Together with Britt-Marie Hallberg Eriksson, legal expert at the Swedish Tax Agency, we investigate why the law has been amended and find out how your business can check that your contractors are registered for Swedish F-tax.
On January 1, 2021, foreign employers without a permanent establishment in the country also became required to deduct tax on payment for work carried out in Sweden. In the past, foreign employers were only required to make tax deductions on remuneration for work in Sweden if they had a permanent establishment here. Following the amendment to the law, work that is carried out physically abroad may be considered to be work that is carried out in Sweden if the work is within the framework of the employer’s activities here. Previously, Swedish companies that paid compensation for work to a foreign company were only required to deduct tax from the remuneration if:
Britt-Marie Hallberg Eriksson, legal expert at the Swedish Tax Agency, explains more about the amendment to the law.
–In Sweden, we have lacked a rule that makes it possible to tax foreign labor in the way that many other countries can. Tax agreements already provide Sweden with this option, but the new Swedish rule had to be added to the Act on Special Income Tax for Foreign Residents (SINK). At the same time, we wanted to make it clear that everyone, including foreign companies, has an obligation to deduct preliminary tax for work. This also makes it clearer that registering for F-tax is of great importance. The aim of the amendment was for the Swedish Tax Agency to help bring order to the situation and thus promote healthy competition in the labor market. This is part of the reason why the Swedish Tax Agency drew up a proposal that was submitted to the Swedish Government. The proposal was then sent out for consultation by the Government. The Swedish Parliament voted through the amendment to the law in the fall of 2020.
The amendment to the legislation means, among other things, that Swedish industrial companies are required to deduct tax from remuneration to foreign employers who perform work if they are not registered for F-tax. This means that industrial facilities need to take greater responsibility for this matter while at the same time needing to be clear in their communication with their suppliers and transport providers. Fredrik Uusitalo, Tax Manager at Smurfit Kappa in Piteå, explains how the amendment has affected their business.
– In purely practical terms, the amendment means that there will be more administrative work for current invoices because we need to manually extract these invoices from the system and withhold and pay 30% of the labor costs to the Swedish Tax Agency. So, we concluded that we would set the same mandatory requirements as for Swedish contractors: that there should be an F-tax certificate for carrying out jobs at the paper mill. We haven’t received any notable feedback. As a tax manager, I was the contact person in this letter. We've received some questions about the regulations: what they entail and whether we can help. Then we’ve referred them either to the Swedish Tax Agency or to tax consultants who can help them, says Fredrik.
– In parallel with this process, we investigated the possibility of using SSG Supplier, which we’re already using today, to monitor whether the foreign contractors have been registered for F-tax, and that has proven to work well, says Fredrik.
With the help of the SSG Supplier service, industrial customers and purchasers can ensure that the contracting firm has a valid Swedish F-tax certificate. Linn Folke, service owner for SSG Supplier, explains more about how the service works.
– F-tax is automatically monitored by the service, which means that the facility is notified when there is a change. Via SSG Safety, the facility can also deny contractors access to the facility if their employer does not meet the Swedish F-tax requirement. This is done manually or automatically depending on which setting the customer chooses. SSG Supplier also simplifies this matter for the contracting firm since the service shows the company’s Swedish F-tax for all clients in the service. In addition, the service notifies the contracting firm if its F-tax status changes for any reason. This then enables the contracting firm to quickly act and update its details.
If you have a foreign company
These rules apply to those of you who run a company outside Sweden but have employees who work here. If you are a foreign employer without a permanent establishment in Sweden, you must deduct tax of 30% from compensation for work performed in Sweden unless the Swedish Tax Agency has decided otherwise. There is one exception. If the pay is exempt from taxation in Sweden under the 183-day rule in the Swedish Act on Special Income Tax for Foreign Residents (SINK), you do not need to deduct any tax. There is no need for a decision from the Swedish Tax Agency that the income is not to be taxed in Sweden. It is sufficient for you to judge that the 183-day rule in SINK applies. Find out more.
Work in Sweden that is performed for a maximum of 15 days
Work in Sweden that is performed for a maximum of 15 consecutive days is not regarded as hiring out of labor as long as the work in Sweden does not together exceed 45 days in a calendar year.
When calculating the number of days, only working days are to be included, which means that days off that are spent in Sweden, for example during a weekend, are not to be included. This differs from the calculation of days according to the 183-day rule, which takes into account all the days of a stay. Since the exemption applies to working days, an interruption to the stay in Sweden affects the assessment only if work is also carried out abroad during the interruption. Find out more.