In an increasingly globalized world, it is becoming more common for companies to operate in countries other than the one they are registered in. Examples of such cases include a construction company coming to a neighboring country to carry out a major construction project, or when a new sales office is to be opened in a neighboring country. According to Swedish legislation, a foreign company with activities in Sweden must either operate through a registered branch or a Swedish subsidiary. In this article, we will go through how you, as a foreign company, register a branch in Sweden, and what this means for your company.
When does a foreign company need to register a branch in Sweden?
According to the Swedish Branch Act, a foreign company should conduct its activities in Sweden through a subsidiary, registered branch, or agency. The most commonly used options among these are to either start a subsidiary or a branch. There are advantages and disadvantages to all options, but generally, it can be said that many perceive branch registration as the easiest option since a new company does not need to be started.
The obligation to register a branch arises as soon as a foreign company has activities in Sweden. In relation to companies from EU-EEA states, however, somewhat different requirements apply, meaning that companies from these countries can have a more significant presence in Sweden without needing to register a branch, provided that the company in question exercises the right to free movement of services.
There are also exceptions for specific industries, where construction projects operated by companies outside the EU/EEA can be in Sweden for a longer period before the requirement to register a branch arises.
How do you register a branch in Sweden?
In Sweden, it is the government agency Bolagsverket that handles branch registrations. A foreign company needs to submit a written application, in a specific prescribed form, to register a branch. A number of attachments must be submitted together with the application for it to be complete.
When a branch is registered in Sweden, a CEO must be appointed by the foreign company. This person must reside in Sweden or another EU/EEA country. It is also possible to appoint a specific person authorized to receive correspondence in the branch's name.
In addition to applying for branch registration with the Swedish Companies Registration Office (Bolagsverket), a foreign company must also undertake certain Swedish tax registrations, such as applying for F-tax, VAT, and submitting a preliminary income declaration. If the branch has employees in Sweden, the branch must also register as an employer and comply with Swedish tax and labor laws in relation to the employees, i.e. setting up a Swedish payroll.
Starting operations in Sweden by establishing a branch entails that several legal assessments must be made, and the application must be made based on these assessments. We always recommend that foreign companies hire professional expertise to assist with this.
Does it cost anything to register a branch in Sweden?
The Swedish Companies Registration Office charges a fee of SEK 2,500 to register a branch in Sweden. This amount is approximately EUR 220 or USD 240.
What are the consequences of having a registered branch in Sweden?
A registered branch is required to keep accounts in the same manner as if it were a Swedish company, which means that accounting must be done according to Swedish rules. It should be noted that the accounting must be separate from the foreign company's own accounting.
A registered branch is also required to end each year with an annual report or annual accounts. In some cases, this must be submitted to Bolagsverket – in other cases, it does not.
For income tax purposes, a branch usually means that the foreign company that established it has a so-called "permanent establishment" in Sweden, which means that the foreign company is obliged to pay corporate tax in Sweden on profits attributable to the branch's activities. As a result, a Swedish income declaration must be submitted by a branch in most cases. The observant reader will then understand that there is a risk that the foreign company's surplus will be taxed in both Sweden and the country where the company is registered. This is correct – and therefore tax treaties must be applied – which generally should be done by the tax authority in the country where the company is registered.
What are the consequences of not having a registered branch in Sweden, despite having to?
If a foreign company does not register a branch in Sweden, despite the legal obligation to do so, several legal consequences can affect the company and its representatives:
The Branch Act stipulates that a person can be fined if they conduct business in Sweden without registering a branch with a CEO.
A representative of a foreign company that does not fulfill the accounting obligation that applies to a foreign company that should have registered a branch can be convicted of accounting fraud in Sweden. Imprisonment of up to six years is risked if a person is found guilty of accounting fraud.
Are you a representative of a foreign company planning to start certain activities in Sweden? Contact us to receive advice on your obligations and possible assistance with branch registration and all other necessary registrations in Sweden.
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