Exception in draft bill on the economic employer concept

A welcome amendment to the draft bill regarding tax exemption when work is temporarily performed in Sweden has been presented. Provided that the modification is accepted, individuals who work here for a maximum of five consecutive days will be excluded and hence not tax liable in Sweden if the Swedish company and the hiring-out company are part of the same group of companies. The foreign company will then also not become liable to withhold tax.

As EY  has previously covered, the Swedish Government has suggested in a draft bill that the economic employer concept should be implemented in Swedish tax legislation effective January 2019. The implication of this suggestion is that the so called 183-days rule (a rule that with the current legislation results in the employment income being exempt from taxation in Sweden) will not be applicable when employees are hired out to a Swedish company, i.e. an employee who works temporarily for a client of the employer as an integrated part of their business. The Swedish Government has also suggested that foreign employers with no permanent establishment in Sweden should become obligated to register themselves as employers with the Swedish Tax Agency and to withhold tax on the income that is paid out and attributable to work performed in Sweden – as opposed to the current legislation where foreign employers with no permanent establishment in most cases do not have to register themselves as employers and do not have any obligation to withhold tax.

The Swedish Treasury has now presented additional suggestions to the rules described above. These additional suggestions include that an employee should not be considered to be hired out to a Swedish company, if the employer and the hiring-out company are part of the same group of companies, if the work performed in Sweden is done during a maximum of five consecutive days and less than 30 days during a calendar year. If this additional suggestion is incorporated it will, among other things, lead to that:

  • individuals coming to Sweden for work for a maximum of five consecutive days, however for a maximum of 30 days per calendar year, will not be tax liable in Sweden if the Swedish company and the hiring-out company are part of the same group of companies, and
  • the foreign company under the same conditions does not become liable to withhold tax for work performed by the employee in Sweden.

Comments

EY welcomes the proposed exception since it reduces the tough administrative burden a bit in regards to individuals working in Sweden during short time spans within the same group of companies. However, it remains to be seen if the fact that the amendment was presented in the middle of the summer holidays and with a very short amount of time for referral may result in a delay in the effective date. EY will monitor the progress and provide further updates as soon as we have more information.

Please do not hesitate to contact us if you want to discuss how this exception may impact your business in Sweden.

Sevim Güven and John Karlsson

 

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Contact
Sevim Güven
+46 72 230 95 20

 

Contact
John Karlsson
+46 76 118 23 46