How do you set up a business in Sweden? Payroll, HR and entering the Swedish market

Updated on 12 April 2024

There is a lot to love about Sweden’s business culture. The country boasts an open economy and very little government intervention or corruption, in addition to a wide range of trading relationships with nations all over the world.

Quick, easy, no commitment!

Perhaps more pertinently, Sweden is a forward-thinking nation that places great emphasis on SMEs and entrepreneurship.

Video: Understanding international payroll

Does Sweden welcome overseas businesses?

If you have ever lost hours of your day attempting to assemble Ikea flatpack furniture, you would be forgiven for assuming that Swedish businesses are determined to make life difficult. 

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In reality, the opposite is true. Sweden is welcoming of international businesses, and the authorities place a refreshing lack of red tape in the path of any foreign company attempting to trade in the country.

If you are looking for a powerhouse nation to trade in, you can do far worse than Sweden. Your business will be up and running comparatively quickly, and you’ll enjoy plenty of opportunities to turn substantial profits.

What industries are most popular in Sweden?

For a long time, the Swedish business landscape was dominated by agriculture. Today, the market is considerably more varied. The most lucrative and widespread industries in Sweden include:

  • Automobile manufacture and maintenance
  • Consumer goods, most notably home appliances
  • Industrial machinery manufacture and maintenance
  • Pharmaceuticals
  • Telecommunications

Sweden is keen to bring new digital skills into the economy, though, ensuring the authorities typically welcome entrepreneurs and SMEs that wish to plug any skill gaps in the national market.

Is it easy to set up a business in Sweden?

Setting up a business interest in Sweden is refreshing short on frustrating bureaucracy. The process breaks down as follows.

How to set up a business in Sweden

  1. Spend 90 days in Sweden and apply for a residence card through the Migrationsverket, the Swedish Migration Agency, and a Swedish start-up visa.

    You’ll need to be considered a Swedish resident to open a business

  2. Choose your business structure 

    See the section of this article about types of Swedish business entity

  3. Locate a trading address in Sweden

    You’ll need a registered office address

  4. Choose a business name and file it with the Bolagsverket – the Swedish Companies Registration Office

    This costs KR 2,200 (£175) in person or KR 1,900 (£150) online

  5. Register for all necessary taxes with the Sketterverket, the Swedish tax office

    And gain an Oranisationummer, a corporate identity number

  6. Register with the Försäkringskassan, the Swedish Social Insurance Agency

    To make social security payments on behalf of your employees

  7. Open a Swedish bank account

    You’ll need a domestic business bank account to do business in Sweden.

This is much less work than most nations will put you through.

You can even skip this limited red tape by purchasing a shelf company. This is a business that has been set up already but never traded, so you can start work straight away. You will not be able to choose the company name, but you’ll save some time and effort.

Can I run a business in Sweden while living overseas?

Unless you hold a Swedish passport, you’ll need a residence permit to set up your business. That means living in Sweden for 90 days or more. 

Once you have your permit and your business is established, there is nothing to say that you need to stay in Sweden. You can run your company from overseas, if that will not impact your ability to abide by local laws.

If spending 90 days in Sweden is not an option, start a partnership with a local person that acts as a co-director to get your business up and running, and to help the day-to-day running while you are abroad.

Cultural considerations when running a business in Sweden

If you’re going to do business in Sweden, ensure you understand some of the business norms that you’ll encounter. These include:

  • Sweden is an informal country, so use first names when dealing with potential partners. There is no need to address anybody as Mr or Ms. The same applies to written communication – emails will be kept friendly, typically opening with hej (hi.)
  • Despite this informality, punctuality is a big deal in Sweden, and it is considered the height of rudeness to be late for an appointment. It’s better to be an hour early than five minutes late.
  • Do your research before scheduling a meeting – Swedish associates will feel uncomfortable if they feel you are winging things or making them up on the fly. They will expect cold, hard data, especially where finances are concerned.
  • Prepare for lot of meetings before a decision or agreement is reached. You’ll need to be patient and potentially repeat yourself time and again. Decisions are not made quickly in Sweden, and numerous people will be involved.
  • Most Swedish partners will discuss time in terms of week numbers rather than dates. So, rather than asking if somebody is free on the 26th of April, ask for their schedule on week 17.
  • Avoid making business plans for the entirety of July. Most Swedes consider this month a sacred time for family holidays.

What business structures are supported in Sweden?

The most popular business structures for a new venture in Sweden are as follows.

Type of Swedish business entityWhat is it?
Enskild NäringsidkareA sole trader that works as an individual entrepreneur rather than registering a business. Be aware that personal income tax will likely be higher than corporation tax.
Aktiebolag(AB)A Limited Liability Company that keeps your business’s finances and legal affairs separate from your own records.
A Partnership – essentially a Limited Liability Company that sees you partner up with a Swedish national on equal terms. This can be ideal if you want to run a business in Sweden while living elsewhere.
Kommanditbolag(KB)A Limited Partnership between two directors, own of whom has legal and financial liability for the business, while the other has limited power and responsibility.
Publikt Aktiebolag(AB publ.)A public company that is floated on the international stock exchange. Only recommended for very large business interests.
FilialA branch of your international business that operates in Sweden. Your parent company will be liable for any financial or legal difficulties encountered by your Swedish branch.

Taxation in Sweden

If you want to do business in Sweden, you must understand the taxation rules and regulations that will impact your bottom line. 

What is the corporate tax rate in Sweden? 

The default corporate tax rate in Sweden is currently 20.6% on all business profits, the lowest it has ever been.

What are the employee income tax brackets in Sweden?

All employees in Sweden must pay income tax on their salary, usually at a very high rate. 

Income tax brackets in this country are a little complicated. Foreign employers in Sweden are charged a flat rate of 25% income tax. Swedish nationals pay two forms of income tax – a national rate and a second local and municipal rate. Brackets break down as follows:

Annual salaryNational income taxLocal and municipal tax 
KR 20,199 or lower0%0%
KR 20,200 – KR 539,0990%32% (average)
KR 5400,000 or higher20%52% (average)
Income tax bands in Sweden

Income taxes must be withheld from salary when running payroll, alongside 7% of an employee’s salary for social security contributions.

How are taxes paid in Sweden?

The financial year in Sweden mirrors the calendar year, starting on January 1st and concluding on December 31st. Tax returns are distributed in April of the following year and must be returned – alongside any payments – by May 31st.

Payroll and hiring employees in Sweden

Hiring the right talent can make or break a company. Ensure your Swedish business interests are staffed by the best possible talent.

Does Sweden welcome overseas talent?

While the Swedish authorities will always prefer the local labour force takes on roles, mainly because they will pay higher taxes, the country welcomes international talent – especially when a skill gap is filled by this import. EU, EEA, and Swiss passport holders can come to Sweden and start working without restriction.

Who needs a visa or work permit to work in Sweden?

Anybody that does not hold a passport issued by Sweden, Switzerland or any other EU or EEA country, will need a visa or work permit to work in Sweden. 

Non-Swedish nationals that wish to remain in the country for longer than 90 days must also apply for a residence card from the Migrationsverket. This can be done online or through a Swedish consulate.

What employee benefits are compulsory in Sweden?

Employees in Sweden will be entitled to the following benefits by law.

  • A minimum of 25 days paid holiday, plus no less than 13 public holidays.
  • 31.42% of an employee’s salary paid to the Försäkringskassan.
  • 14 days of sick pay, paid at 80% of salary.
  • Overtime pay for any work that exceeds 40 hours in a single week.
  • 14 weeks of paid maternity leave and 10 days of paternity leave.

Employment law considerations in Sweden

There is no minimum wage in Sweden.

Employees are protected by the Swedish Discrimination Act, ensuring they cannot receive unfair treatment based on gender, race, age, religion, or sexual orientation.

Cultural considerations when hiring employees in Sweden

If you wish to run a business in Sweden that relies upon the local labour force, ensure you understand some of the nuances you will encounter. These include:

  • We mentioned previously how business culture in Sweden is informal. Your employers will address you by your first name and will expect to be invited to share their opinions, though you are under no obligation to act upon these insights.
  • Dress codes in Swedish offices are also pretty casual. Unless your workplace requires a uniform, expect employees to wear jeans and no tie.
  • Work/life balance is critical in Sweden, so do not expect your employees to work longer than their contracted hours as a habit – and only ask them to do so if it’s strictly necessary.
  • Swedish employees will typically keep their work and personal lives separate. Colleagues may be friendly, but they’re unlikely to socialise much outside the office.
  • Despite this, ensure that you respect the sacred tradition of fika – a daily coffee break, where colleagues can chat and catch up about anything unrelated to the workplace.

FAQs about setting up a business in Sweden

Still have questions or are seeking a swift answer to a basic query? Here are some of the most frequently asked questions about establishing a business in Sweden.

How long does it take to set up a Swedish entity?

Setting up a Swedish entity is comparatively quick, especially compared to other nations. You can usually be up and running in a matter of weeks.

What are the most common business structures in Sweden?

There are many possible business structures in Sweden. The most common are an Aktiebolag (AB), which acts as a Limited Liability Company; a Handelsbolag (HB) or Kommanditbolag (KB), which are two variations of Partnership; or a Publikt Aktiebolag (AB publ.), a publicly traded company.

What is the primary municipal and county council tax in Sweden? 

Employees in Sweden pay municipal and county council tax at a rate that varies from 32–52%, depending on their salary. Employees that earn KR 5400,000 or more also pay a flat rate of 20% in federal income tax.

What are the Bolagsverket and Skatteverket?

The Bolagsverket is Sweden’s version of Companies House, while the Skatteverket is the Swedish tax office.

How much must employees and employers contribute to social security in Sweden?

Employers must pay 31.42% of an employee’s salary to the Försäkringskassan – Sweden’s social security office – every month. Employees contribute 7% of their earnings, to be withheld from a monthly wage.

What is a common probationary period for employees in Sweden?

You will need to agree on a provanställning, or probationary period, with any employees in their contract. This cannot exceed six months.

What is the total cost of employment to hire an employee in Sweden?

When you factor in the sizable social security payments due to the Försäkringskassan every month, a Swedish employee will typically cost you at least 1.5 times their annual salary.

What is the minimum share capital required to establish an entity in Sweden?

The minimum share capital for an Aktiebolag or Kommanditbolag is KR 25,000 (about £2,200.) A Publikt Aktiebolag requires a share capital of KR 50,000 (closer to £4,500.) There is no minimum capital to register as an Enskild Näringsidkare (sole trader) or Handelsbolag.

Do you need to set up a local bank account in Sweden?

Yes, you will need a local bank account to trade in Sweden.

What is the standard working week in Sweden?

The standard working week in Sweden is 40 hours, Monday to Friday. Most employees will expect this to be rigidly abided by, as Sweden is a country that famously values work/life balance.

What are common supplementary employee benefits in Sweden?

Benefits packages are already generous in Sweden, and high taxes and substantial contributions to social security ensure that residents already enjoy free healthcare and state pension. All the same, you could make your company more appealing by offering a private pension or healthcare policy.

In Sweden, can employment contracts be terminated at will by the employer?

No, Swedish law does not recognise at will termination for employees outside their provanställning. You will need a compelling reason to end somebody’s employment without notice or an equivalent severance payment. 

What is the standard annual leave entitlement in Sweden?

Employees in Sweden must be permitted no less than 25 days of paid holiday plus 13 public holidays. Most people in Sweden look to take a vacation in July.

Can you establish a branch of your company in Sweden?

Yes, an international company branch is known as a filial and is set up through the Bolagsverket. Your branch will be subject to the same legal restrictions as any company set up in Sweden.

What are the main options for setting up payroll in Sweden?

You can run a local payroll from your company in Sweden, bring in a partner agency based in Sweden, or run an international payroll from the UK.

What are the different types of work permits and visas in Sweden?

Employees with a job offer can apply for a Swedish work visa, which typically takes around two months to come through. If you’re looking to run a business rather than act as an employee, you can apply for a start-up visa which allows you to remain in Sweden for up to nine months. This is long enough to form a company, then leave the country and operate it from overseas. Alternatively, you can apply for an EU Blue Card if you have the necessary skills and finances.

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