The following texts are excerpts from the book Live and Work in Sweden. Be advised that any and all information therein is not necessarily provided in its original context and as such are only representative of the content of the book and should not be taken at face value. For the complete information please purchase the book. The reader bears the sole responsibility for any action or inaction which they may decide upon based on the information provided through the book or its excerpts.

Starting a Business

Permanent Establishment in Sweden
The determination of permanent establishment is based on how a foreign business has chosen to organize its business activities and is important since it will have a significant impact on how it should prepare its accounting records as well as how it will be taxed. It is crucial to understand the issues before deciding which structure your Swedish business should take, particularly with regards to income tax liability.

Incorporating a Company or Registering a Foreign Business Presence in Sweden

If you want to pursue your business activities in Sweden through a limited liability company, and the nature of your business venture makes it impractical to use posted employees (see Chapter 7 for more information) you have two options. Either you can incorporate a new company in Sweden, or you can register a pre-existing foreign corporate entity with the Swedish authorities.


Certain business activities and/or their premises require permits or licenses to operate. There are various licensing and supervisory authorities at local, regional and/or national levels that may deal with the notification, registration and permit requirements. Each authority may have its own set of deadlines so it is important to understand when you should contact them, how long it will take to process your permit or license application and how much the fees will be. You may also need to provide them with documentation to accompany the application. Appeals are usually possible but again, this will vary depending on the authority.

Annual Reports

To ensure legal compliance, companies registered with the Swedish authorities are bound by law to provide certain governmental agencies with annual reports concerning the company’s financial activities. The exact extent of this obligation depends to a large part on the type and size of the company. Large companies with a limited liability generally need to present more extensive reports, while sole traders with a turnover of less than SEK 3 million per year are allowed to use a highly simplified process.

Business Structures

A business activity that has a permanent establishment in Sweden should take the form of a registered branch, company or sole proprietorship, unless the business is operating under the right of free mobility within the European Economic Area (EEA). Even legal entities who are not deemed to be permanently established on the Swedish market are to be regarded as a type of corporate presence, called representationskontor (representation office), as long as they are directly active within the Swedish market. This chapter lists the most important of the available Swedish corporate forms and provides additional information regarding the legal principles that govern them. Most of these business forms will, after their creation, be a juridisk person (“legal person”, a separate legal entity), which can accumulate both assets and debts in its own name. Others, like enskild firma (sole trader) and enkelt bolag (joint venture), are simply extensions of their individual owners. Just like other countries, Sweden recognizes all human beings as entities with their own legal capacity to accumulate assets and debts. To distinguish humans from other legal entities, living humans are referred to as fysiska personer (natural persons).

Alternative Business Structures

Whilst the limited liability company is the most common business structure, other structures do exist for other purposes. For example, many older companies take the form of general partnerships and many new companies start out as an economic association or as an enskild firma (private firm).

Close Company

In an effort to avoid situations where the active partners in a company receive all or a majority of their profits by way of dividends on their stock in order to be taxed at the lower dividend tax rate (capital gains tax), and thereby circumvent the high Swedish income tax, there is a special set of tax rules for business entities controlled by a single individual or a close circle of partners.

These rules can be applied to limited companies and economic associations controlled by a close circle of owners, formally known as a fåmansföretag (Close companies), and partnerships with the same type of ownership (which are known as fåmanshandelsbolag or Close partnerships). Foreign companies of corresponding types that have a legal presence in Sweden can also be classed as Close companies by the Swedish tax authorities. The Close company rules mainly regulate how much of the profit the owners can receive in the form of dividends, and how much they must take out in the form of salary. There are also special regulations regarding several other aspects of the taxation of Close companies. Close partnerships are subject to most of the Close company rules, but since the profit shares of the partners are neither paid as dividend nor salary, the effect that the rules have on such a company is quite limited.

Self-Employed, Consultants & Posted Workers

The Swedish labor law is built around the traditional employment model, where the individual works for an employer with a permanent establishment in Sweden (the general rule is a company should have two or more significant and separate customers and two or more employees to be considered an independent entity). However, the modern international labor market often demands more flexible and independent solutions. Consultants Foreign consultants on assignment in Sweden must pay special attention to the rules specific to the Swedish market. The rules that are applicable in Sweden are very different from the more liberal rules applicable in the United States or the United Kingdom. Consultants that are self-employed must follow strict rules in order to avoid being considered an employee. Typically they will need to at least register a Swedish sole proprietorship or their limited company, and make sure that they have enough clients to be regarded as independent. A Swedish compliant umbrella employment solution is for this reason often a good solution for consultants who do not want to deal with the formalities involved, adhering to the specific criteria (e.g. bookkeeping) or dealing with the required paperwork and regulations Joint Tax Liability One factor that often surprises foreign individuals and companies active in the Swedish market is that the concept of hiring-out of labor is not explicitly recognized by Swedish law. In most other jurisdictions, the concept of hiring-out of labor corresponds to the OECD Model Tax Convention (MC) Article 15 Paragraph 2 on International Hiring-Out of Labor (for instance, Denmark holds the end client strictly liable for any unpaid taxes by contractors working for it). Current EU discussions are looking at closing gaps in the OECD MC by looking at the entire supplier chain (e.g. employees of one entity who work under the supervision of another, generally brings with it that the whole supplier chain will be subject to joint tax liability for any taxes and social fees due. In this way, the local authorities can more easily make sure that the proper amounts are paid, and for example assess the consultant or client for any fees the consultant’s employer has failed to pay). Umbrella Solution for Consultants An umbrella company is a company that acts as an employer for a contractor, who is in turn performing work for an end client. The most common model consists of an umbrella company that acts as an employer to agency contractors who work under a fixed term contract assignment, usually through a recruitment employment agency. When a recruitment agency is involved, they typically issue contracts to a limited company to reduce their own liability. Posted Workers In order to reduce the costs of employment in Sweden, some companies choose to contract with foreign self-employed people rather than hiring employees; however, bringing foreign self-employed workers into Sweden is in many cases not cost-effective and presents a very high risk of unanticipated costs, such as severe back taxes. Migrationsverket, Skatteverket, and the Swedish labor unions keep a close watch on the use of self-employed consultants in ways which risk circumventing the Swedish labor rules (refer to international hiring-out of labor in Section 2.2 above). If the Swedish authorities decide that a consultant is to be regarded as an employee in disguise it makes their client liable for both payroll tax and basic Swedish employment benefits on a retroactive basis. By posting employees in Sweden, employers often have an easier time ensuring tax compliance and avoiding the risk of back taxes.