Regardless of the location of the business, knowledge of accounting regulations is essential for the proper functioning of the company. A Swedish entrepreneur should know how to issue invoices and what tax rates and deadlines apply to him – the detailed aspects of bookkeeping can be entrusted to specialists in this field. With up-to-date knowledge of accounting, a company in Sweden will run smoothly and in compliance with the regulations, and the entrepreneur will not have problems with the Skatteverket – the Swedish Tax Agency.
LAWS GOVERNING ACCOUNTING IN SWEDEN
Accounting in Sweden is regulated by the so-called Accounting Act (bokföringslagen) of 1999 and the Annual Accounts Act (årsredovisningslagen) of 1995. The Bokföringsnämnden (BFN), the Swedish Accounting Standards Board, oversees the laws and regulations related to accounting.
In order to record business-related transactions, it is necessary to access one of the certified accounting programmes with appropriate security features. The use of spreadsheet software such as Microsoft Excel is not permitted.
According to the Act’s arrangements, the Swedish company’s accounting may be carried out either by the owner himself or by a qualified accountant, but in either case it is the company owner who bears the ultimate responsibility for proper bookkeeping. Since accounting matters require experience and appropriate qualifications, when choosing an accounting office in Sweden, it is advisable to use only registered accountants who have received appropriate education and are qualified to practice as accountants in Sweden. The accounting office or accountant can be checked through Revisorsinspektionen.
Swedish accounting requires entrepreneurs to record all business transactions and to keep company documents in accordance with current regulations. It is very important that the deadlines set by the authorities are met and that the accounts are correct – failure to comply with the obligations, deadlines and accounting failures may lead to frequent audits by the tax authority, Skatteverket.
A company’s accounting in Sweden is also important from the point of view of authorities, banks and contractors. The financial health and accounts of the company are taken into account by:
- the tax office for the purpose of settling income tax, VAT and social security contributions,;
- financial institutions when the entrepreneur plans to take out a loan;
- suppliers, when the company buys goods with deferred payment;
- potential investors.
SWEDISH INVOICE
The invoice issued by Swedish companies has a standard form – basic information about the seller and buyer and the goods or services being transacted.
To be able to issue invoices, the business must have a company bank account number and be assigned an identification number. If the invoice is issued by a limited liability company, the document should also include the company’s identification number, name and place of business in Sweden (either the city or municipality is sufficient).
According to the applicable regulations, the invoice should be prepared with the date on which the goods or services were delivered to the customer. Accounting for a company in Sweden can either be carried out by the owner himself or be outsourced to a professional external company. However, it is important to note that Microsoft Excel must not be used to prepare invoices – only certified software for this purpose is accepted. Documents must be stored using a special programme that meets all security requirements.
Swedish invoices are usually issued as an electronic document in accordance with the Svefaktura standard. Following the example of state bodies and government agencies, an increasing number of private companies only handle Swedish e-invoices, thus facilitating their contact with authorities and contractors. Paper forms are still accepted, but are gradually being withdrawn from general circulation.
Companies liable for VAT should issue invoices that include the correct tax rate. Only the Swedish VAT correctly shown on the invoice allows input tax to be deducted.
ACCOUNTING ACCOUNTS
Accounting accounts in Sweden are used to record economic events occurring in connection with the business. Each bookkeeping account is designed to record specific events, and all of them together form a chart of accounts.
The chart of accounts is a summary of the accounts booked by a particular company. It enables the Swedish entrepreneur to show the course of economic events over a given period of time. The standard chart of accounts (BAS) contains a scheme for qualifying a particular event. It is important to note that economic events should be correctly matched to the individual accounting accounts – the account balances are entered in the annual tax return.
Accounting accounts in Sweden consist of four digits. Belonging to a specific one is determined by the first digit indicating the account class – 1 is reserved for assets, 2 for liabilities, 3 for income and 4-8 for expenses. The second digit of the account indicates the account group, while all four determine the specific accounting account.
A Swedish company should have a bank account to be used for all financial operations related to the business. In the case of companies, the company’s Swedish bank account is also intended for depositing start-up capital of a certain amount.
COMPANY DOCUMENTATION
An entrepreneur in Sweden should keep company documentation in a reliable and transparent manner. It is especially important to keep the documents in order when the deadline for settlement with the tax authorities is approaching or when an audit is carried out in the company.
Company documentation should be kept for at least seven years from the date of issue. Archiving should take place in the form the document has – electronic documents can be saved in digital form, while paper documents must be retained in their original form. An entrepreneur in Sweden may archive documents in-house or outsource this task to an external company. However, it must be remembered that in the event of a possible inspection by the authorities, the warehouse is obliged to provide access to the stored documentation.
Swedish company documentation is divided into primary and secondary documentation. Primary documentation includes, among other things, annual declarations, VAT returns, cost and income documents, account registers, balance sheets and personnel documents. Secondary documentation includes documents such as the company’s contracts and stock records.
AUDIT OBLIGATION
An audit obligation applies to selected companies operating in Sweden. An auditor is defined as a person who has completed specialized training and is qualified by passing an examination. The Swedish auditor is either an auktoriserad revisor, or revisor godkänd, that is approved auditor.
The purpose of the audit is to assess the company’s annual reports and to catch possible irregularities. The auditor confirms the reliability of the documents without interfering in the Swedish company’s accounts.
In the case of small business associations, the audit may be carried out by a person without the title of authorized or approved auditor, but this person must be suitably qualified.
TYPES OF COMPANIES IN SWEDEN
As residents of a country belonging to the European Union (EU) and the European Economic Area (EEA), Poles have the right to establish a company in Sweden on an equal footing with Swedish citizens. Opening a business itself is not complicated, however, the whole process and its duration depend on the type of business you intend to start.
The types of business in Sweden are:
- Sole proprietorship (enskild nӓringsidkare),
- Civil partnership (enkelt bolag),
- Commercial company (HB – Handelsbolag),
- Limited partnership (KB – Kommanditbolag),
- Limited liability company (AB – Aktiebolag),
- Subsidiary of a foreign company (Filial),
- Business association (ekonomisk fӧrening),
- Foundation (stiftelse),
- European public limited company (Europabolag).
The variety of requirements and formalities involved in business registration make sole proprietorships the most popular business types. Limited liability companies and limited partnerships, on the other hand, are the most inaccessible for foreigners due to a number of complicated formalities and the need to contribute a large amount of share capital.
SWEDISH SOLE PROPRIETORSHIP
A Swedish sole proprietorship does not require the employment of an accountant. Accounting is relatively straightforward, but a business owner will not be able to run a smooth business without knowing at least the basics of accounting – the arrangements that are contained in the Accounting Act and the correct accounting of the company’s financial transactions.
Enskild nӓringsidkare, i.e. a sole proprietorship in Sweden, who’s has no legal personality. This means that Swedish income tax is settled according to the rules for individuals. Income tax is divided into national tax and local tax. The rate of national tax depends on the income earned in a given tax year. The local tax paid to the municipality (kommun) and the region (landsting) depends on the place of residence or permanent establishment of the company.
Income tax in Sweden is paid in the form of advance payments. Advance income tax is paid each month on the basis of the profit declared at the beginning of the relevant tax year.
A sole proprietorship that sells goods or services subject to VAT is required to add the appropriate rate of VAT (moms) to each transaction. Swedish VAT is settled by means of a tax return, which must be submitted either monthly, quarterly or annually.
The rates of VAT in Sweden are:
- 25% (standard rate);
- 12% (reduced rate for groceries, hotels, handicrafts, etc.);
- 6% (low rate for newspapers, books, passenger transport, etc.).
SWEDISH COMPANY
Swedish accounting for companies is more complicated than for sole proprietorships, so it is advisable to hire an accountant or to entrust the company’s accounts to a professional external accounting firm.
Establishing a company in Sweden requires the payment of share capital in a certain amount, which should be deposited in the company’s bank account. The amount of initial capital varies from SEK 50,000 for limited liability companies up to SEK 500,000 for joint stock companies.
A Swedish company is established on the basis of a memorandum of incorporation, which must be signed in the presence of a notary public. Within six months of signing the document, it is necessary to register with Bolagsverket, the Swedish Register of Companies.
The company is a legal entity and the Swedish income tax calculated on the basis of the profit made in the relevant tax year is 28%. It is paid in the form of monthly advance payments calculated on the basis of the company’s declared income – the initial declaration can be adjusted during the year.
Advance income tax payments – deadlines:
until 17 January,
until 12 February,
until 12 March,
until 12 April,
until 12 May,
until 12 June,
until 12 July,
until 17 August,
until 12 September,
until 12 October,
until 12 November,
until 12 December.
If a Swedish company sells goods or services that are subject to VAT, the entrepreneur should register the company in the VAT register and charge and pay the appropriate rate of tax. VAT in Sweden is levied at 25 per cent, 12 per cent and 6 per cent, and is settled by means of a tax return sent to the authorities on a monthly, quarterly or annual basis.
THE COST OF DOING BUSINESS IN SWEDEN
Running your own business in Sweden is a way of gaining control over financial matters and having a real impact on the amount of profit, but running your own business also means that you have to incur certain costs. The extent and amount of the costs depend on the nature of the services provided and the type of activity, and the Swedish entrepreneur is required to prove the reasonableness of the costs.
The main costs of a business in Sweden are taxes – income tax, VAT and taxes for employees. Taxes are paid periodically according to certain rates and deadlines set by the Skatteverket. Swedish income tax ranges from 30 per cent to 55 per cent of a company’s profit, for corporations it is 28 per cent. VAT rates (moms) are 25%, 12% and 6%, while the total employer tax is 31.42% on the employee’s gross salary and other benefits.
For companies, another cost is the need to create start-up capital of between SEK 25,000 and SEK 500,000, which must be deposited in a company bank account.
The company’s costs are calculated by means of invoices issued by suppliers, so-called cost invoices, which provide evidence of the actual costs incurred. It is also the entrepreneur’s responsibility to scrupulously check the correctness of the data on the invoices, in particular the amounts shown on the documents – value of goods and VAT rates – and the company’s identification data.
The costs of doing business in Sweden can be divided into fixed and variable costs. Fixed costs are understood as costs that can be determined in advance because they are incurred on a regular basis. Variable costs fluctuate according to the company’s current needs – they mainly relate to equipment, materials and office supplies needed to run the business.
TAXES IN SWEDEN
Companies in Sweden are required to pay the relevant taxes – income tax, value added tax and tax on hiring employees.
If a Swedish employer has employees it is obliged to pay tax and contributions, which are part of the so-called employer tax, or arbetsgivaravgifter. These include a payroll tax of 11.62%, a pension contribution of 10.21% and insurance contributions of 3.55%.
Income tax in Sweden applies to every entrepreneur, both corporate and natural persons. The income tax consists of two parts: the national tax and the local tax to finance the municipality (kommun) or region (landsting).
National income tax for individuals, including sole proprietorships, is calculated on the basis of the income earned in a given tax year. Corporate tax is 28% on company profits. Local income tax varies depending on the place of residence or permanent establishment of the company – ranging from 30% to 35%.
Income tax rates for individuals in Sweden for 2020:
| taxable income | national tax | local tax |
| from 0 to 490 700 SEK | 0% | 30-35% |
| more than 509 300 SEK | 20% | 30-35% |
Swedish income tax is paid in the form of advance payments determined on the basis of the declaration of profit expected for the year. The company’s income is estimated at the company registration stage and then at the beginning of each subsequent year.
Swedish VAT, so-called moms, applies to companies that offer taxable goods or services for sale. It is charged on each transaction, regardless of the stage of production or distribution. A transaction is understood to be the sale of goods, the provision of services, exchange and self-payment from the company.
The VAT rates in Sweden are:
- 25% (standard rate),
- 12% (reduced rate for foodstuffs, hotels, handicrafts, etc.),
- 6% (low rate for newspapers, books, passenger transport, etc.).
VAT in Sweden is settled by means of a tax return. The frequency of filing the return depends on the size of the company and the company’s annual turnover. The entrepreneur should determine the frequency of the tax return when applying for registration with the tax authority – Skatteverket. Swedish VAT can be settled in three ways:
- once a year or once every three months or once a month – for small companies with a turnover of less than SEK 1 million per year;
- once every three months or once a month – for medium-sized companies with a turnover of between one million and forty million SEK per year;
- once a month for large companies with a turnover of more than SEK forty million per year.
OBLIGATIONS OF THE EMPLOYER
The operation of a company sometimes requires the hiring of employees. An employer in Sweden is obliged to fulfil certain obligations towards employees and authorities.
A company that employs temporary workers from outside Sweden is required to report this to the Swedish Work Environment Authority. It is also necessary to report the hiring of employees to the Skatteverket, the tax authority. A work permit is not required if the employee comes from a country within the European Union. However, if the employee is a citizen of a country outside the European Union, the Swedish Migration Board – Migrationverket – must be contacted.
Employer costs for Swedish employers, as with company costs, are divided into fixed costs and variable costs. Each of these should be properly documented and recorded.
The employer pays taxes and contributions that form part of the employer tax – arbetsgivaravgifter – including payroll tax of 11.62%, pension contribution of 10.21% and insurance contributions of 3.55%. The Swedish employer tax is calculated on the tax base: the gross salary amount and other benefits, and totals 31.42%.
Sickness benefit is payable to an employee who is temporarily unable to work due to illness. The Swedish employer should determine the amount of the employee’s sickness benefit due based on the amount of salary and other benefits paid. The amount of sickness benefit is 80% of the average salary, including any employee allowances.
The employer’s obligations regarding health and safety training, job training or the provision of work clothes depend on the nature of the company’s business in Sweden. Mynak, the Swedish Work Environment Authority, is responsible for health and safety issues.
