Sweden – An increase of employer social charges may affect companies with employees posted to the USA, Canada, Quebec or India
Deloitte Tax Alert
On 10 September 2014, the Swedish Tax Agency published guidelines stating that employers posting employees in certain countries must pay the general salary fee even if the employee remains only partly in the Swedish social security system. This will lead to an increase of employer charges for employers with employees posted to the USA, Canada, Quebec or India, i.e., countries with which Sweden has entered a social agreement covering pension rights.
The Swedish Tax Agency’s standpoint
The general salary fee is included in the employer social security charges for employees posted abroad who entirely remain subject to the Swedish social security system. The general salary fee has up to now not been charged for employees posted abroad who only partly remain subject to the Swedish social security system.
The Social security agreements that Sweden has entered with the USA, Canada, Quebec and India only determine the applicable laws on coverage regarding age-, survivors’ and disability pension (pension rights). Until now, employer charges for employees posted to these countries, holding a Certificate of Coverage from Sweden, have been 13.48 percent (13.78 for employees posted to Quebec) in social charges and no general salary fee has been levied.
The Swedish Tax Agency’s standpoint is now that the general salary fee should be included in employer charges even when the employee only partly remains in the Swedish social security system. The general salary fee amounts to 9.88 percent for 2014. As a result of the revised position, employer charges for employees posted abroad while remaining in the Swedish social security system with regards to only pension rights, would amount to 23.36 percent for 2014 (23.66 percent for employees posted to Quebec).
For Swedish employers with employees posted in the USA, Canada or Quebec the increased employer charges are due from the 1 January 2015. For employers with employees posted to India the increased employer charges are due from the 1 of August 2014 (the date the social security agreement between India and Sweden entered into force).
The reasoning and timing behind the Swedish Tax Agency’s released guideline is unclear. No changes have been made to Swedish internal law governing employer charges and no new case law has been issued in this regard to support the Swedish Tax Agency’s standpoint. However questions were raised in connection to the implementation of the Social security agreement between Sweden and India which forced the Swedish tax agency to clarify its view and interpretation of the legislation around the general salary fee.
Due to the above the legal value of the standpoint, which can ultimately have to be decided in court, can be questioned. However, as it is the official view of the Swedish Tax Agency the recommendation would be to comply with the position until otherwise decided via case law and/or changes in legislation.