The Consequences of the Registration Requirement for Foreign Employers
On the 1st of January 2021, new tax legislation came into effect in Sweden, affecting the taxation and tax deductions for foreign employers with employees in Sweden.
Border Issue Status: Not solved
The border issue is yet to be registered in The Nordic Council of Ministers border issues database.
Answer from Minister of Finance Magdalena Andersson (S) on the 15th of september 2021
On the 1st of January 2021, new rules came into effect obliging foreign employers to make tax deductions for employees working in Sweden. This affects foreign employers with employees working in Sweden. The new rules essentially mean that from January 1st, foreign employers who pays employee wages to employees working in Sweden, must report monthly on the preliminary tax for each individual employee for work performed in Sweden. The foreign employer must therefore register as an employer in Sweden at the Swedish Tax Authority (Skatteverket). This registration and reporting duty for preliminary tax for foreign employers did not exist previously and is entirely new.
The new legislation creates an obstacle for Swedish and Danish employees and cross-border commuters. It has been reported that employers from these countries could start electing not to recruit Swedish residents due to the new law to avoid double registration, monthly reporting on preliminary taxes in two countries, and tracking what country the employee is currently performing their work - Sweden, Denmark, or another Nordic country, on a monthly basis.
This means that even though the employees normally would be covered by Öresundsavtalet (the Oresund Agreement), which allows the employee to work from home less than 50% of their total working days during a three-month period.
The new legislation makes the situation more difficult for both employees who perform their work in Sweden and for their employers. It has been reported that employers from these countries could elect to not recruit Swedish residents in the future due to the new law thereby avoid the double registration, monthly reporting on preliminary taxes in two countries, and the tracking of days that the employee has worked in Sweden, Denmark, or another Nordic country on a monthly basis. The Öresundsavtal between Denmark and Sweden adds to the complexity for employers as they will need to first track where the employee has performed more than 50% of their work, and then report the preliminary taxes monthly to the correct country.
