Running payroll in Sweden

Sweden presents attractive opportunities for foreign companies seeking to hire skilled talent and expand their operations in a stable and business-friendly environment. However, navigating the Swedish payroll system requires a solid understanding of local legislation and administrative obligations.

Employers must comply with strict tax and social security reporting requirements, including monthly filings with the Swedish Tax Agency. Additionally, collective bargaining agreements (CBAs) play a significant role in determining wage structures, working conditions, and benefits, and may impose obligations beyond statutory law.

Foreign employers without a permanent establishment in Sweden face specific rules regarding registration, tax withholding, and social security contributions, making it essential to stay informed and ensure compliance with all applicable local and international regulations.

Before processing payroll, employers must register with the Swedish Tax Agency (Skatteverket) to fulfill withholding and reporting obligations. This applies to both foreign employers with and without a permanent establishment in Sweden.

• Foreign Employers Without Permanent Establishment: Such employers can register using an online form provided by Skatteverket. This registration is necessary to handle tax deductions and social security contributions for employees working in Sweden.

• Foreign Employers With Permanent Establishment: If a foreign company establishes a permanent presence in Sweden, it must register with the Swedish Companies Registration Office (Bolagsverket) and subsequently with Skatteverket as an employer. 

Employers may be obligated to establish supplementary pension funds or provide additional insurance to employees under collective bargaining agreements (CBAs). In such cases, registration with the relevant pension fund or insurance provider is required. It's essential to review applicable CBAs to determine specific obligations.

There is no legal obligation for foreign employers to open a local Swedish bank account solely for payroll purposes. Payments to employees and authorities can be made from a foreign account.

Sweden's income tax system comprises both municipal and national income taxes. The national income tax applies only to higher income levels. Social security contributions are solely the responsibility of the employer.

Tax Considerations

Income in Sweden is taxed at two levels. All taxable income is subject to municipal income tax, which averages 32.41% in 2025. In addition, a national income tax of 20% applies to annual income exceeding SEK 625,800. Income below this threshold is exempt from national income tax. Married taxpayers are taxed separately.

Taxable income includes all payments made to the employee, whether in cash or in kind. This encompasses bonuses, stock options, commissions, pensions, and other forms of compensation. Certain employment expenses are deductible, subject to specific limits. A personal tax allowance applies, with amounts ranging from SEK 17,300 to SEK 45,300, depending on income level. Employee contributions to personal pension plans may be deductible under certain conditions.

Residents are taxed on their worldwide income, whereas non-residents are taxed only on income sourced in Sweden. Non-residents are subject to a flat tax rate of 25% on such income. Tax residency is determined based on several factors, including duration of stay and ties to Sweden. Individuals are considered tax residents if they stay in Sweden for more than six months in a tax year, live there permanently, or maintain significant ties to the country after having been tax residents previously.

Sweden offers a special tax regime for foreign experts, researchers, and key personnel. Under the "expert tax relief," qualified foreign employees may be eligible for a 25% tax exemption on their income for a period of seven years. Eligibility requires an application to the Taxation of Research Workers Board (Forskarskattenämnden) within three months of commencing work in Sweden. The relief applies to all taxable compensation paid by the Swedish employer, including base salary, bonuses, equity compensation, and benefits in kind.

Tax Withholding and Reporting

Employers are obligated to withhold income tax from employee salaries on a monthly basis. Since January 2021, this obligation also extends to foreign employers without a permanent establishment in Sweden. The withheld income tax must be paid to the Swedish Tax Authority by the 12th of the following month, except for January and August when the due date is extended to the 17th.

In 2019, the rules for tax declarations were updated. Instead of submitting an annual tax declaration for the income tax withheld on behalf of employees, employers are now required to file a monthly report called the Arbetsgivardeklaration (Employer's Declaration). This report provides detailed information on the income tax deducted, as well as on the social security contributions made for each employee. Employers can file this report electronically through the Tax Authority’s e-service (using the Swedish personal identification number), or through paper forms.

Starting from the January 2025 reporting period, employers must also include details about employees' periods of absence from work that may qualify them for parental or temporary parental benefits. This includes specifying the dates and types of absence, as well as the absence rate.

For individuals, the tax year runs from 1 January to 31 December. Employees must file their personal tax returns by 2 May of the following year. Married couples are taxed separately, and the tax return must cover all income earned during the calendar year.

Social Security Contributions

Employers are required to make a monthly social security contribution equal to 31.42% of the employee’s salary. These contributions cover various social security systems, including healthcare, unemployment insurance, and statutory pensions. The payments are administered by the Swedish Social Insurance Agency (Försäkringskassan) and the Swedish Pensions Agency (Pensionsmyndigheten).

Employees are also subject to a 7% pension contribution; however, as this amount is fully deductible from the income tax owed, the de facto contribution is effectively zero.

The calculation base for these contributions is the employee’s total remuneration, including both cash payments and benefits in kind. Employers are the sole contributors and must submit their contributions to the authorities on a monthly basis, with the due date being the 12th of the month following the pay period.

Foreign employers without a permanent establishment in Sweden must either:

• Register with the Swedish Tax Agency as an employer to make social security contributions, or

• Enter into an agreement with their employees, who then become responsible for making and reporting the monthly contributions.

Contribution rates for foreign employers without a permanent establishment may be slightly lower than the standard rates for local employers.

Additionally, employers contributing to a supplementary pension fund, whether voluntarily or due to collective agreements, must fulfill reporting obligations towards the pension fund provider. These reports may be monthly or annual, depending on the provider and the type of employee (blue-collar or white-collar).

Employees in Sweden are entitled to various benefits. These include:

• Annual leave and public holidays: at least 5 weeks, plus 13 public holidays

• Parental leave: 480 days of paid parental leave for both parents, this includes maternity and paternity leave; 90 days are exclusively reserved for each parent

• Maternity leave: see parental leave; for mothers, parental leave can start up to 60 days before the expected date of birth

• Paternity leave: see parental leave; fathers can take 10 days on the child’s birth together with the mother

• Sick leave: 14 days paid by the employer at a rate of 80%; starting from day 15, sickness benefits are paid by Social Security

For more information on employee benefits and other employment requirements in Sweden (including severance pay and termination procedures), check out our Global Hiring Guide.

Sweden does not have a statutory minimum wage. Instead, minimum wages are determined through collective bargaining agreements (CBAs) negotiated between employers and trade unions. These agreements vary by industry and employee classification (e.g., blue-collar or white-collar workers). The lowest wages in these agreements are often negotiated separately from general wage increases to prevent widening wage disparities.

Overtime pay in Sweden is also regulated by CBAs. These agreements typically specify the rates and conditions for overtime compensation, which can vary depending on the industry and employee classification. In the absence of a relevant CBA, overtime pay should be stipulated in the individual employment contract.

There is no legal obligation in Sweden for employers to provide a 13th-month salary or similar bonuses. However, such payments may be included in CBAs or individual employment contracts.

Payroll in Sweden is typically processed monthly, with payments commonly issued on the 25th of each month. Employers must adhere to the pay frequency specified in the employment contract. Employers are mandated to provide payslips to employees on each pay date. Both paper and electronic formats are acceptable; however, electronic payslips have become the standard due to their convenience. All accounting records, including payroll data, must be retained for at least seven years. This requirement is governed by the Swedish Accounting Standards Board (Bokföringsnämnden, BFN).