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Swedish Krona (SEK)
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Pay your team in Sweden
Setting up payroll in Sweden
Income tax and social security in Sweden
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Sweden offers foreign companies great hiring and business opportunities, both in terms of available talent and local business environment. However, Swedish payroll rules and regulations can be challenging for foreign employers.
In addition to compliance requirements imposed by Swedish law such as monthly tax and social security returns, employers further have to pay attention to local CBAs which can impact payroll. Furthermore, rules and requirements differ for foreign employers without permanent establishment in Sweden.
Before they can start processing payroll, employers have to register with the Swedish Tax Agency (Skatteverket) so that they can fulfill their withholding and reporting obligations. Foreign employers without permanent establishment in Sweden can do so using an online registration service or a special form. For employers with a legal entity in Sweden, registration as an employer is usually done after registering with the Swedish Companies Registration Office (Bolagsverket).
Employers may further be obligated to set up a supplementary pension fund or take out additional insurance for their employees under a collective agreement. In this case, a separate registration with the pension fund and/or insurance provider would be necessary.
There is no legal obligation to set up a local bank account - unless the foreign company wants to incorporate in Sweden and needs it to deposit the necessary capital to get started - as payments to employees and authorities can be made from a foreign account.
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The Swedish income tax system is divided into a local and a national income tax. The latter, however, only applies to higher incomes. Social security contributions are made solely by the employer.
Income in Sweden is paid on two different levels. In addition to the standard municipal income tax, higher income is also subject to national income tax. While municipal income tax rates are around 32% on average, the national income tax rate is levied at a 20% standard rate. The threshold for national tax is set at SEK 540,700 in 2022. Income below this threshold is exempt from national income tax. Married taxpayers are taxed separately.
Taxable income is calculated as the sum of all payments made to the employee, be it in cash or in kind. Payments in cash include bonuses, stock options, commissions, pensions and more. Employment expenses are deductible - some limits apply - and there is a personal tax allowance which ranges from SEK 14,200 to SEK 37,200 (valid for 2022). Pension contributions made by the employee to a personal pension plan may be deductible under certain conditions.
While residents are taxed on their worldwide income, non-residents only pay tax on income sourced in Sweden. For the latter, a 25% flat rate applies for both income tax and pension contributions. Residency for tax purposes is determined based on several factors. According to the rules, individuals are considered resident taxpayers (and are thus taxable on their worldwide income) if they stay in Sweden for more than 6 months in any given tax year or live there permanently or still have essential ties linking them to the country after having been tax residents in the past.
There is a special tax regime for foreign experts. Under the so-called “expert tax relief”, qualified foreign employees may be eligible for tax exemption of 25% of their income for a period of 5 years (was 3 years up to January 2021). However, certain conditions have to be met and the employee must apply for the tax regime via the Taxation of Research Workers Board (Forskarskattenämnden).
2022 Tax Bands
Municipal Income Tax
National Income Tax
* Please note: This is the average municipal tax that is levied on employment income. The exact tax rates vary from municipality to municipality.
Tax on employment income must be withheld by the employer on a monthly basis. Since January 2021, this obligation also includes foreign employers without permanent establishment in Sweden. The withheld amount of 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 shifted to the 17th.
The rules for tax declarations changed in 2019. Instead of filing an annual tax declaration for the income tax paid on behalf of their employees, employers now have to submit a monthly report for each employee which is called Arbetsgivardeklaration. The report contains detailed information on deducted income tax as well as on social security contributions. The filing can be done either electronically via the Tax Authority’s e-service - Swedish social security number is needed - or via paper forms.
Individuals, on the other hand, have to file a personal tax return which needs to be filed by 2 May of the following year. The tax year runs from 1 January to 31 December.
Employers are obligated to make a monthly social security contribution equal to 31.42% of the employee’s salary. Payments are administered by the Swedish Social Insurance Agency (Försäkringskassan) and the Swedish Pensions Agency (Pensionsmyndigheten) and cover various social security systems such as healthcare, unemployment and statutory pensions. In theory, employees also pay a monthly 7% pension contribution, but as the amount is entirely deductible from the income tax they owe, the de facto contribution is nil.
The calculation base is the employee’s total remuneration. This includes any type of cash payments as well as benefits in kind. As the sole contributor, employers are responsible for submitting their contributions to the authorities on a monthly basis. The due date is the same as for the remittance of withheld income tax, i.e. the 12th of the month following the pay period.
Foreign employers without a local legal entity can either register with the Tax Authority as an employer to make social security contributions or draw up an agreement with their employee who then becomes responsible for paying and reporting the monthly contributions. Contribution rates for foreign employers without permanent establishment are slightly lower.
Employers who are contributing to a supplementary pension fund - either voluntarily or because they are obligated to do so by a collective agreement - have reporting obligations towards the pension fund provider. Depending on the provider and the nature of the employee’s work (i.e. blue-collar or white-collar employee), reporting may be monthly or annually. Additional pension contributions (i.e. those exceeding the mandatory requirements) are subject to a 24% special tax. Further insurance coverage for employees may be mandatory under a CBA.
Employees in Sweden are entitled to various benefits. These include:
Annual leave and public holidays: at least 5 weeks, plus 12 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
Further parental leave: 25% reduction of normal working hours available for parents with children under 8
Sick leave: 14 days paid by the employer, sickness benefits are paid between days 15 and 90
For more information on employee benefits and other employment requirements in Sweden (including severance pay and termination procedures), check out our Global Hiring Guide.
Minimum pay in Sweden is regulated by collective bargaining agreements and therefore varies greatly from industry to industry. The employee’s position (i.e. whether they are blue-collar or white-collar employees) also influences the applicable minimum wage rate. The same applies to overtime pay which is also set by collective agreements.
Where no collective bargaining agreement applies, overtime pay should be fixed in the individual employment contract. If neither is the case, the employee is not entitled to additional pay. There is no legal obligation for the employer to provide 13th month pay or a similar bonus.
Payroll in Sweden is typically processed once per month. It is common to issue payments to employees for the whole month on the 25th. Employees can be paid either in the local currency which is Swedish Krona (SEK) or in a foreign currency.
It is mandatory to provide each employee with a payslip - both paper and electronic payslips are permitted although paper payslips are hardly used anymore - which details their gross and net salary as well as the tax and social security deductions that have been made. Payroll records must be kept for a period of at least 7 years.
Learn about tax reporting, compensation laws, registration requirements and more in our free Payroll Guide for Sweden.
This country guide is for informational purposes only and should not be construed as legal advice. The content of this guide contains general information, and although we update this guide regularly, it may not reflect current legal developments. Lano Software GmbH disclaims any liability for any actions you take or refrain from taking based on the content contained in this country guide.
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