F-tax in Sweden
Many foreign companies face issues related to tax-at-source or preliminary tax in Sweden. It should be withheld by a Swedish payor on all payments for contracts delivered there by the companies which are not formally registered with Swedish Tax Agency (Skatteverket). The rule refers also to the foreign businesses which are not directly involved in performing services in Sweden but are reselling them.
Preliminary tax or tax-at-source in Sweden amounts to 30% of the invoice value for a foreign subcontractor. The Swedish authorities aim to minimize the outflow of tax revenue related to foreign companies with business activities in Sweden. As a rule, all foreign entities delivering services on the territory of Sweden are subject to preliminary taxation. However, the contracting party is not required to withhold it if the contractor is registered. But what are the tax obligations when a foreign company has a contract with another entity without an establishment in Sweden?
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The F-tax registration confirms the company’s foreign status and the absence of outstanding tax debt. It is required to guarantee, that all business operations in Sweden do not pose legal or financial risks. If however, the work in Sweden is performed for companies which do not have a formal presence there, a special exemption from withholding the tax may be requested without the need for registration.
Some contracts of a temporary character do not create the necessity to register with Skatteverket.
F-tax registration is a key issue to start business activities in Sweden. It is also equally crucial to determine whether the arrangement involves subcontracting or employee leasing. The latter imposes obligations on companies to withhold tax on employees’ incomes, even if the business itself does not constitute a permanent establishment in Sweden.
In general, addressing the issue of F-tax in Sweden well in advance of starting a project is advisable.
For more information on the services the Nordic Forum offers to companies fulfilling assignments in Sweden, Finland and Norway, please visit the SERVICES page. We take care of formalities related to the registration of contracts, employees and tax exemption procedures.
