Sweden

Lying at the centre of Northern Europe, Sweden is officially a kingdom - and the third-largest country by area in the European Union.

Home to prehistoric Germanic tribes, Sweden unified during the Middle Ages to form an empire, but gradually ceded territory to assume its modern borders, and join the EU, in 1995.

Today, Sweden maintains a prominent regional and global presence as a member of the United Nations, the Nordic Council, the Council of Europe, and the WTO - amongst numerous other organisations. 

Sweden’s natural resources have helped it become one of the wealthiest nations in the world: a status reflected by high living and educational standards, and its ongoing global competitiveness.

Part of the Scandinavian Peninsula, Sweden’s landscapes are characterised by rolling mountains and hills, while the country enjoys a temperate climate, with mild winters and warm summers.

General information

• Full Name: Kingdom of Sweden
• Population: 10.486 million (World Bank 2022)
• Capital: Stockholm
• Major Language: Swedish
• Major Religion: Christianity
• Monetary Unit: 1 Swedish krona = 100 ore
• Main Exports: Machinery and transport equipment, paper products, chemicals
• GNI Per Capita: US $67,630 (World Bank 2022)
• Internet Domain: .se
• International Dialling Code: +46

How Do I Say in Swedish?

• Hello: Hallå
• Good morning: god morgon
• Good evening: god kväll
• Do you speak English?: Talar du engelska?
• Goodbye: adjö
• Thank you: Tack
• See you later: Vi ses senare

Expanding your business into Sweden presents a strategic opportunity to tap into one of the world's most innovative and sustainable economies. Known for its strong economy, high quality of life, and cutting-edge technological advancements, Sweden is a prime destination for businesses aiming to grow on a global scale. This guide will delve into the advantages of doing business in Sweden, underlining why this Nordic nation should be your next investment destination.

Sweden stands at the forefront of innovation, consistently ranking among the top countries in global innovation indexes. It's home to a vibrant startup scene and world-renowned companies in sectors such as telecommunications, automotive, and renewable energy. The Swedish government actively supports research and development, making the country an ideal environment for businesses focusing on innovation and technology.

Sustainability is deeply ingrained in the Swedish business culture, with the country aiming to become carbon neutral by 2045. Sweden offers a thriving market for green technologies, renewable energy solutions, and sustainable products and services. Companies investing in Sweden benefit from aligning with these sustainable values, opening up avenues for green investments and innovation.

Sweden's open economy is recognised by a welcoming attitude towards international trade and investment. With a strategic location in Northern Europe, Sweden serves as a gateway to the Nordic and Baltic markets, offering businesses a platform to expand their operations across the region. The country's transparent business practices and stable political climate further enhance its attractiveness as an investment destination.

The Swedish government offers a conducive environment for business with competitive corporate tax rates, well-developed infrastructure, and a range of incentives for foreign investors. Sweden's membership in the European Union ensures access to the EU single market, along with adherence to EU standards and regulations, providing a stable and predictable business framework.

Doing business in Sweden offers a unique blend of innovation, sustainability, and a highly skilled workforce, all within a supportive and open business environment. The country's commitment to green technologies, coupled with its leadership in innovation and design, makes Sweden an ideal destination for businesses looking to invest in a sustainable future and expand their global footprint. Whether you're a startup in the tech industry or an established company looking to invest in green energy, Sweden provides a dynamic and forward-thinking platform for growth and development.

Investing in Sweden offers a myriad of advantages for businesses looking to thrive in an innovative, sustainable, and dynamic economic environment. Recognized globally for its stable economy, commitment to environmental leadership, and technological advancements, Sweden stands out as a compelling destination for foreign direct investment (FDI). 

Sweden's reputation as a leading innovation hub is well-earned, with a strong focus on research and development across various sectors, including information technology, life sciences, and clean energy. The country's investment in education and a culture that encourages innovation make it a breeding ground for cutting-edge technologies and startups. For businesses looking to stay at the forefront of innovation, Sweden offers an ecosystem that fosters growth and creativity.

Situated in Northern Europe, Sweden offers strategic access to the Nordic and Baltic markets, as well as the broader European Union. Its well-developed infrastructure, including ports, airports, and digital networks, facilitates efficient logistics and distribution, making Sweden an ideal base for companies aiming to expand their presence in Europe and beyond.

Sweden's ambition to lead in sustainability is evident in its goal to become one of the world's first fossil-free welfare states. This commitment is mirrored in the business sector, where there is a strong focus on developing sustainable solutions and practices. For investors, this creates opportunities in green technologies, renewable energy, and sustainable products, aligning with global trends towards environmental responsibility.

Sweden's highly educated, skilled, and multilingual workforce is one of its greatest assets. The country’s emphasis on quality education and continuous skill development ensures a pool of talented professionals, particularly in high-tech industries. Businesses investing in Sweden can leverage this human capital to drive innovation and competitive advantage.

Sweden is known for its transparent, efficient, and business-friendly environment. The government offers various incentives for foreign investors, including tax incentives for research and development, support for startups, and a straightforward process for business registration. Sweden's legal and regulatory framework is designed to protect investments and promote fair competition, providing a secure environment for business operations.

Foreign Direct Investment (FDI) in Sweden is a cornerstone of its open and competitive economy, with the country rolling out the red carpet for international investors across a wide range of sectors. Sweden's approach to FDI is recognised by a transparent regulatory environment, robust government support, and a suite of incentives designed to facilitate ease of doing business and foster growth. 

Foreign Direct Investment (FDI) Sectors in Sweden

Sweden's economy is diverse, with several sectors standing out as particularly attractive for foreign investors:

• Technology and Innovation: Including ICT, software development, and life sciences, where Sweden is a global leader.
• Green Technology and Renewable Energy: Reflecting Sweden's commitment to sustainability and environmental leadership.
• Manufacturing and Engineering: Including automotive and aerospace, with Sweden home to globally recognised brands.
• Digital Economy: Fueled by Sweden's strong digital infrastructure, sectors such as e-commerce, fintech, and digital health thrive.
• Forestry and Timber: Given Sweden's vast forest lands, this sector remains crucial, including paper and pulp industries.

Incentives Available for Foreign Direct Investment (FDI) in Sweden

Sweden offers a range of incentives designed to attract and support foreign investment:

• Tax Incentives: Including competitive corporate tax rates and R&D tax credits, aimed at fostering innovation and growth.
• Grants and Financing: Direct financial support for specific projects, especially those contributing to innovation, job creation, and regional development.
• Simplification of Business Establishment: Streamlined processes for starting and running a business in Sweden, including ease of registration and minimal bureaucratic hurdles.

Government Support for Foreign Direct Investment (FDI) in Sweden

The Swedish government provides extensive support to foreign investors through various agencies:

• Business Sweden: The Swedish Trade & Invest Council that helps international companies to establish in Sweden and connects them with investment opportunities and partners.
• The Swedish Agency for Economic and Regional Growth (Tillväxtverket): Focuses on promoting entrepreneurship and regional development, offering support to businesses throughout their growth phases.
• The Swedish Tax Agency (Skatteverket): Provides guidance on tax-related matters, ensuring that foreign investors understand their fiscal responsibilities and benefits.
• Almi: Offers financing solutions and advisory services to startups and companies looking to expand, fostering innovation and growth within the Swedish business ecosystem.

Regulatory and Innovation Support in Sweden

• The Swedish Innovation Agency (Vinnova): Supports innovative projects within research and development, crucial for businesses looking to lead in new technologies and solutions.
• The Swedish Financial Supervisory Authority (Finansinspektionen): Regulates the financial market, ensuring stability and transparency for investors.

Sweden’s holistic approach to FDI—combining sector-specific opportunities, financial incentives, and dedicated institutional support—ensures that investments are not only welcomed but nurtured for long-term success. The blend of a high-innovation economy, commitment to sustainability, and a strategic location in Europe makes Sweden an attractive destination for businesses aiming for growth and global impact.

This information is currently being updated for 2024.

It is not mandatory to make payments to both employees and the authorities from an in-country bank account.

This information is currently being updated for 2024.

An employer must be registered at the Swedish Tax Office. The company is not considered as a legal entity until it is registered with the Swedish Companies Registration Office. It usually takes two to four weeks to register a new company.

Company formation in Sweden follows this 3-stage process:

1. Obtain certification from a Swedish bank that the total cash amount for shares has been deposited into an account. This takes 1 day.
2. Submit an online application to the Swedish Companies Registration Office and obtain a Registration Certificate. This takes 14 days and costs approximately SEK 2,000.
3. Registration with the Swedish Tax Agency. This takes 1 day and can be done at the same time as stage 2.
4. If the company is only applying to become an employer in Sweden with the Swedish Tax Office (and not with the Swedish Companies Registration Office) it can take up to 15 weeks for the application to be processed.

Some useful information on how to fill in the tax application for foreign entrepreneurs.

The tax year runs from 1st January to 31st December.

This information is currently being updated for 2024.

The typical penalty awarded for the late submission and payment of tax and social security contributions is a fee of SEK 625.

Taxation on salaries for an employee involves contributing to three different levels of government: The Municipality, The County Council and The Central Government.

Employer with Permanent Establishment:

Preliminary Income Tax shall be deducted from the payslip and paid by the employer to the authorities.

The tax tables used for the calculation vary depending on where the employee lives, age and the employees’ total economic situation.

For irregular payments such as bonus, final pay etc. it is a percentage for one-time tax 10-57 % depending on the employees’ yearly income.

All the residents are liable to pay National and Municipal Swedish Tax on their worldwide income; non-tax residents in Sweden are liable to pay tax on income derived from work performed in Sweden.

Individuals will be regarded as tax residents if they are present in Sweden for a period of more than 6 months.

Married people are taxed separately.

Taxable Income Includes:

• Income from employment (deemed to form only one source), is taxed for municipal tax up to the threshold and for national tax for the exceeding part.
• Income from business (may include various sources of income), is taxed for municipal tax up to the threshold and for national tax for the exceeding part.
• Income from capital (deemed to form only one source) is taxed separately. No municipal tax is levied.

Certain deductions are permissible: i.e. expenses incurred due to double accommodation and home travel during temporary assignments away from ordinary place of work for up to 2 years for single individuals and five years for married couples.

If the employee is not a Swedish citizen, but has worked for a Swedish company for less than 6 months, they will have to apply for SINK at the Swedish Tax Office. SINK is always 25%, and the employer makes the tax deduction.

If the employee has worked for more than 6 months at a Swedish company, they have to apply for and pay general taxes (A-skatt) or have a decision from the Tax Office for adjustment. They will also have to make an income tax return.

Filing Date: May following the assessment year.

Monthly contributions must be paid to the local authorities by the 12th one week later in January and August of the following month.

This information is currently being updated for 2024.

Sweden has one of the most highly developed welfare systems in the world.

All employers in Sweden pay the social security contributions consisting of charges for pensions, health insurance and other social benefits. These contributions amount to 31.42% of the gross salary. 10.21% of this represents pension contributions. Only the contributions on income up to a maximum of 8,07 income related base amounts (SEK375´255) 519 708 kr for 2019 are calculated per person for pension. 538 700kr for 2020.

All Swedish residents are entitled to a state-financed guaranteed minimum pension of approximately SEK7,500 per month. State-financed guaranteed for single persons SEK 8,779, for married persons SEK 7,853.

Employees pay 7% of their income to pension contributions, up to a maximum of 8,07 income base amount. However, this contribution is neutralised by a corresponding income tax reduction for the employee.

For employees born in 2004-2006, employers pay a contribution of 10,21%. The lower fee applies to benefits up to a maximum of SEK 25,000 per month and employer. For compensation over SEK 25,000, the fee is 31.42%/ For employees born in 1999-2003, employers pay a contribution of 19,73%. The lower fee applies to benefits up to a maximum of SEK 25,000 per month and employer. For compensation over SEK 25,000, the fee is 31.42%. For employees born from 1938 to 1956, employers only pay a contribution of 10,21%. For employees born in 1937 or earlier, no contributions are paid.

Pension contributions are tax deductible for the employer, and a tax of 24.26% is levied on the amount of the contribution. The tax of 24,26% is not on the statutory contributions, it´s on the occupational pension.

The monthly amount depends on the:

• Size of pension contributions made entitling a person to a pension.
• General employment income development in the country.
• Accrued value of the part (2.5%) of the pension entitlement invested according to individual choice (premium pension).
• Current average life expectancy

Monthly contributions must be paid to the local authorities by the 12th of the following month.

This information is currently being updated for 2024.

Yearly

Processing of statutory year end (tax year end)

• An annual reconciliation of payroll transactions
• The tax files (FOS) are updated via the payroll system. The files are retrieved from the Swedish Tax Authority (Skatteverket) and are instantly uploaded to the payroll system. The tax files include all tax information for the following year.
• Due to changes in tax policies, maintenance of the employer’s system is completed as required.

From January 2019, PAYE tax returns per employee are reported every month instead of the yearly annual income statement.

This information is currently being updated for 2024.

The employment contract can be written or verbal. Even if there is no requirement of a written contract, the employer is obliged to provide written information stating all of the terms & conditions that are of material relevance to the employment relationship. This must be done within one month after the commencement of work by the employee. This information is provided using the form mentioned above.

The details required when setting up a new start include:

• Employment contract in Swedish or English
• Tax information - information about tax table and tax adjustment is sent to the employee from the Swedish Tax Agency (STA) upon request.

If a new employee is a non-Swedish citizen:

• Tax information - the employee must visit a Tax Office and ask for a social security number and fill out an application form for SA-tax registration. After processing, the Tax Agency sends the decision to the employee and depending on their decision the social security percentage is decided.
• A1 form (if applicable)

The documentation required from expat new starts include:

• Passport / date of birth (YYMMDD)
• Work permit
• Contract
• A1 form (they shall not pay Swedish social security)
• SINK decision (if they will not stay for longer than 6 months and not pay full Swedish tax)
• Tax details

This information is currently being updated for 2024.

If there is a dismissal by the employer, it shall be based on objective grounds. Objective grounds always exist in case of shortage of work (redundancy). The notice of dismissal, which has to be in writing, should contain all the information stated in The Employment Protection Act. According to The Employment Protection Law (LAS), the employee has the right to be informed of the termination at least 2 weeks before, or according to the employment contract.

Payment for leavers must be made in the month after termination day.

No notifications have to be made to the local authorities when there is a leaver.

This information is currently being updated for 2024.

Payroll in Sweden involves certain obligations on the part of employers, who should be primarily concerned with observing relevant tax laws. A business’ payroll process must take into account individual income tax, social security contributions, payroll and sales taxes, and withholding tax.

Setting up payroll requires information from employees, including a Swedish Tax Identification Number (TIN). Income tax in Sweden is progressive, but may differ for ‘resident’ and ‘non-resident’ taxpayers. Employees are required to make a 7% contribution to social security, while employers contribute 31.42%: the payments cover various benefits including unemployment insurance, pensions, family benefits and health insurance.

Employees must be issued with a payslip every pay-date, and payroll records must be kept for at least 10 years.

This information is currently being updated for 2024.

The working week in Sweden is normally Monday to Friday.

Normal working hours cannot exceed 40 hours per week.

No more than 48 hours overtime over a period of four weeks, or 50 hours over a calendar month, is permissible.

Maximum overtime is 200 hours per calendar year.

Please note that this document gives general guidance only and should not be regarded as an authoritative or complete statement of the law, regulations or tax position in any country. You should always seek specific advice for each specific situation. This document should not be relied upon as professional advice and activpayroll accepts no liability for reliance on its contents.