Entering the Swedish Market

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Swedish Market

Moving into 2022, the Swedish economy is poised for growth. Already tagged as the ‘jet engine for Scandinavia’s start-up’ culture, Sweden is looking for consumer spending, exports, and investment to drive the economy further forward.

The country ranks among the world’s most prosperous nations with a standard of living and social and health care that takes it to the top of the lifestyle ladder. Sweden matches high quality of life with stunning landscapes of lakes, forests, and islands – the capital Stockholm is built around 14 lakes with the city connected by 57 bridges.

In the employment market, the impressive pool of human resources boasts a well-educated and highly skilled workforce. But incoming companies tempted to set up a subsidiary will find adjustments need to be made – and quickly. The demanding employment market is framed by strictly applied laws and regulations … and they cannot be ignored or side-stepped.

Starting a Business into Sweden

Foreign companies starting a business in Sweden typically prefer the option of a limited liability company known as an aktiebolag and regulated by the Swedish Companies Act (aktiebolagslag).

The necessary stages for starting the business include:

  • Register the company with the Swedish Companies Registration Office (Bolagsverket) to obtain an individual ID number
  • Register with the Tax Agency (Skatteverket) for income and corporate taxes, Value Added Tax, if applicable, and F-tax for self-employed, if necessary
  • Deposit minimum share capital of SEK 25,000 (€2,440, US$2,762) in the bank to receive the deed of deposit
  • Obtain possible extra permits or registrations according to the type of business being incorporated
  • Register names and details of all ‘beneficial owners’, i.e., founders and shareholders who own or control the limited company, with the Companies Registration Office
  • Register employees with the Tax Agency (Skatteverket) to receive their personnel identity number (personnummer) for assessing entitlements such as maternity, pension, sickness and unemployment benefits
  • Register employees with the Tax Agency for withholding and remitting income tax 
  • Register company and employees with the Swedish Social Insurance Agency (Fӧrsäkringskassan)
  • Companies posting employees in Sweden must also register with the Swedish Work Environment Authority (Arbetsmiljöverket) if the assignment lasts more than five days. Failure to register risks a fine of SEK 20,000 (€1,952, US$2,209)
  • Ensuring employees receive written agreement or formal contract within 30 days of starting work to comply with the Swedish Employment Protection Act

Expanding Business into Sweden

Opening a business in any overseas territory brings issues. Moving staff across the world means lengthy processes to obtain visas and work permits. When employees are in place, who will handle payroll? How will your company deal with regulations on taxation, entitlements and benefits, termination, and severance?

Drawing up an expansion blueprint is not enough. Your business plan will have to answer all these questions.

Sweden welcomes foreign investment, but the employment market is complicated by its mix of laws and collective agreements affecting employee benefits and entitlements. There are other questions too: where will you find distributors, manufacturers, and offices?

Sweden Business Facts

  • Capital – Stockholm
  • Population – Nearly 10.5 million by end of 2021
  • Regions – Three regions. Norrland – a forest area. Central Sweden or Svealand. Götaland including Småland in the South. There are 21 counties
  • Official language – Swedish
  • Economy and world ranking – GDP US$550 billion Ranked 24th
  • Leading sectors by GDP – Service 65.6%, industry 21.5%, and agriculture 1.4% end of 2020. Leading industries include engineering, telecommunications, automotive industry and pharmaceuticals
  • Main exports include – Cars and vehicles; pharmaceuticals and packaged medicaments; petroleum and mineral oils; telecommunication and transmission apparatus; vehicle parts
  • Main imports include – Cars and vehicles; telecommunication and transmission apparatus, crude petroleum and oils; motor vehicle accessories; data processing machines
  • Main trading partners – Germany, Norway, Netherlands, Denmark, US, China
  • Government – Constitutional monarchy, parliamentary system, representative democracy
  • Currency – Swedish krona SEK

Advantages and Challenges of the Sweden Market

Advantages of expanding into the Swedish market include:

  • Workforce: Well-educated, highly skilled, and motivated
  • Communication:  Wide use of English language
  • Economy: Strong and stable, diverse, innovative, and competitive on the world stage
  • Business:  Ranks 10th out of 190 nations in the World Bank’s 2020 ‘Ease of Doing Business’ report
  • Taxation:  Corporate Tax at 20.6 is among the lowest in the European Union (EU)
  • Innovation:  Rates highly in all innovation indexes
  • Start-ups:  Stockholm and Gothenburg are the hot spots … Skype and Spotify were launched as start-ups in Sweden

Challenges of expanding into the Swedish market include:

  • Taxation:  High personal rates help fund strong social and health welfare programs, but could dissuade talent from overseas
  • Expenditure: High cost of living
  • Red Tape:  Complex employment laws and collective agreements provide a rigid framework of protection for employees, based on legislation, collective and trade union agreements

Limited Company / Subsidiary or Branch in Sweden?

International companies targeting Sweden for expansion will generally choose a limited liability subsidiary, known as an aktiebolag or AB, and regulated by the Swedish Companies Act (aktiebolagslag).

They have independent legal status from the parent company, which is generally free from responsibility for any debts or liabilities of the subsidiary. Subsidiaries can have a different name from the parent company, pursue different business activities and form their own contracts.

Branches (filial) in comparison, are an extension of the parent company and are not a separate legal entity