Accounting in Sweden
Knowing the rules regarding bookkeeping is fundamental to the operation of a business, no matter what country it is based in. And while qualified accountants can be used, every entrepreneur should know how to issue invoices, what company documents they need to keep, what tax rates and accounting deadlines apply to them. On this page you will find a lot of relevant information about accounting in Sweden.
Sweden - Accounting laws
In all countries, including Sweden, companies are obliged to keep accounts. It applies to all companies, regardless of their size and type of business. This can be done by the owner himself, but there is also the option to use the services of an accounting firm that will professionally handle all business matters. The financial health and accounts of a business are of great importance to:
- financial institutions if the entrepreneur needs a loan,
- the tax office when settling income tax, VAT and social security contributions,
- suppliers and investors,
Infographic "Acts regulating Swedish accounting "The most important documents that regulate company accounting in Sweden are: The Annual Accounts Act (årsredovisningslagen) and the Accounting Act (bokföringslagen).
In the Accounting Act, it is stipulated that, in all cases, it is the responsibility of the owner (even if the bookkeeping is done by an accountant) to keep the accounts correctly. It is also worth mentioning that the laws impose an obligation on the entrepreneur to record all company transactions and to keep company documents. Failure to comply with the obligations or failure to account on time may lead to an increase in the frequency of inspections and even financial penalties.
Types of business activity in Sweden
Residents of countries within the European Union (EU) and the European Economic Area (EEA) have a simplified procedure for establishing a business in Sweden. The process itself depends entirely on the type of Swedish company chosen; it is easier to set up a sole proprietorship than any company.
Types of business in Sweden:
Enskildnäringsidkare - sole proprietorship (self-employment);
Aktiebolag - company with limited liability (AB);
Handelsbolag - commercial company (HB);
Enkeltbolag - civil partnership;
Filial - subsidiary of a foreign company;
Kommanditbolag - limited partnership (KB);
Ekonomisk förening - business association;
Stiftelse - foundation.]
Swedish sole proprietorship
The accounting of a Swedish sole proprietorship is not complicated and, as such, the owners most often do not need the assistance of an accountant. However, if the entrepreneur decides to do the accounting on his/her own, he/she has to familiarize himself/herself with a number of issues that are contained in the Accounting Act (these mainly concern the correct accounting of financial transactions).
When operating on a self-employed basis, there is no separation between the business assets and the owner's personal assets. It is also worth remembering that in Sweden, it is the owner who is liable for the company's obligations with all his/her assets. This type of economic activity in Sweden is subject to settlement on the same basis as the settlement of natural persons. Income tax is divided into national tax and local tax. The rate of national tax depends on the income earned in a given year. The rate of local tax, on the other hand, depends on the location of the company's registered office or place of residence. Swedish income tax is paid in the form of advance payments, which are paid monthly. These are based on the profit, which is estimated by the owner at the beginning of the tax year.
Infographic "Personal income tax rates..."
Importantly, a Swedish sole proprietorship that trades in services or goods must add the appropriate VAT rate. VAT in Sweden is settled on the basis of a return filed monthly, quarterly or annually. The criterion determining the accounting period is the size of the company.
The VAT rates in Sweden are 25, 12 and 6 per cent. The first is the standard rate, the second applies to all foodstuffs and the third covers among others: books, magazines and transport services.
Company accounting in Sweden is more difficult than accounting for a sole proprietorship, which is why many entrepreneurs use a professional accountant or an external accounting firm.
Incorporating a company in Sweden requires that the share capital is paid into a company bank account. You also need to sign a memorandum of incorporation in the presence of a notary and, up to six months later, you need to register with Bolagsverket, the Swedish Companies Register. A Swedish company has legal personality and therefore its profit is subject to corporation tax at a rate of 28%. It is paid in the form of advance payments calculated on the basis of the company's estimated income at the beginning of the year. The law requires payment by the 12th of each month (exceptions: 17 January and 17 August).
As in the case of a sole proprietorship, a Swedish company selling services or goods subject to moms tax (VAT) should be entered in the VAT register and also account for this tax. As a reminder: the VAT rates in Sweden are 25%, 12% and 6%, and it is settled using a tax return either monthly, quarterly or annually.
Infographic "VAT rates in Sweden"
Swedish accounting accounts
Accounting accounts are used to record economic events relating to your business. Each accounting account relates to different events, and they all form a chart of accounts, i.e. a summary of the accounts booked by the business. The standard chart of accounts (BAS) contains a specific qualification scheme of events, but it is also possible to create a plan tailored to a specific company. Every entrepreneur should pay particular attention to matching events to accounts correctly, as these are included in the annual tax return and incorrect data can bring the company into trouble. Swedish accounting accounts consist of four digits. The first digit usually indicates the class of the account and so:
- 1 - assets,
- 2 - liabilities,
- 3 - revenue,
- 4-8 - expenses.
The second digit of the account, on the other hand, indicates the account group.
Infographic "Accounting accounts in Sweden"
Speaking of accounts, it is worth remembering that every company in Sweden must have a bank account that will be used for financial operations and, in the case of companies, for the deposit of start-up capital.
The documentation of every company in Sweden should be kept in a reliable and orderly manner. This is very useful when an audit is carried out in the company, when a tax settlement deadline is approaching or when ambiguities arise during transactions. In addition, every Swedish entrepreneur is required to keep company documentation for at least seven years from the date of issue.
Company documentation in Sweden is divided into primary and secondary documentation. Primary documentation consists of all invoices, cost and income documents, annual VAT returns, balance sheets, account registers and personnel documents. Secondary documentation, on the other hand, consists of contracts concluded by the company and all stock documents.
It is important to remember that documents must be kept in their original form - electronic documents in digital form and paper documents in traditional storage. Interestingly, documents can be archived on the company's premises, but an external company's warehouse can also be used.
Audit obligation in a Swedish company
To begin with, it is worth noting that sole proprietorships and small companies (trading and limited liability companies) are exempt from the mandatory audit, while virtually all larger Swedish companies must undergo it.
An audit is an inspection of a company's annual accounts to catch irregularities (if any). The auditor, i.e. a person who has completed specialized training and is qualified, confirms the reliability of the documents without interfering in the company's accounting in Sweden. Interestingly, an audit of small business associations can be carried out by a person without the title of auditor (this does not change the fact that he or she must be qualified).
Infographic "Audit obligation applies to companies..."
Cost of doing business in Sweden
The costs that a company incurs in Sweden are documented on the basis of cost invoices that confirm expenses and income. The entrepreneur, either personally or through an accountant, is obliged to check the accuracy of the invoices and all documents related to the accounts. The most important data that must be recorded correctly are the company data (address, number, owners' data) and the amounts (value of goods or services and rates of VAT added). An incorrect invoice is invalid.
Running your own business usually involves generating income, but also incurring certain costs. Their amount usually depends on the nature of the company, the type of business or the employment of employees
and their number.
The basic cost, concerning any company, are taxes - personal income tax (ranging from 30 to 55%) or corporate tax (28%), moms tax (VAT) and tax related to the employment of employees. VAT (moms) rates are 25%, 12% and 6%. The tax on the employment of employees itself is approximately 32% and is deducted from the gross salary.
Operating a company is more costly than being self-employed. Already at the start, you have to deposit share capital in a company account at a bank. The amount varies from SEK 50,000 to as much as SEK 500,000 - this depends on the type of company.
The costs that apply to running a company in Sweden are divided into:
- fixed costs (incurred from time to time, on a regular basis);
- variable costs (which depend on current demand and are not incurred regularly).
Infographic "Swedish company - fixed costs"
Infographic "Swedish company - variable costs"
What taxes are incumbent on the owner of a Swedish company?
Firstly, income tax, which applies to individuals and corporations. It consists of national tax and local tax, which includes municipal tax (kommun) and regional tax (landsting). For sole proprietorships, the tax is calculated on the basis of annual income. In contrast, Swedish corporation tax, which applies to companies, for example, has a fixed rate of 28%. Income tax is paid by means of advance payments, which are determined on the basis of the expected profit for the year. The company's income is initially estimated when the company is registered and later at the beginning of the year.
Infographic "Advance income tax payments - deadlines"
The tax related to employees consists of the pension contribution - 10.21%, the tax on the payment for work - 11.62% and the insurance contribution - 3.55%. The employer tax in Sweden is a total of 31.42% on the tax base (the amount of gross pay and other employee benefits).
Thirdly, the value added tax, or VAT (so-called moms). This applies to virtually all companies that offer to sell goods or services. Its standard rate of 25 per cent applies to most goods for which reduced rates of 12 per cent and 6 per cent do not apply.
VAT in Sweden is settled on the basis of a VAT return. The frequency of filing this document depends on the size of the company and the amount of the company's annual turnover, and is determined at the stage of filing the registration application with the Skatteverket.
- Monthly VAT returns - annual turnover above SEK 40 million (large companies).
- Quarterly (or monthly) VAT returns - annual turnover of SEK 1 million to SEK 40 million (medium-sized companies).
- Annual VAT returns - annual turnover below SEK 1 million (small enterprises).
VAT must be paid by the 12th of the month (exception: 17 January and 17 August). It so happens that some businesses pay VAT at the end of the following month - around the 26th of the month. Failure to settle on time may result in interest or penalties (15 or 20 per cent of the required tax).
Invoicing in Sweden
Invoices in Sweden can be issued using certified software, but it is worth knowing that the use of Microsoft Excel is prohibited. Swedish invoices can only be issued by a company that has a business bank account and a special identification number, but these are basics related to registration, so this is not a problem. It is very important that, according to the regulations, the invoice must include the date on which the goods or services were actually delivered to the customer.
A Swedish company must keep invoices for seven years, as they may be subject to inspection by the Swedish Tax Agency. They are usually issued electronically in accordance with the Svefaktura standard, as e-invoices facilitate contact with commercial and official matters. Paper forms are accepted, but more and more companies are abandoning them. A correctly issued invoice is of great importance because, as a sales document, it is, among other things, the basis for claiming reimbursement from the counterparty.
Infographic "A Swedish invoice should contain..."
Swedish employer obligations
If a Swedish entrepreneur is an employer (hires employees), he or she must fulfil a number of obligations not only to his or her subordinates, but also to state institutions.
It is worth remembering that non-Swedish employees who have come to Sweden for work must report the start of their work to the Swedish Work Environment Authority and to Skatteverket, the Swedish Tax Agency. Importantly, employees from an EU country do not need a work permit. However, if they come from a non-EU country, they must obtain one by applying to the Swedish Migration Board - Migrationverket.
A Swedish employer must also be mindful of all charges, i.e. wages, employee benefits and also employment taxes. The employer is obliged to pay arbetsgivaravgifter (employer tax), which is approximately 32% of the gross salary.
The Swedish employer's obligations also include health and safety training, preparation for the job or providing employees with appropriate protective clothing. It is worth remembering that in Sweden, the employer is the main one responsible for the safety of its employees and that its actions are controlled by the Health and Safety Authority.