Increased reporting requirements

The increased reporting obligations will impose a heavy burden on companies doing business and having employees in Sweden. These obligations include:

• Registration of posted employees in Sweden (and Europe Posted Workers’ Directive)

• Monthly employer reporting on an individual employee level
• New way of determining which company is the actual employer (Economic Employer)”
• Expanded reporting and registration requirements for foreign entities

According to the Posted Workers Directive (PWD) companies with employees posted to other countries (than their home country) need to take into consideration host country labor law requirements. In Sweden foreign employers must report postings and a contact person with the Swedish Work Environment Authority.

The requirement to register is sanctioned in different ways in various countries within the EU and there are different approaches as to when registrations are needed. Hence, it is important for employers to track the travel pattern of their employees (business travelers, commuters, etc.) to be able to comply with the registration and reporting requirements in each country. 

Since January 2019 all employers with reporting obligations related to employees in Sweden have to report the payments and tax deductions that they have made for every employee each month, and file an employer tax return per employee.

The cash basis principle applies, which means that a remuneration or benefit should be reported in the accounting period it was disbursed. Each month will be a closed period and therefore reporting must be timely and accurate.  All decisions and processes relating to work permits, adjusted tax withholding or expert tax relief must be in place from the start of work in Sweden.

There are proposed changes to the interpretation of who is considered to be the employer of an employee working in Sweden – this is a change to the Economic Employer approach. Under the proposed changes, which are to be implemented in January 2021, the assumption would be that the company benefiting from the work should generally be considered as the employer rather than the company that pays the salary. This amended interpretation of the employer concept will have a major impact on tax liabilities and associated reporting requirements in Sweden for both foreign employers and employees.

The consequences of the proposed legislation will be that individuals performing work for a foreign employer will generally be tax liable for income related to work physically performed in Sweden from the first day of work in Sweden. This tax liability also triggers reporting and tax withholding obligations for the employer.

Read more in our Tax Alert >

There is a proposed requirement for foreign companies that have employees performing work in Sweden to register as an employer in Sweden. The foreign company will also be required to withhold Swedish tax on salary paid to employees for work performed in Sweden and proceed with monthly reporting and tax payments in Sweden (employer tax returns), regardless if the income is taxable in Sweden for the employee.

In addition to the above, there is a proposed requirement for foreign companies doing business in Sweden to provide certain information to the Swedish Tax Agency in order for the Tax Agency to determine whether a permanent establishment (PE) in Sweden is at hand.