Having Employees in Sweden? Key Tax and Social Security Considerations for non-Swedish Employers

Such situations require careful consideration of Swedish tax and social security rules to avoid unexpected consequences. With proactive planning, foreign companies can reduce unnecessary tax costs, ease administrative burdens and create greater certainty for both employers and employees.

 

Having the Appropriate Mobility Setup from the Start

One of the most important factors in any cross-border work arrangement is how the employment contract is structured. This includes agreeing on key aspects such as the expected duration of work in Sweden, how tax liabilities arising during the assignment should be handled and which remuneration and benefits the employee will be entitled to during the assignment.

Another central aspect concerns the employee’s social security affiliation, i.e. whether the individual can remain in the home country’s social security system or whether coverage will shift to Sweden. Labour law considerations may also become relevant depending on the circumstances.

For both employers and employees, it is important to understand what the agreed salary, remuneration and benefits represent in practice. Differences between gross and net salary arrangements, as well as the use of tax equalisation set-ups, can significantly affect the final tax outcome in Sweden. Misunderstandings regarding net pay may lead to unexpected liabilities or retroactive adjustments.

A clear understanding of the employment structure and compensation model helps manage expectations and supports correct taxation. Depending on how the arrangement is structured, different obligations may arise for both the employer and the employee. Well-documented agreements ensure compliance with Swedish tax rules and reduce the risk of misunderstandings. Establishing a consistent approach to cross-border work from the outset also supports greater predictability and long-term compliance.

 

Employer Registration in Sweden

In certain situations, foreign companies are required to register as employers in Sweden and report salary, withholding tax and social security charges in monthly PAYE returns to the Swedish Tax Agency (STA). 

Situations in which these obligations can arise for foreign employers include:

• The company has employees in Sweden and forms a permanent establishment for corporate income tax purposes in Sweden. 
• The company does not form a permanent establishment in Sweden but has employees in Sweden for a period longer than 183 days during a calendar year. 
• The company outsources (hires out) employees to work in Sweden. 
• The company has employees remaining in or belonging to the Swedish social security system as well as situations where it is necessary to withhold Swedish income tax on payments made to the employees.

 

Employer Compliance Obligations in Sweden

Once a foreign entity has registered as an employer in Sweden, there is a monthly obligation to file PAYE returns with the Swedish Tax Agency. Depending on the circumstances, the employer may need to establish Swedish payroll routines and have an obligation to withhold Swedish income tax on salary, benefits and other payments made to the employees.

The employer may also have an obligation to pay Swedish social security contributions, calculated on the gross payment to the Swedish Tax Agency at the time of filing the monthly PAYE returns. In Sweden, social security charges are exclusively a cost of the employer and there are no employee contributions applied. 

As a result, foreign employers often need to coordinate home-country payroll systems with Swedish reporting requirements. Foreign entities are therefore well advised to assess their Swedish tax obligations at an early stage when cross-border work is planned or expected.

 

Tax Regimes and Income Tax in Sweden

Swedish taxation of employment income is primarily based on where the work is performed. However, it is also necessary to assess the individual’s tax status in Sweden. It is important to note that an individual may become tax resident in Sweden even without a permanent relocation, depending on the personal circumstances.

Individuals can either be considered to have limited or unlimited tax liability in Sweden.

Unlimited tax liability applies when a person 1) is a resident of Sweden, 2) continuously stays in Sweden, or 3) has previously lived in Sweden but still has essential ties to Sweden. 

A stay in Sweden is considered continuous if the stay is longer than six (6) months, the employee will be considered unlimited tax liable in Sweden, which means that any taxable income for work in Sweden will be taxed at a progressive tax rate ranging between approx. 29–54%. It is important to note that Swedish case law has asserted that even shorter periods than six (6) months in Sweden, if spread across one or several years, can be considered as continuous stays in Sweden. Unlimited tax liable individuals also have an obligation to file an annual Swedish income tax return.

If the employee can be considered limited tax liable in Sweden, the employee may qualify for SINK tax, a flat-rate tax regime of 22.5% (to be reduced to 20% from 1 January 2027) on taxable employment income. The SINK regime is a final tax, meaning the employee will not have an obligation to file an income tax return in Sweden.

Sweden also offers an expert tax relief regime for non-Swedish employees, which provides a reduced taxable base under certain conditions. Under this tax regime, 25 % of the gross income, including benefits, is tax exempt both for the employee and the employer (social security fees are paid only on 75% of the income and benefits). The expert tax relief must be applied for within three months from starting the employment in Sweden. A decision can be valid up to seven years.

• Read more about the expert tax regime here: Sweden’s expert tax regime: current rules, proposed changes and practical implications

The foregoing implies that assessing the tax residency of employees and applicable tax regimes is essential to ensure that any planning opportunities for assignments/employment in Sweden are not missed.

 

Social Security Belonging 

For cross-border work, it is also necessary to determine whether social security contributions should be paid in Sweden or not. In such situations, the EU regulation on social security and other social security conventions that Sweden has entered into must be assessed.

Failure to assess social security affiliation correctly may result in retroactive charges, incorrect employer contributions and the loss of social security benefits for the employees.

The full social security contribution in Sweden is 31.42% (2026) of the taxable salary and benefits and is a cost borne solely by the employer. If the employer is a foreign company that does not have a permanent establishment in Sweden, the social security contribution is reduced to 18.8% (2026).

 

Final Thoughts

Careful planning offers clear benefits for both businesses and individuals in cross-border situations. With the right structure in place and early consideration of tax and social security matters, international work arrangements can be managed efficiently and predictably.

BDO Sweden assists foreign entities that plan to bring employees to Sweden or employ Swedish residents with tax-related advice. For tailored assistance with Swedish tax matters in cross-border situations, do not hesitate to contact BDO’s team of tax experts today.