The legislative changes regarding economic employer are delayed

Background

In June 2017, the Swedish Tax Agency submitted a memorandum to the Swedish Finance Department, in which changes regarding the taxation of individuals who are working temporarily in Sweden were proposed. The Tax Agency proposed, amongst other changes, that the concept of an economic employer should be applied in Sweden when interpreting tax treaties and internal legislation, instead of the currently applied concept of a formal employer. The economic employer concept entails that the employer is considered to be the company for which the work is actually performed rather than the company which is legally responsible for the employee and paying out the salary. In practical terms, this means that the 183-day rule would not apply to short term business visitors to Sweden and that individuals would be taxed from day one when assigned to perform work for the benefit of a Swedish entity.

The Swedish Finance Department presented its draft legislative proposal during the fall of 2017 and the Council of Legislation submitted its opinion on the proposal in June 2018.

During the preparation of the legislative proposal, the Government has been made aware that the proposed change could have a substantive effect on inter-company transfers in a way that was not intended. Thus, the Government amended the proposal to include an exception for certain inter-company transfers in August 2018. According to the proposed exception, shorter periods of work not exceeding five days in succession, and no more than 30 days in total during a calendar year, would not be covered by the new rule in the proposal.

The legislative changes regarding economic employer are delayed

The plan was to implement the proposal with an effective date of January 1, 2019.  However, according to information from the Swedish Finance Department, the proposal has been postponed and will not apply from 1 January 2019 as previously communicated.

Deloitte comments

Given that the economic employer approach is the most commonly practiced internationally, it is likely that it will also be implemented in Sweden in the future. However, in view of the current uncertain political situation, it remains to be seen if and when the proposal will be adopted and if any further amendments will be made to the current proposal as the preparation is still in progress.

Deloitte’s recommendation is however that both Swedish and foreign companies should review their internal procedures and analyse which employees may be covered by the proposal in order to be prepared once the new regulatory framework is introduced.

Deloitte will monitor the progress of the proposal and provide updates accordingly.

Contact

Anna Sabelström Holmberg
Partner| Global mobilitet
aholmberg@deloitte.se
+46 73 397 13 04 

Mato Saric 
Director | Private Client Services 
msaric@deloitte.se 
+46 76 827 61 66 

Jonas Blomberg 
Assistant Manager | Global Employer Services 
JBlomberg@deloitte.se 
+46 70 080 44 15