Foreign Companies in Sweden: Tax, Employer and VAT Obligations
Every year, a large number of foreign companies come to Sweden to carry out projects. The trend is growing, driven by major industrial investments in northern Sweden such as Northvolt and Stegra, and by the rapid expansion of data centres that rely on specialist expertise from abroad.
If your company is about to start a project in Sweden, you need to understand your exposure to Swedish taxes and what you are required to report. This guide walks you through the key rules, step by step.
Table of contents
6 months
Normal threshold for a permanent establishment
12 months
Threshold for building and installation projects under most tax treaties
183 days
Limit for tax-free employment income in Sweden
When is a foreign company liable to Swedish corporate income tax?
Under Swedish tax law, a foreign company cannot be a Swedish tax resident. That status is reserved for companies registered and incorporated in Sweden. Foreign companies are only taxed in Sweden on income attributable to Sweden, which in practice means income of a permanent establishment (PE).
What is a permanent establishment?
Swedish law follows the OECD definition. A PE is a fixed place of business through which the business of an enterprise is wholly or partly carried on. Two main requirements apply:
The company carries on business through a fixed place in Sweden. This can be an office, a warehouse, a factory, a workshop, a building site, or even a home office, whether owned, rented or otherwise at the company’s disposal.
The activities have a certain degree of permanency.
Two further points matter:
The core business must be carried on at the place. If the activity is purely preparatory or auxiliary, no PE arises.
A company can also have a PE without any fixed place if it has a dependent agent in Sweden, meaning a person who acts on its behalf, is significantly dependent on it, and has authority to bind it in contracts. Habitually approving contracts prepared by someone else can be enough, as can negotiating contracts.
How long is “permanent”?
Type of activity | Time limit | Where the limit comes from |
General business activities | At least 6 months | Swedish domestic law and OECD guidance |
Building, construction and installation projects | More than 12 months | Tax treaty between Sweden and your home country |
Why the 12-month rule depends on your tax treaty
Swedish domestic law has no time limit for building and installation sites. The twelve-month period comes from the tax treaty between Sweden and your home country. The Sweden-Netherlands treaty, for example, says a building site or construction or installation project constitutes a PE only if it lasts more than twelve months. If your home country has no treaty with Sweden, or the treaty is worded differently, the position can be less favourable. Always check the treaty.
Installation projects are interpreted broadly. They cover not only installations connected to a construction project, but also the installation of new equipment, such as a complex machine, in an existing building or outdoors. On-site planning and supervision are covered too. Mere maintenance and redecoration are not.
How is the project length calculated?
The calendar span of the project matters, not the number of days you actually work. Under the OECD Commentaries:
The site exists from the day the work begins, including preparatory work in Sweden.
Temporary interruptions, for example due to weather or unexpected events, do not stop the clock.
Testing of the installation by the contractor or subcontractor counts towards the period.
The period normally ends when the work is completed and delivered, provided nobody from your company keeps working on the site afterwards.
If the project exceeds twelve months, the company is taxable on the PE’s income from day one, not just from month thirteen. Keep documentation showing the start and end dates of your on-site activities so you can prove the duration in a tax audit.
What happens if you get a permanent establishment?
If your company has a PE in Sweden, it must:
Pay Swedish corporate income tax on the profit attributable to the PE’s activities
Submit a Swedish income tax return for legal entities (form INK2)
Pay monthly preliminary corporate income tax instalments
Register with the Swedish Tax Agency and fund its Swedish “tax account”, from which the instalments are charged
Do foreign companies without a PE have obligations in Sweden?
Yes. No PE does not mean no paperwork.
F-tax registration
Since 2021, foreign companies that perform services on Swedish soil, such as construction, installation and IT companies, must register for Swedish F-tax. The purpose is to bring foreign companies into the Swedish Tax Agency’s view so it can monitor potential tax liabilities more easily.
Annual filing of Specific Information (särskilda uppgifter)
Once registered for F-tax, the company must file an annual return called Specific Information. It looks back at the previous year and gives the Swedish Tax Agency the information it needs to decide whether the company has a taxable presence in Sweden. The Tax Agency normally sends a letter about the filing, in practice around the end of March.
We recommend professional help with this filing. It is the basis on which the Swedish Tax Agency may decide to examine more closely whether your company is tax liable in Sweden through a PE.
How are your employees taxed in Sweden?
Your employees’ personal tax position is separate from the company’s PE exposure, and it drives your employer obligations.
Tax residency
Individuals who are Swedish tax residents are taxed on their worldwide income. Generally, a person becomes tax resident after six consecutive months in Sweden. For people who commute regularly, for example weekly, between Sweden and another country, as few as 70 days of stay per year can be enough.
Non-residents are, as a main rule, still taxed in Sweden on salary for work performed in Sweden. They do not have to file a Swedish personal tax return unless they are taxed. The important exception is the 183-day rule.
The 183-day rule
Employment income from work in Sweden can be tax free in Sweden if all of these conditions are met:
The employee spends fewer than 183 days in Sweden in any 12-month period
The employer does not have a PE in Sweden
The employee is not hired out to a Swedish entity
The third condition can be disregarded if the stay is short enough to meet the 15/45-day rule: a maximum of 15 consecutive working days, and 45 days in total per calendar year. A 15-day period is interrupted only by working at least one day outside Sweden.
When is an employee “hired out”?
This is where the rule gets complex, particularly since Sweden introduced the economic employer concept in 2021. The question is whether your company or the Swedish customer really carries the responsibility for the work. Factors pointing towards your company include:
A fixed price agreed with the customer, so your company bears the economic risk
Contract terms that make your company responsible for delivering the agreed result and correcting defects
Your own management of the staff, with your own instructions, drawings and work preparation
Your company supplying the tools and materials
Your company remaining responsible for the work environment of your staff
If these factors line up, the employees are generally not seen as hired out and the 183-day rule can apply. There is no application to the Swedish Tax Agency for this, but you need to be able to argue the point in an audit, so keep the contracts and documentation that support it.
Employer obligations for foreign companies in Sweden
Tax and social security
A foreign employer must register as an employer with the Swedish Tax Agency if either of these applies:
The salary is taxable in Sweden in the employee’s hands
The salary is subject to Swedish social security contributions
Conversely, if the 183-day rule applies and the employees hold valid A1 certificates, there are generally no tax-related employer obligations in Sweden and no need to register as an employer.
An A1 certificate, issued by the home country’s social security authority, confirms that social security contributions are paid only there. It means Sweden cannot charge social security contributions. Even where contributions would not otherwise be due, we recommend having A1 certificates available, and ID06 will ask for them. A1 certificates are available for employees insured in the EU, the EEA and the U.K., and each certificate must name the employing company.
Swedish labour law for posted workers
Even if your employment contracts are governed by your home country’s law, some Swedish labour law rules can apply to employees you send to Sweden, under the EU Posted Workers Directive (PWD). Which rules apply, and how far they reach, depends on the nature of the project, the length of the posting and the terms of your employment contracts.
Two examples that often catch foreign employers by surprise:
Working time and rest: Swedish rules on maximum working hours, overtime and minimum rest periods can apply, and they may be stricter than what your employees are used to.
Vacation pay: Swedish rules on vacation entitlement and vacation pay can apply for the time worked in Sweden, which in some cases means your home-country terms need to be adjusted.
Other rules, such as work environment requirements, can also be relevant. A short review before the project starts is usually enough to identify what applies and what needs to change.
Posting notification
Before each worker starts working in Sweden, the employer must notify the Swedish Work Environment Authority (Arbetsmiljöverket) of the posting. The employer must also inform the Swedish contractor or client that the notification has been made. Penalties can apply if these notifications are missed.
ID06 cards for construction and installation sites
Many Swedish construction and installation sites use the ID06 electronic passage system, and workers without a valid ID06 card often cannot enter the site. The system is intended to counter non-compliance and unfair competition, and it is the site owner or main contractor who decides whether ID06 is required.
For foreign companies, ID06 means a few practical things to plan for:
The company must be approved for Swedish F-tax before it can order cards.
Each employee needs documentation of their social security and tax position, such as an A1 certificate.
The rules on how long a card is valid, and what is required for each type, depend on the employee’s situation and are updated from time to time.
Foreign companies that manage their own staff and carry responsibility at the workplace may be able to apply for an exemption that applies when the 183-day rule is met.
Employees usually need to verify their identity in person once, and the card can often be collected at the same time.
Because the requirements change, always check the current rules with ID06 before ordering, and start early. Cards often need to be in place before the first day on site.
How to set up a compliance-light project in Sweden
Many business owners ask how to keep compliance to a minimum. In practice, this usually means combining the following:
Avoid creating a PE. Keep projects well below six months, or below twelve months for building and installation projects covered by your tax treaty, and make sure you can document the start and end dates.
Keep employees’ stays short enough to avoid Swedish taxation, meaning the 183-day rule applies, and structure the contract so staff are not seen as hired out.
Make sure employees hold valid A1 certificates before they start working in Sweden.
Comply with the posting notification and the Swedish labour law rules that apply to your staff.
Withholding Exemption Decision or F-tax?
If you do not need F-tax for anything else, it can make sense to opt out of F-tax and apply to the Swedish Tax Agency for a Withholding Exemption Decision. It has the same practical effect as F-tax, but exempts you from the recurring annual Specific Information filing.
There is one important exception. If your project is on a site that uses ID06, you need to be approved for F-tax to order the cards. In that case F-tax, together with the annual Specific Information filing, is usually the more practical route.
Example: an installation project in Stockholm
To show how these rules interact, consider an anonymised example based on a real type of advisory case.
An EU company contracts to install an automation system in a commercial building in Stockholm. It uses six of its own technicians, employed in their home country. The work runs in two phases of roughly eight weeks each, one in spring and one in autumn, with a short test period in between. The price is fixed, the company supplies the tools and materials, and its staff follow its own drawings and instructions. All employees have A1 certificates.
Permanent Establishment
The work is an installation project covered by the twelve-month rule in the relevant tax treaty. The project runs from spring to late autumn, so it stays under twelve months even though the testing period counts. All on-site work should be finished well before the twelve-month mark, and the dates documented.
Employees and employer obligations
The employees will not become tax residents, and the fixed price and the company’s own management of the work mean they are unlikely to be seen as hired out. The 183-day rule should therefore apply, and their salary should not be taxed in Sweden. With A1 certificates, there are no tax or social security employer registration obligations, apart from the annual Specific Information filing because the company holds F-tax.
Labour law and ID06
Parts of Swedish labour law still apply to the posted technicians, and each posting must be notified to the Work Environment Authority before work starts. The company also needs to register with ID06 and order cards for all technicians before the site work begins.
Because the requirements change, always check the current rules with ID06 before ordering, and start early. Cards often need to be in place before the first day on site.
How to set up a compliance-light project in Sweden
Many business owners ask how to keep compliance to a minimum. In practice, this usually means combining the following:
Avoid creating a PE. Keep projects well below six months, or below twelve months for building and installation projects covered by your tax treaty, and make sure you can document the start and end dates.
Keep employees’ stays short enough to avoid Swedish taxation, meaning the 183-day rule applies, and structure the contract so staff are not seen as hired out.
Make sure employees hold valid A1 certificates before they start working in Sweden.
Comply with the posting notification and the Swedish labour law rules that apply to your staff.
Withholding Exemption Decision or F-tax?
If you do not need F-tax for anything else, it can make sense to opt out of F-tax and apply to the Swedish Tax Agency for a Withholding Exemption Decision. It has the same practical effect as F-tax, but exempts you from the recurring annual Specific Information filing.
There is one important exception. If your project is on a site that uses ID06, you need to be approved for F-tax to order the cards. In that case F-tax, together with the annual Specific Information filing, is usually the more practical route.
Example: a Dutch installation project in Sweden
To show how these rules interact, consider an anonymised example based on a real type of advisory case.
An EU company contracts to install an automation system in a commercial building in Stockholm. It uses six of its own technicians, employed in their home country. The work runs in two phases of roughly eight weeks each, one in spring and one in autumn, with a short test period in between. The price is fixed, the company supplies the tools and materials, and its staff follow its own drawings and instructions. All employees have A1 certificates.
Permanent establishment
The work is an installation project covered by the twelve-month rule in the relevant tax treaty. The project runs from spring to late autumn, so it stays under twelve months even though testing counts. All on-site work should be finished well before the limit, and the dates documented.
Employees
The employees will not become tax residents. The fixed price and the company’s own management of the work mean they are unlikely to be seen as hired out, so the 183-day rule should apply and their salary should not be taxed in Sweden.
Employer obligations
With the 183-day rule and A1 certificates, there are no tax or social security employer registration obligations. The exception is the annual Specific Information filing, which applies because the company holds F-tax.
Labour law
Parts of Swedish labour law still apply to the posted technicians, and each posting must be notified to the Work Environment Authority before work starts.
ID06
The company needs to register with ID06 and order cards for all technicians before the site work begins.
Should you incorporate a Swedish limited liability company (AB)?
Many multinational groups ask this when they expect to be active in Sweden for a longer period.
When incorporation is a good idea
In our experience, a Swedish subsidiary is a good option if the company:
Intends to rent premises in Sweden, such as an office
Intends to hire staff who live permanently in Sweden
Expects the project, or the stream of projects, to run beyond the PE time limits
Additional advantages
Cleaner compliance: Registrations and filings are limited to the Swedish company, which only deals with Swedish authorities.
Credibility: A local entity can increase trust in transactions and negotiations.
Tax-efficient profit distribution: Under Sweden’s participation exemption regime, profits can often be distributed to the parent company without Swedish withholding tax.
Speed and cost: Incorporation takes roughly 1-2 weeks and costs approx. EUR 200 in fees, plus share capital of approx. EUR 2,300 (SEK 25,000).
When must a foreign company account for VAT in Sweden?
VAT is separate from income tax. A foreign company can have Swedish VAT obligations even if it has no PE. The standard rate is 25%, with reduced rates of 12% and 6% for certain supplies. Whether you must register depends on what you sell, to whom, and where the supply is deemed to take place.
Situation | Who accounts for the VAT? | Must the foreign company register? |
Services to a Swedish VAT-registered business (B2B) | The Swedish customer, under the reverse charge | Generally no |
Installation, customer is a VAT-registered business and the reverse charge applies | The Swedish customer | Normally no |
Installation, customer is a consumer or cannot account for the VAT | The foreign company | Yes |
Sales to consumers (B2C) | The foreign company | Yes, from the first sale. There is no turnover threshold. |
What else can trigger registration?
The contract chain matters. Who your direct customer is, and whether that customer is a VAT-registered business, can change the outcome even when the end client is a Swedish public body. Registration can also be triggered by bringing your own goods or equipment to Sweden, importing goods, or storing goods in Sweden before delivery.
Reclaiming Swedish input VAT
Even without a Swedish VAT registration, you may be able to reclaim VAT on local costs such as hotels, materials and equipment rental. EU companies apply through their home country’s tax portal. Non-EU companies apply directly to the Swedish Tax Agency, generally by 30 June the year after the VAT was incurred.
A wrong assumption about who must account for the VAT can lead to additional charges and penalties. Confirm your VAT position before the project starts, ideally before you sign the contract.
Checklist before your project starts
Document the start and end dates of your on-site activities
Check the tax treaty between Sweden and your home country
Make sure every employee has a valid A1 certificate naming your company
Submit the posting notification to the Work Environment Authority and inform your client
Arrange F-tax and ID06 where the site requires it
Review Swedish working time, rest and vacation rules for your posted employees
Confirm your VAT position before signing the contract
Key takeaways
A foreign company is only liable to Swedish corporate income tax if it has a permanent establishment, typically after six months, or after twelve months for installation projects covered by a tax treaty.
For installation projects, the whole calendar span counts, including preparatory work and testing. Exceed twelve months and the company is taxable from day one.
Even without a PE, foreign companies performing services in Sweden generally must register for F-tax and file Specific Information annually, unless they hold a Withholding Exemption Decision.
Employees can often work tax free in Sweden under the 183-day rule, provided they are not seen as hired out. Valid A1 certificates remove the social security contributions.
Even when no tax or social security obligations arise, parts of Swedish labour law can still apply, and each posting must be notified in advance.
ID06 cards are needed on many sites and require F-tax. The detailed requirements change over time, so check the current rules before you order.
A Swedish limited liability company is often the cleanest setup for longer stays, local premises and local staff.
VAT is assessed separately: B2B services are often subject to reverse charge, but consumer sales and some installation projects can require Swedish VAT registration.
FAQ
Can a foreign company be tax resident in Sweden?
No. Only companies registered and incorporated in Sweden can be Swedish tax residents.
How long can we work in Sweden before a PE arises?
Generally around six months for ordinary business activities. For installation projects, twelve months under most tax treaties, counted from the start of preparatory work until completion, including testing.
Do we need to register for F-tax if we have no PE?
Foreign companies performing services in Sweden generally must. You can apply for a Withholding Exemption Decision instead to avoid the annual Specific Information filing, but you need F-tax to obtain ID06 cards.
Does Sweden tax our employees’ salaries?
Not necessarily. If the employees are non-residents, stay fewer than 183 days in any 12-month period, your company has no PE, and they are not hired out to a Swedish entity, the salary is generally not taxed in Sweden.
Do we need an A1 certificate for our employees?
In most cases yes, if you want social security contributions paid only in the home country. Without it, Swedish contributions may be due, and ID06 will ask for it.
Do Swedish labour law rules apply to our posted employees?
Some of them can, even if the employment contract is governed by your home country’s law. Which rules apply depends on the project and the posting, so it is best to review this before the work starts.
Do we have to notify anyone before our employees start work?
Yes. Each posting must be notified to the Swedish Work Environment Authority before the worker starts, and your Swedish contractor or client must be informed that the notification has been made.
Do we have to charge Swedish VAT on our services?
Not always. For B2B services, the reverse charge often applies and the customer accounts for the VAT. For consumer sales and some installation supplies, Swedish VAT registration may be required.
Need help with a project in Sweden?
Contact us for a review of your tax, employer, ID06 and VAT position before you start.
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