Swedish Tax Changes for UK based Contractors

[emma357]

From 1st January 2021 the rule to determine where we pay tax drops from 183 days in Sweden to about 20! We will have to pay Swedish tax on any income that we earn in Sweden.

This article is old but gives you a flavour. Swedish proposal on how to distinguish employment relationship

I'm trying to find out what options we have as contractors.

Has anyone looked into this yet?

As far as I can see, we either need a UK based accountant with Swedish knowledge, or an International Umbrella company, aparently they exist and will handle all the tax for us, at a cost.

[TheCyclingProgrammer]

I thought it was already the rule that if you go to another EU country to work, you're taxable on earnings made there from day one - its just after 183 days there that you also become tax resident and are also liable to tax on your worldwide earnings too.

[Fred Bloggs]

I thought it was already the rule that if you go to another EU country to work, you're taxable on earnings made there from day one - its just after 183 days there that you also become tax resident and are also liable to tax on your worldwide earnings too.

That would be my understanding too and it's often been a mistaken assumption here.

[jamesbrown]

I thought it was already the rule that if you go to another EU country to work, you're taxable on earnings made there from day one - its just after 183 days there that you also become tax resident and are also liable to tax on your worldwide earnings too.

Yes, that is the general rule. In most cases, income earned is taxable where the work is done from day one and worldwide income is taxable only upon residency. Exceptions are states that tax on citizenship rather than residency. Many people get this wrong and are then heavily exposed to taxes that should’ve been paid overseas on the money they earned there from day one. OP sounds like one of those people, but I haven’t looked at Sweden carefully and these things do require a careful look.

[BlasterBates]

That would be my understanding too and it's often been a mistaken assumption here.

It's not a mistaken assumption. If you are an employee then you can be sent to a foreign country for 183 days without paying tax in most countries. However if you are a self-employed contractor then usually this is not accepted. What PWC is referring to is the former case, where the rules have been tightened further.

All countries are slightly different and it is possible that in Sweden self-employed contractors may have been classified as employees of a foreign company, but generally most countries don't, in particular countries where lots of contractors have avoided tax in this way.

[Fred Bloggs]

It's not a mistaken assumption. If you are an employee then you can be sent to a foreign country for 183 days without paying tax in most countries. However if you are a self-employed contractor then usually this is not accepted. What PWC is referring to is the former case, where the rules have been tightened further.

All countries are slightly different and it is possible that in Sweden self-employed contractors may have been classified as employees of a foreign company, but generally most countries don't, in particular countries where lots of contractors have avoided tax in this way.

Don't disagree with you at all. And that's where a lot of the poor thinking comes from. Many of us, me included, were often sent into other countries by our employers for periods of time and we just paid regular tax at home on our salaries. Where folks seem to be confused is thinking the same applies when you go abroad with MyCo Ltd. It's not the same thing.

[jamesbrown]

It's not a mistaken assumption.

FB was correctly pointing to the situation for contractors, given the thread title, and the mistaken assumption (by the OP) that contractors and posted workers (employees of companies that post workers) are the same thing.

[m0n1k3r]

I thought it was already the rule that if you go to another EU country to work, you're taxable on earnings made there from day one - its just after 183 days there that you also become tax resident and are also liable to tax on your worldwide earnings too.

It depends. Many countries apply the OECD's "Economic Employer" concept. Norway, Denmark and the Netherlands do. Sweden does not, currently. Without it, it is 183 days of stay that matters, regardless of the purpose, as long as you receive your income from a foreign employer or is foreign self employed.

With the Economic Employer concept, the relationship with a client is always treated as local employment if there is an intermediary (e.g. if you have a direct contract with a client, the 183 day rule still applies as for posted workers).

There are ways around it, however. I'm one of the directors of a Swedish company, and is a dual Swedish-British citizen. PM me if you want the longer answer, as it depends on the specific context.