Sweden is a naturally desirable destination for international contractors, as a Nordic culture where English is widely spoken, and with a strong presence in the technology industry. Stockholm is second to only Silicon Valley in the number of workers in tech companies. But taxes are famously high so anyone contracting in Sweden will want to make sure their compensation rate accounts for this when setting contract terms.
No matter what skills you offer, it is important to understand the legal landscape for contracting in Sweden, including residency, how to contract with clients and get paid, immigration requirements, and tax obligations. This guide will outline these topics and give you an idea of what challenges you might face and how to overcome them.
Do I need a visa to be a contractor in Sweden?
Because Sweden is part of the EU, EU citizens do not need a work visa. However, they do need to obtain a residence permit after three months. Non-EU citizens will have to apply for a work permit from outside of Sweden and have a Swedish company sponsor. For freelance contractors, this could be your client or an umbrella company.
All contractors with their own limited company will have to apply for the self-employment residence permit, and the criteria include:
- At least 50% ownership, and you run the company
- Goods/services must be produced or sold in Sweden
- Have savings enough for two year’s living expenses
- Customers and network are in Sweden
The permit is good for two years and then you will face an assessment of your business for its viability.
How do I get paid as a contractor in Sweden?
The way you get paid while contracting in Sweden will depend on how long you plan to stay and whether you want to remain independent or work through a limited company or an umbrella company.
Work as a freelancer
If your work engagement in Sweden is less than three months, you don’t need any type of residence permit and can easily work as a freelancer. This is possible for EU citizens, but more difficult for non-EU freelancers that need a work visa. Once you have the permit and visa issues sorted out, you would bill your client directly and arrange payment once the work or period is complete.
Long-term engagements or work with multiple clients may need a different solution that can overcome the immigration hurdles for non-EU contractors.
Set up your own limited company
You can set up your own limited company in Sweden (or use one registered abroad). However, you will need to meet the visa requirements mentioned for a self-employment residence permit. If you manage to do that, your clients would pay invoices to the limited company, and you would perform the work as usual.
This option is more suited to experienced contractors with a commitment to working and living in Sweden, and there is a capitalization requirement as well.
Use an umbrella company in Sweden
New international contractors and non-EU freelancers could use an umbrella company, that can sponsor work permits and handle all tax withholding from client payments. This offers a third-party intermediary to the contract, eliminating any potential conflicts with performance or payments.
The umbrella company will handle all of the administrative tasks and issue a payslip to the contractor each month.
How do taxes work for contractors in Sweden?
Self-employed contractors will need to file tax returns in Sweden by May 2 of the following year. However, if a foreign contractor stays less than six months they don’t have to pay Swedish income tax if they don’t create a permanent establishment (generate revenue) in Sweden.
What are the tax rates?
Tax rates while contracting in Sweden will vary depending on residency and income level, and the rates are notably high. Self-employed freelancers pay the same tax rates as Swedish employees as follows:
- Residents: 32% + 20% on annual income over SEK 509,000 ($60,000)
- Non-residents: 25%
What is the tax residency rule in Sweden?
Because of the difference in tax rates, residency is an important factor. In general, any stays of more than 183 days a year will result in tax residency. There are also other tests used to determine your connection to Sweden, such as owning a principal home.
If you are deemed a Swedish tax resident, not only will you pay a higher Swedish tax rate, but you will also be taxed on worldwide income, so a tax treaty with your home country would be essential.
How do I file taxes in Sweden?
Step 1: Register with the Swedish Tax Agency
Register with the Swedish Tax Agency by visiting your nearest Tax Agency office.
The tax agency will register you in the Swedish Population Register and issue you a personal identity number (person number).
Step 2: Obtain Your Income Tax Return Form
An income tax return form will be sent to you in April if you are registered with the Swedish Tax Agency, and liable for income tax. If you have not received a form by the 15th of April, order a new form online, or contact the Swedish Tax Agency at +46 (0) 771 567 567.
Step 3: Complete Your Income Tax Return Form
Complete your income tax return form, verify the pre-printed information and make the necessary changes. This information can be submitted via the Swedish Tax Agency’s e-service (Inkomstdeklaration). You can do this via their app (Skattevert), by mail, by SMS, or by dialling 020-567 100.
It is advised that you consult a translator, as the e-service and app are in Swedish.
What are the social security contributions in Sweden?
Self-employed contractors pay around 29% for social contributions, covering pension and health insurance among other things. The high rate is because this is the typical ‘employer’ contribution amount (employees only pay 7%). Foreigners who are covered under their home social security program may be able to avoid this contribution.
How do I stay compliant while contracting in Sweden?
The main compliance concerns for international contractors in Sweden are making correct tax payments, meeting immigration requirements, and paying social contributions. Each of these can apply to ex-pat contractors in Sweden, and depend on several criteria that may be difficult to learn if you are new to the country.
The easiest way to remain compliant given all the variables is to use an umbrella company as your local partner in Sweden. They are already well-versed in the Swedish rules for the self-employed contractor. Also, they can help you get started with the contract, and then facilitate all of the compliance-related steps on your behalf.
Aside from compliance, here are the other benefits of using an umbrella company:
- First, handle all client payments, tax withholding, and any social contributions
- Secondly, issue you a payslip each month, to a Swedish or foreign account
- Sponsors work permits for non-EU citizens
- Helps set up the Swedish contract with the client
- Moderates any disputes with your client
- Last but not least, advice on access to totalization and double taxation treaties
We have experienced umbrella companies in Sweden who are ready to help you right away, even before you leave home. Please contact us for more information on how an umbrella company can be your essential partner in international contracting.