still only available for those individuals who have joined an A-kassa (unemployment fund). Most of these organizations are still closely associated with different labor unions. However, even though they often share the same name they are separate organizations and it is always possible to join an A-kassa without joining a union.

Contract law

If you are planning to do business in Sweden it is likely you will either be selling goods, services, or both. There are many areas of legislation regarding the sale of goods and/or services so hiring a professional legal advisor is recommended as a preparation for an important transaction. However, to prepare you, some of the main laws you should be aware of are listed below.

The Contracts Act is a relatively short piece of legislation that covers all contracts. Nearly half of the Act deals with agency and therefore a section is devoted to this below.

General Principles of Contract Law

Under Swedish law, a legal entity or person can be a natural person or a corporation. Such parties have freedom of contract – that is to say, they are free to enter into a contract about more or less anything with whomever they like. The main limitation to this is with regard to consumers, for whom laws exist for their protection. However, individuals under the age of majority (18 years of age) are further limited in their ability to contract.

Swedish contract law also follows the principle of the sanctity of the contract. This means that the rights and obligations contained in the contract must be observed between the parties, and implies that non-fulfillment of respective obligations is a breach of the pact. Under Swedish law this is manifested in the availability of remedies, such that the primary remedy is specific performance rather than damages alone.

Offer and Acceptance

In order to create a binding contract, an offer must be made followed by a parallel acceptance (i.e. an acceptance where no change is made to the terms of the original offer). This can be done either verbally or in writing. Once given, the offer and the acceptance are usually irrevocable and will be binding on the parties making them, subject to any exceptions made by statute or the parties themselves. However, both the offer and the acceptance can be validly revoked if the revocation reaches the other party before they have a chance to partake in the binding communication which is to be revoked. Also, some offers state that the offer will only be open for acceptance within a certain time period, and verbal offers are normally only open until the conversation is over, unless something else is agreed. This time period is irrelevant if the offer is rejected before the time period expires.

Making Sales

One of the most common types of contracts is the sales contract. Sweden has a large number of laws regulating this type of transaction, and the different forms of distribution agreements and agency which can be used in such situations. It is important to note that Sweden differentiates heavily between sales that directly involve individual consumers and those which only involve companies. For more information about the rights of the consumer, see section 4.

Corporate Taxes

If you conduct business in Sweden you are required to pay corporate tax and to make sure that any moms (VAT) that you have received from your customers is transferred to the Swedish tax authorities. To verify their status and basic tax compliance business entities registered in Sweden need an F-skatt sedel (F-tax certificate), which in many ways forms the basis for the business identity of a company or sole trader.

Payroll Taxes

All companies that have employees in Sweden are required to register with Skatteverket as an employer. Registration may also apply to companies with employees that are paying their social taxes to Sweden through a reciprocal tax treaty between Sweden and the nation in which they are working.

The employment taxes cover (i) the social tax, (ii) the withholding tax, which is part of the income tax, and (iii) the tax treatment of benefits.

Bookkeeping Obligation

Companies in Sweden must comply with Swedish bookkeeping rules. The books (whether digital and/or hard copies) and all the justifications must be archived for a period of 10 years from the time the financial year ended. A representation office does not need to hold accounting books under Swedish Law. However, bookkeeping records might need to be held in accordance with the laws of the country in which the company has its main place of business. An easy way to ensure compliance with the legal obligations is to hire a bookkeeping company familiar with Swedish practices. It is also preferable to apply a well-established account structure to your company's economy, which a bookkeeping company will do as a matter of course unless otherwise instructed.

It is often necessary, for businesses as well as private individuals, to use different forms of credit to make their economy run smoothly. Such credit can, for example, come in the form of loans and credit cards or even a creditor's approval to delaying a payment which is due. This chapter describes the Swedish rules for credit, credit evaluation and debt collection.

Consumer Credit

As in all developed countries, personal credit plays an important role in the Swedish economy. The regulation of personal credit is therefore a highly prioritized area of legislation, mainly to ensure the protection of the individual consumer but also to safeguard the economy as a whole. Since 1 July 2014 all companies offering credit services to consumers must have an appropriate license from Finansinspektionen (the Swedish Financial Supervisory Authority).

Credit Evaluation and Screening

In accordance with Section 12 of the Consumer Credit Act all commercial lending must be preceded by a credit evaluation and a consumer is never to be offered credit if they are not believed to be capable of fulfilling the amortization schedule. Since 2014 failure to perform a sufficient credit evaluation can result in a fine of up to SEK 5 million, depending on the severity of the violation and the yearly turnover of the creditor. For more information on credit evaluation, see Section 4 below.

In Sweden, like most developed countries, it is impossible to run a business without registering with a number of verk (government agencies) and needing to settle disputes, often by turning to domstolen (the court). In this chapter we will explain the basics behind the Swedish legal system and the alternative forms of conflict resolution; mediation and arbitration.

Legal System

The Swedish legal system differs from most others by combining the centralized legal codes of the European civil law tradition with the extensive use of legal precedents.

It is also a basic tenet of the Swedish system that all laws should be interpreted in accordance with their original purpose, as expressed in the legislator’s preparatory writings. Herby the intent of the law can in some cases take precedence before the letter of the law. This combination of strict legal guidelines and relatively independent courts has contributed to the somewhat relaxed atmosphere in the Swedish legal system, but can still cause some confusion among foreign observers.

Dispute Resolution

When doing business, sooner or later, a conflict will occur. Though preparing for this may seem a little unpalatable, it is advisable to work out how a potential conflict should be resolved before it actually happens. You can always turn to the courts in a litigation process, but in most cases, mediation or arbitration can solve problems in ways a judge cannot. The dispute resolution system in Sweden varies slightly from other jurisdictions in that the courts have more power to force these alternative resolutions where they believe it would be beneficial. However, alternative resolution methods can also generate higher costs.