The so-called 183-day rule is quite famous among the general public, or at least among individuals who have worked in another country than their home state. In this article, we will explore how the 183-day rule operates in Sweden and what pitfalls you should avoid.
Does Sweden apply the 183-day rule for employment income tax purposes?
Indeed, for many years now, the Swedish domestic tax legislation has included the 183-day rule. Essentially, the 183-day rule offers an opportunity for a person who is not a tax resident in Sweden to avoid being taxed in Sweden, even though they work there.
In other words, the 183-day rule sets a minimum threshold for having to pay tax on one's employment income.
What are the requirements of the Swedish 183-day rule?
There are several requirements that must be fulfilled to successfully apply the 183-day rule. These requirements are as follows:
The individual spends less than 183 days in Sweden in every possible 12-month period.
The individual is employed by a foreign (non-Swedish) employer that does not have a permanent establishment in Sweden.
The individual does not have a Swedish 'economic employer.'
Initially, one cannot be present in Sweden for more than 183 days during any 12-month period. This rule may sometimes be affected by Tax Treaties with more beneficial versions of the 183-day rule. In some cases, the 183 days are to be counted with respect to the calendar year, rather than "any 12-month period."
Regarding the second requirement, this is one of the more challenging ones to assess. Whether a foreign company has a permanent establishment is a complex assessment conducted by lawyers. Therefore, this topic should be thoroughly assessed as it affects both the employer (due to potential Corporate Tax Liability) and the employee (since it affects their ability to apply the 183-day rule).
Thirdly, Sweden introduced the so-called 'economic employer' concept in its domestic legislation as of January 1, 2021. This adds a third criterion to the 183-day rule. In short, one should assess if the person in question is to be seen as 'hired out' to a Swedish business from a foreign employer. If this is the case, the 183-day rule will not be applicable, as a general rule. The assessment can be complex and is usually performed by a Swedish lawyer, by reviewing the relevant agreements governing the work in Sweden.
What is the 15/45 day exception?
As you may have noticed, it is not easy to determine whether the 183-day rule can be applied for work performed in Sweden. This is mainly due to the economic employer concept being added to Swedish tax legislation.
To simplify matters, the Government of Sweden introduced an exception to the economic employer concept. This exception means that the economic employer concept will not apply to income from work that meets the following criteria:
Less than 15 work days are performed consecutively in Sweden, and
The total amount of work days conforming to the above criteria amounts to less than 45 days per calendar year.
Are you the owner of a foreign business planning to send your staff to Sweden for a time-limited project? Do you want to know whether your staff can use the 183-day rule and only pay taxes in their home countries? Please reach out to us.