The Government of Sweden has recently presented a reform proposal that could affect non-resident companies. This is due to the withholding tax obligations measure currently in force, focusing on payments for work carried out in Sweden by these entities.
Context of the Obligation
In the tax year 2021, a 30% withholding tax obligation was introduced in Sweden on payments made to non-resident companies for work carried out on Swedish territory. The amount of the payment had to be declared and transferred to the tax authorities by the withholder.
There is the possibility of facing penalties if the withholding tax is not correctly levied. To avoid this withholding tax, non-resident companies must possess an F-tax certificate (F-skatt) from Sweden. This certificate is granted by the Swedish administration upon prior application by the interested party.
Additionally, foreign companies without a permanent establishment in Sweden are obliged to submit specific information to the tax administration. Public institutions may determine whether there is a permanent establishment in their territory, in which case the company would be obliged to file an income tax return in Sweden.
Around the Debate
However, the European Commission (EC) views this legislation as incompatible with the freedom of establishment and the freedom to provide services in the EU market. Consequently, the EC has urged the Swedish Government to align its legislation with EU standards.
The reform proposed by the Swedish tax authority suggests that the application for an F-tax certificate could be refused or revoked for companies that do not comply with specific information requirements or provide insufficient information.This aims to ensure that companies without a permanent establishment are treated the same as those established in Sweden, promoting greater neutrality in the application of withholding taxes.
If approved by the European Commission, the reform is proposed to enter into force on 1 July 2025. However, if the Commission’s response is unfavorable, the Swedish Government will need to review and adapt the current legislation to meeto EU requirements.
The good economic situation in the Scandinavian country attracts major foreign investment. If you want to expand your company to this region, count on Auxadi for accounting, payroll, and tax compliance management in Sweden. We offer these services in more than 50 jurisdictions in Europe, America, Asia, and Africa.
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Auxadi can become your ideal partner. We offer a one stop shop value added outsourcing services in the areas of accounting and reporting, tax compliance, payroll management and representation services, among others.
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All information contained in this publication is up to date on 2024. This content has been prepared for general guidance on matters of interest only, and does not constitute professional advice. You should not act upon the information contained in this chart without obtaining specific professional advice.No representation or warranty (express or implied) is given as to the accuracy or completeness of the information contained in this content, and, to the extent permitted by law, AUXADI does not accept or assume any liability, responsibility or duty of care for any consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this chart or for any decision based on it.