In an increasingly globalized world, companies and individuals move across borders more frequently. It could be a German construction company coming to Sweden to install a component or an individual working remotely from Sweden for family reasons. Regardless of the reason, there are many legal requirements that foreign employers must meet when they have staff in Sweden, including registrations and reports. By using an Employer of Record, a foreign (non-Swedish) employer can quickly create a compliant setup in Sweden without having a local company here. We explain further in this article.
What is an Employer of Record (EoR)?
Employer of Record is a type of service that has become increasingly popular in recent years. The service involves a Swedish company being hired to act as the formal employer for a person (employee) who works physically from Sweden. The formal employer, referred to as the Employer of Record, handles the Swedish employer obligations, which include the following:
Paying salary
Withholding Swedish preliminary tax on the salary and sending this to the Swedish Tax Agency
Submitting monthly PAYE reports to the Swedish Tax Agency
Paying mandatory Swedish employer contributions to the Swedish Tax Agency
In addition to these employer obligations, an Employer of Record can also set up an occupational pension solution for the employee. We at nomadtax can also offer the possibility of ID06 cards for individuals employed through our Employer of Record service.
When should one use an Employer of Record solution?
If you run a business outside of Sweden and want to hire a person who will work from Sweden, it is very advantageous to use an Employer of Record solution. You then avoid having to register as an employer with the Swedish Tax Agency, register for Swedish F-tax, making preliminary tax deductions on salary, and more. All these tasks are handled by us as the Employer of Record on your behalf.
In cases where non-Swedish employers plan to send their staff to Sweden to, for example, carry out a construction or installation project, it can also be very advantageous to use an Employer of Record. You then avoid registering with Swedish authorities and setting up a Swedish payroll. Instead, you can focus on what you do best - your core business.
What are the advantages of using an Employer of Record in Sweden?
As mentioned, the main advantage is that you ensure you are always compliant when you have people employed working from Sweden. Complying with all the requirements according to Swedish law is both difficult, time-consuming, and often costly. You would have to setup a Swedish payroll - that complies with the Swedish tax legislation and sends PAYE reports to the Swedish Tax Agency on a monthly basis.
Let a professional provider take care of it, and don't worry about your company not meeting Swedish legal regulations. Also - you will avoid costs for local compliance and/or cost for setting up a Swedish subsidiary that is used to employ the person(s).
Are there legal risks in using an Employer of Record in Sweden?
In Sweden, Employer of Record solutions are legally accepted in general. In some cases, such as when employing people in a company's management, it may be necessary to investigate whether an Employer of Record solution could pose any corporate tax risks for the foreign company. We at nomadtax can certainly assist with this – and set up a solution that is optimal for your company's specific situation.
Which country's tax rules apply when using an Employer of Record?
Foreign employers must follow Swedish employer obligations if they have staff who are taxed in Sweden. The taxation of your employees depends partly on the person's tax status in Sweden and, in some cases, also on how a tax treaty can be applied.
We at nomadtax always set up an optimal Employer of Record solution by first analyzing your company and your employees' individual tax situations. In some cases, it is necessary to apply for, for example, Swedish A-tax or SINK, which we handle. We can also handle the application for the Swedish Expert Tax Regime – which results in significant cost reductions for the employer and significant tax relief for the employee.
Are you planning to hire a person who will work from Sweden for your non-Swedish company? Do not hesitate to contact us to set up an optimal Employer of Record solution. We offer a tailored solution designed for your company and your employees' needs.
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