Concept of economic employer in Sweden – how is it going?
“Drrrr, drrrr, drrrr, there are 223 people waiting, we will answer your call as soon as possible”.
Sweden introduced new rules and the concept of economic employer from January 1, 2021, as well as an obligation for the foreign legal employer to withhold Swedish payroll tax and provide benefits.
The new rules also contain an obligation to withhold a preliminary tax of 30% from invoices of foreign companies for works / services performed in Sweden, unless the foreign entity has registered and obtained a tax invoice F Swedish.
The aim of the new rules is to create neutrality between Swedish and foreign service providers.
Acting in a digital world, the Swedish Tax Agency has developed and introduced an online portal to be used for F-tax and employer registration and a portal for non-resident income tax claims ( tax paid by staff working temporarily in Sweden).
These have been used frequently and the first sentence refers to the experience of calling the tax agency to ask why you haven’t heard anything about the case submitted in May 2021 yet. Our current understanding (September) is that the tax agency is currently dealing with cases submitted in March / April 2021.
This is probably only a first hurdle as many companies have to register at the same time. In the long run, the processing time is unlikely to be long and we are grateful for the online portal, especially since most people around the world have been working from home during the pandemic.
Working from home has made printing and signing documents difficult, especially if you need multiple original signatures on the same document. The design of the portal made it possible to avoid registration requests being signed in blue ink and submitted with original signatures. The companies had the possibility to receive the F-tax invoice, and therefore, to receive the full payment of their invoices, that is to say to avoid a 30% withholding tax and to wait for the next year for a possible reimbursement.
In southern Sweden, around 15,000 to 18,000 people commute daily to jobs in Denmark and the Copenhagen region. There are special provisions that make the daily life of an employer easier. As long as the employee works at least 50% in Denmark in each three month period, all work is deemed to be done in Denmark and the Danish employer can withhold Danish tax and pay Danish social security contributions. This means that the Danish employer does not have to face the Swedish employer’s salary obligations in addition to the Danish obligations each month.
Then the pandemic happened and people were asked to work from home. There were travel restrictions between countries and many people were working more than 50% of their homes in Sweden, therefore the special provision was no longer respected by everyone. Fortunately for employees, there is a tax transfer agreement between Sweden and Denmark, but although the authorities take a while to complete the transfer, it is a very handy feature for occasions like this. The challenge probably lies with the Revenue Agency in estimating the number of employees it needs to devote itself to these tasks this year and next.
For Danish employers with staff working from their home in Sweden, the new rules in Sweden mean they may have to manage Swedish tax withholding alongside Danish withholding tax. Right now, lobby groups are working hard to develop a new, simplified solution tailored to this topic and this region. Well, the crisis is the mother of invention, so we are sure that a suitable solution will be in place soon!
The new normal is now around the corner – where will the staff be working in the next two years? From your home, inside or outside the country? Summer houses in another country? And when recruiting globally, will people avoid moving to another country by signing a new employment contract because we’ve all learned to work digitally? Now is the time to assess and develop preferred workplace guidelines so that supervisors know when to accept and reject staff questions on this topic and have created records of compliance with the guidelines.
“Hello, tax officer here, how can I help you? “
Senior Director, KPMG
© 2021 Euromoney Institutional Investor PLC. For help, please see our FAQ.