If you wish to expand your business operations to Sweden, it is not necessary to establish a Swedish limited liability company or a sole proprietorship. Instead, you can register an existing foreign company – such as a Lithuanian UAB or MB- in Sweden. There are two main registration options available: registering solely as a taxpayer or establishing a branch office.
Registering an existing foreign company in Sweden can save valuable resources, as there is no need to set up a new legal entity. Moreover, this approach helps avoid certain bureaucratic challenges often faced by foreign entrepreneurs, such as opening a Swedish bank account or appointing a local contact person for official correspondence.
However, it is important to note that one of the main drawbacks of this structure is the obligation to submit reports and tax declarations in both countries – your home country and Sweden – which may result in additional administrative costs.
P.S. If you do not currently own a company in Lithuania, we can assist you with the full company formation process and handle all the necessary formalities on your behalf.
Registration fee: 2 400 SEK + VAT.
We prepare and submit the registration form to Skatteverket.
Branch establishment fee: 3 000 SEK + VAT.
The fee includes:
-
Preparation of the registration form for submission to Skatteverket;
-
Preparation of the registration form for submission to Bolagsverket;
-
Preparation of a power of attorney for the branch manager.
All documents are prepared within 1–3 business days after payment and receipt of all required information.
EU law does not impose any restrictions on a company registered in another EU member state conducting business in Sweden. Therefore, business activities in Sweden can be carried out either by registering as a taxpayer or by establishing a branch. While there is no clear definition of when an EU company must register a branch in Sweden, it can be argued that taxpayer registration is intended for short-term operations, whereas establishing a branch is suitable for long-term activities.
The main difference between these two forms of business is the registration process. To register as a taxpayer, it is sufficient to register for F-tax (and, if necessary, VAT and/or employer tax) with the Swedish Tax Agency (Skatteverket). On the other hand, to establish a branch, the branch must first be registered with the Swedish Companies Registration Office (Bolagsverket), and then a taxpayer registration must be completed with Skatteverket. Additionally, taxpayer registration is free of charge, while establishing a branch incurs additional fees with Bolagsverket.
It is often stated that clients and creditors tend to perceive a branch as a more reliable form of business, as its registration and deregistration processes are more complex. It is also important to note that a branch must have a separate manager, who is typically an individual authorized to make decisions and sign contracts on behalf of the branch.
Despite these differences, both forms of business have many similarities. For example, the taxes payable do not depend on the chosen form. Additionally, neither of these forms constitutes a separate and independent legal entity. Both forms must also comply with Swedish laws regarding labor rights, tax reporting, and other regulations.
Each foreign company planning to start operations in Sweden should carefully consider the four main taxes: corporate tax, income tax, social security contributions, and value-added tax (VAT). Below is a brief overview of each of these taxes. If you would like more detailed information or a personalized consultation, please do not hesitate to contact us.
Corporate Tax
The corporate tax rate in Sweden is 20.6%. This rate applies to both Swedish and foreign companies. The tax is calculated based on the profit generated from activities in Sweden, i.e., income minus the expenses incurred to generate that income.
Income Tax (GPM)
Income tax in Sweden applies in the following cases:
-
When an employee is employed in Sweden;
-
When an employee spends more than 183 days in Sweden within a 12-month period;
-
When the employer has a permanent establishment in Sweden or is considered an economic employer.
This tax is deducted from the employee’s gross salary. Income tax is progressive, and the rate depends on the employee’s place of residence. In some cases, a fixed rate may apply.
Social Security Contributions
The standard employer social security contribution rate is 31.42% of the employee’s gross salary. However, if the employee holds a valid A1 certificate, social security contributions are paid in the country that issued the A1 form, not in Sweden. Reduced rates may apply in certain cases.
Value-Added Tax (VAT)
The standard VAT rate in Sweden is 25%. Some goods and services may be subject to reduced rates of 12% or 6%, and certain activities may be entirely exempt from VAT. Starting January 1, 2025, the VAT registration threshold will increase to SEK 120,000 in annual revenue.
If you have any questions or would like a more detailed consultation, please feel free to contact us – we are happy to assist you!
The concept of a permanent establishment in the Sweden-Lithuania Double Taxation Agreement defines the conditions under which income derived from certain sources should be taxed in only one country to avoid double taxation.
A permanent establishment is defined as any fixed place of business (lasting longer than 6 months) through which a foreign company carries out all or part of its economic activities. This may include a company’s branch, office, factory, construction site, and so on.
Three main conditions determine whether a permanent establishment status applies:
-
A physical place of business;
-
Continuity;
-
The nature of the business activities.
Note: Additional conditions apply to companies operating in the construction sector.
Under Swedish labor law and the tax system, an economic employer is defined as a company that actually benefits from the employee’s work and controls the terms and conditions of their employment. This means that the employer may be recognized as the company that is effectively utilizing the employee’s services, rather than the one where the employee is formally employed. This concept is particularly relevant for companies engaged in employee leasing.
When determining whether the economic and actual employer coincide, factors such as the integration of the activities, responsibility for results, organization of work, provision of work tools, and other elements are considered. These factors help determine who truly controls and benefits from the employee’s work outcomes.
