The newly introduced economic employer concept in Swedish domestic tax legislation will reduce the possibility to obtain tax exemption in Sweden under the 183-day rule. The amended legislation will have significant impact on short-time workers in Sweden and their foreign employers and add demands to the Swedish customer.
In general, a non-resident employee working temporarily in Sweden for a foreign employer will be liable to pay income taxes in Sweden as from day one in situations where the work carried out in Sweden should be seen as hiring of labor to a Swedish company - the economic employer. In practice, the main criteria to assess whether an employee is taxable in Sweden or not, is to ascertain which entity that is the beneficiary of the employee's work, and not which entity that pays the salary to the employee. Exemptions may apply for very short and limited workdays in Sweden, but this should be assessed on case-by-case basis.
The foreign (formal) employer shall register for employer reporting purposes in Sweden, withhold employee preliminary tax and file monthly payroll returns, if the employee is subject to Swedish tax under the new rules. Further, approval for Swedish F-tax is required to avoid 30% tax withholding by the Swedish customer from the invoiced amount for the work performed.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
