1. What is the legal system in your jurisdiction based on (for example, civil law, common law or a mixture of both)?Traditionally, the Swedish legal system has been thought of as a civil law system. However, the system does not fit perfectly into either the civil law or common law category. The Swedish system is comprised of a mixture of both statutory and case law, and also has a degree of built in self-regulation. The system is part of the Nordic legal family, which is distinct from the Anglo-American, Germanic and Roman legal families and is often referred to as a "third way" between the common law and civil law systems.
2. What are the main forms of business vehicle used in your jurisdiction? What are the advantages and disadvantages of each vehicle?A distinction is normally made between companies (bolag) and associations (föreningar). The main form of business vehicle used in Sweden is the limited liability company. There are four different kinds of companies under Swedish law:
- Limited liability company (aktiebolag).
- General partnership (handelsbolag).
- Limited partnership (kommanditbolag).
- Non–registered partnership (enkla bolag).
The form most commonly used in Sweden is the limited liability company, which is regulated by the Companies Act (Aktiebolagslag 2005:551). Both public and private limited liability companies are regulated under the Act. There are several reasons for the form's popularity. For example, it is possible for one person to form a limited liability company and formation is simple. In addition, it is the only company form in which all shareholders enjoy limited liability.General partnerships have many benefits. For example, each of the partners, and not the partnership itself, are taxed. Unlike a limited liability company, there is no need to file separate tax returns for the corporate entity and its owners. Another advantage of general partnerships is the flexibility they offer when it comes to partnership agreements. The partners are free to set their responsibilities and benefits as they see fit or as the needs of the business dictate. In addition, the structure of the organisation and the distribution of profits and losses are much more flexible in a general partnership than in a limited liability company. Typically, limited liability companies distribute dividends evenly according to the percentages of shares held by each shareholder.However, a disadvantage of the general partnership form is that the partners lack limited liability protection. The business-related acts of any partner can legally bind all other partners, depending on the partnership agreement.Regulation (EC) 2157/2001 on the statute for a European company establishes rules for European companies, referred to as a Societas Europea (SEs), and has been implemented in Swedish legislation. European companies are very uncommon in Sweden.
Establishing a presence from abroad
3. What are the most common options for foreign companies establishing a business presence in your jurisdiction?A foreign entity wishing to establish a business presence in Sweden can do so either through incorporation of a limited liability company (aktiebolag) or through the registration of a branch (filial). From a risk perspective, using a limited liability company is advantageous as it creates a separate legal entity.4. How can an overseas company trade directly in your jurisdiction?A foreign company can trade directly in Sweden through a Swedish branch. Legally, the branch is viewed as an extension of the foreign company and is not a separate legal entity. Therefore, any liabilities of the branch are assumed by the foreign company. However, while the branch is not deemed to be a legal entity, it remains subject to Swedish law in matters arising in connection with the branch's business activities in Sweden.If a business establishes a branch in Sweden, this has tax consequences for the company. A foreign enterprise may be considered to have a permanent establishment in Sweden if a legal person in Sweden meets all the following conditions:
- It is acting on behalf of the enterprise.
- It has the authority to enter into contracts in Sweden on behalf of the enterprise.
- It habitually uses that authority.
However, a permanent establishment is not deemed to exist merely because an enterprise carries on a business in Sweden through a broker or other independent agent, as long as such person is acting in the ordinary course of his or her business.5. What are the formalities for setting up a partnership?General partnerships are regulated by the Partnership and Non–registered Partnership Act. A general partnership is formed when two or more natural or legal persons enter into an agreement with the purpose of jointly operating a business. The partners can be foreign natural persons as well as foreign legal entities. A partnership agreement is required; however, the law does not require the agreement to be in writing. If a written partnership agreement is entered into, it must be signed by all partners. The partnership must be registered in the trade register at the Swedish Companies Registration Office. If the partnership is not registered, it is treated as a non–registered partnership. The general partnership is a legal entity and can own property, assume rights and obligations, and be a party to court proceedings. Although partnerships are legal entities, the partners are personally and jointly liable for all obligations and liabilities of the partnership. The partners are also liable for all partnership debts up to the full amount of their assets. Partnerships do not constitute separate taxable entities for income tax purposes. Instead, the partners are taxed individually in proportion to their share of the partnership's income.Limited liability partnerships do not exist in Sweden; however, there are limited partnerships (kommanditbolag). Limited partnerships are also regulated by the Partnership and Non-registered Partnership Act. This form of partnership is a hybrid of a general partnership and a limited company in which a limited number of partners are exposed to unlimited liability. At least one partner in a limited partnership must have unlimited liability (a general partner (komplementär)) and at least one must have limited liability (a limited partner (kommanditdelägare)). The liability of the limited partner is restricted to the capital investment that the partner has contributed to the partnership. A limited partnership is a legal entity. The general partner is generally the only partner who is authorised to commit and represent the partnership. The limited partner is entitled to a share in the profits in accordance with the partnership agreement; however, the limited partner is generally not entitled to be involved in the management of the partnership.Once the taxable income of a partnership has been determined, it is allocated among the partners. Depending on whether the partner is an individual or a company, the partner must pay personal income tax or corporate income tax on the allocated amount.6. What are the formalities for setting up a joint venture?Swedish law does not recognise joint ventures as legal entities, and there is no legal definition of the term. The lack of legal recognition means that the content of the joint venture agreement is of great importance, as it is the agreement that will determine how the co-operation will be regulated. Under Swedish law, it is possible for parties to establish their co-operation based on one of the three forms of joint ventures:
- Contractual joint ventures.
- Partnership joint ventures.
- Corporate joint ventures.
The form of the joint venture is determined by the joint venture agreement, which often has the character of a shareholders' agreement. Generally, the term joint venture refers to corporate joint ventures. Only corporate joint ventures and partnership joint ventures are considered legal entities with rights and obligations.7. Are trusts available in your jurisdiction?Trusts are not available in Sweden. There are foundations in Sweden, but they are not generally used in business contexts.
Forming a private company
The main legislation applying to businesses includes the:
- Companies Act (Aktiebolagslag 2005:551).
- Accounting Act (Bokföringslag 1999:1078).
- Act on Service of Documents (Delgivningslag 2010:1932).
- Business Names Act (Firmalag 1974:156).
- Competition Act (Konkurrenslagen 2008:579).
- Bankruptcy Act (Konkursförordning 1987:916).
- Withholding Tax Act (Kupongskattelag 1970:624).
- Act on Cancellation of Lost Documents (Lag (2011:900) om dödande av förkommen handling).
- Prohibition against Supply of Legal or Financial Services in Certain Cases Act (Lag (1985:354) om förbud mot juridiskt eller ekonomiskt biträde i vissa fall, m.m.).
- Financial Instruments Trading Act (Lag (1991:980) om handel med finansiella instrument).
- Act on Identification Designation for Legal Entities (Lag (1974:174) om identitetsbeteckning för juridiska personer m.fl.).
- Notice to Unknown Creditors Act (Lag (1981:131) om kallelse på okända borgenärer).
- Act on Accounts of Financial Instuments (Lag (1998:1479) om kontoföring av finansiella instrument).
- Trading Prohibition Act (Lag (1986:436) om näringsförbud).
- Labour Dispute (Judicial Procedure) Act (Lag (1974:371) om rättegången i arbetstvister).
- Private Sector Employees (Board Representation) Act (Lag (1987:1245) om styrelserepresentation för de privatanställda).
- Act on the Annual Accounts for Credit Institutions and Securities Companies (Lag (1995:1559) om årsredovisning i kreditinstitut och värdepappersbolag).
- Wage Guarantee Act (Lönegarantilag 1992:497).
- Public Accountants Act (Revisorslag 2001:883).
- Annual Reports Act (Årsredovisningslag 1995:1554).
- Swedish Code of Corporate Governance (Svensk kod för bolagstyrning).
Tailor-made or shelf companies
To form a company, one or more founders must draft a deed of formation, subscribe for all shares, pay for the shares, and finally sign and date the deed of formation. After executing the deed of formation, the company is deemed incorporated. However, the formation is contingent on the Swedish Companies Registration Office (Bolagsverket) approving the application for registration of the company.Within six months of executing the deed of formation, the board of directors must apply for registration of the company at the Swedish Companies Registration Office. It is through this registration that the company becomes a duly formed legal entity and is assigned an organisation number. Application form 816, which is available on the Swedish Companies Registration Office's website, must be completed to register. The registration fee is approximately SEK2,000 and must be paid when the application is submitted.Together with the application for registration, the deed of formation (original or certified copy), the articles of association (one copy), and a bank certificate (original) evidencing the payment of the share capital must be filed.A deed of formation must contain:
- Proposed articles of association.
- The amount to be paid for each share.
- Provisions relating to the time limit for payment for the shares, which must not be later than the date of registration of the company.
- Provisions relating to in-kind contributions, other conditions for subscription, payment of costs for the formation of the company, and any special rights or privileges granted to any person by the company.
- Names, addresses and personal identity numbers of the board members and the auditor.
A faster alternative is to purchase an off-the-shelf company. This entails purchasing a company that is already incorporated but not conducting any business, and which is ready for immediate trading. The purchase of a standardised off-the-shelf company usually costs approximately SEK25,000 to SEK30,000 (in addition to the minimum share capital) and can be completed within a few days. The company can commence business as soon as payment has been made and a new board of directors has been appointed.
The articles of association must contain the following:
- The name of the company.
- The county in Sweden where the registered office (säte) is to be situated.
- The business objectives of the company.
- The share capital, either stated as a fixed share capital or as a range with a minimum and a maximum share capital.
- The number of shares, either as a fixed number or as a range with a minimum and a maximum number of shares.
- The number of board members, and the number of deputy board members (if there are to be any deputies). A minimum and a maximum number can be stated instead of a fixed number.
- The number of auditors and any deputy auditors. A minimum and a maximum number can be stated instead of a fixed number.
- The manner in which notice of general meetings is to be given.
- The financial year of the company.
Shareholders can also include other provisions in addition to the mandatory provisions above, provided that they do not violate the Companies Act (Aktiebolagslag 2005:551) or any other laws or regulations.The articles of association are public.
9. What financial reports must the company submit each year?Under the Accounting Act (Bokföringslag 1999:1078), a limited liability company must maintain accounting records, adhere to generally accepted accounting principles and make Swedish statutory filings.
10. What are the statutory trading disclosure and publication requirements for private companies?The name of the company must contain the word "aktiebolag" or the abbreviation "AB". For public limited companies, this must be followed by the word "public" or the abbreviation "publ". Other detailed provisions on names can be found in the Business Names Act (Firmalag 1974:156). Official communications and any webpages must include the company name and registration number. Invoices must state the company's VAT number.11. How do companies execute contracts or deeds?The board of directors can always execute contracts for the company. Documents that require the signature of the board of directors must be signed by not less than half of the total number of board members.If the company has appointed a managing director, he or she is always authorised to sign documents for the company on day-to-day matters. In addition, the board of directors can authorise a board member, the managing director or any other person to sign on behalf of the company.The company executes a contract through a written indication of the name of the company together with the signature and name of the signatory. Deeds are generally not recognised under Swedish law.
Minimum capital requirements
13. Is there a minimum investment amount or minimum share capital requirement for company formation?The minimum share capital requirement for private limited liability companies is SEK50,000. The minimum share capital requirement for public limited liability companies is SEK500,000.14. Are there restrictions on the transfer of shares in private companies?A fundamental principle of the Companies Act (Aktiebolagslag 2005:551) is that shares can be freely transferred and acquired. However, since there is occasionally a need to prevent unwanted share transfers, the Companies Act allows three types of provisions in the articles of association to limit the unrestricted transferability of shares:
- Post-sale purchase right clauses (hembud).
- Right of first refusal clauses (förköp).
- Consent clauses (samtycke).
Unwanted share transfers can also be prevented by the shareholders entering into an agreement with each other, which limits the right to transfer the shares. A limit on the transferability of shares through a shareholders' agreement instead of through a provision in the articles of association is unenforceable against the company, but a breach by a shareholder may result in liability for damages.
Shareholders and voting rights
15. What protections are there for minority shareholders under local law? Can additional protections be given?Protection for minority shareholders is available under several provisions of the Companies Act (Aktiebolagslag 2005:551). The most fundamental rule is the equality of treatment principle, which means that decisions and actions must be carried out in a manner that treats all the shareholders equally. Minority protection is also provided by the general clauses that require the general meeting and the board of directors to refrain from decisions that are likely to provide an unfair advantage to a shareholder or any other person to the disadvantage of the company or any other shareholder. The following rules also function to protect minority shareholders:
- A minority shareholder who holds not less than one-tenth of all shares can require the board to convene an extraordinary general meeting.
- A minority shareholder who holds less than one-tenth of all shares can demand that the majority shareholder purchase their shares.
- A minority shareholder who holds not less than one-tenth of all shares is entitled to demand distribution of dividends at the annual general meeting.
- If a proposal that the company appoint a minority shareholders' auditor is approved by shareholders who hold not less than one-tenth of all shares, a minority shareholders' auditor is appointed to participate in the audit of the company together with the auditor of the company.
16. Are there any statutory restrictions on quorum or voting requirements at shareholder meetings? Must quorum or voting rights be proportionate to shareholdings?Each shareholder is entitled to vote for all shares that he or she owns or represents, unless otherwise prescribed in the articles of association. For companies whose shares are kept in the Euroclear System, the record date is five days before the meeting.There are no general quorum requirements for general meetings. However, there are some resolutions that require a statutory majority of the votes cast at the general meeting and/or a statutory majority of the shares represented at the general meeting. Some decisions that are subject to special requirements include:
- Resolutions to amend the articles of association.
- Resolutions to amend the articles of association to reduce an existing shareholder's right to profits or other assets, restrict the transferability of shares, or alter the legal relationship between shares.
- Resolutions to amend the articles of association for the purpose of limiting the number of shares for which a shareholder may vote at a general meeting, requiring retention of a larger amount of the net profit than required by the Companies Act (Aktiebolagslag 2005:551), or amending shareholders' rights on the winding-up of the company.
- Share issues that diverge from any preferential rights of the shareholders.
17. Are specific voting majorities required by law for any corporate actions (for example, increasing share capital, changing the company's constitution, appointing and removing directors, and so on)?Under the Companies Act (Aktiebolagslag 2005:551), certain voting majorities apply to elections and different voting majorities may apply to other issues. The main rule regarding decisions in matters other than elections is that they must be adopted by an absolute majority, meaning the meeting adopts a resolution that is supported by more than half of the votes cast. In the event of a tie, the chairman of the meeting has the casting vote.The general rule for elections of board members is that the person who has received the largest numbers of votes is elected. In the event that two candidates receive the same number of votes, the election is determined by the drawing of lots.For more details on voting majorities see Question 16.18. Can voting majorities required by law be disapplied to protect a minority shareholder (for example, through class rights or weighted voting)?Both higher and lower voting majority requirements may be set out in the provisions of the articles of association. However, for resolutions that require a qualified majority, the requirements set out in the Companies Act (Aktiebolagslag 2005:551) are mandatory. It is therefore not permitted to reduce qualified majority requirements below the requirements prescribed in the Companies Act by inserting provisions in the articles of association.Shares may differ with respect to voting rights. The Companies Act states that no share can carry more than ten times the voting rights of another share. Shares carrying many votes are often designated as class A shares, while shares carrying fewer votes are designated as class B shares.
19. What are the conditions or restrictions on establishing a business in specific industry sectors? Are there industry sectors in which it is not permitted to establish a business?Insurance, banking and credit institutions are subject to restrictions and require permits, but foreign ownership does not disqualify a company from carrying on business in these industries.20. Are there any restrictions on foreign shareholders?There are no restrictions on foreign shareholders in Swedish limited liability companies.21. Are there any exchange control or currency regulations?Sweden has implemented Directive 88/361/EEC on the free movement of capital, which means that all restrictions on the movement of capital and payment across borders are prohibited. This rule applies to EU member states as well as non-member states.The free movement of capital rule does not prevent control or intervention by the authorities through requiring declarations of the movement of capital. Authorities are also allowed to intervene to prevent crimes related to taxation or money laundering.22. Are there restrictions on foreign ownership or occupation of real estate, or on foreign guarantees or security for ownership or occupation?There are no restrictions on foreign ownership or occupation of real estate.
23. Are there any general restrictions or requirements on the appointment of directors?Swedish law distinguishes between formal and informal directors, in that only formal directors are members of the board. There is no distinction between inside and outside directors in the Swedish language, and the term "director" covers the board of directors, the managing director and other management officers.The Companies Act (Aktiebolagslag 2005:551) requires at least half of the board members to be residents of the European Economic Area (EEA), unless an exception is granted by the Swedish Companies Registration Office. The residence requirement means that citizenship of an EEA member state is not required. In addition, the company must have a duly appointed representative in Sweden on whom notice can be served.There are no specific qualification requirements for board members, although they must be sufficiently competent to carry out their mandate. Insufficient personal qualifications cannot release a board member from liability. Although the board often consists of both specialists and non-specialists, board members will generally have some kind of qualifications in practice.
Number of directors or members
In a private company, the board of directors must comprise one or more board members. If the board only comprises one or two members, there must be at least one deputy appointed. In addition, if the board has more than one member, a chairperson must be appointed.A public limited liability company must have at least three board members.There can only be one managing director, who is appointed by the board and not the shareholders. The managing director is usually a board member, although this is not a requirement. A private company is not required by law to appoint a managing director, while a public company must have a managing director at all times.
Under the Private Sector Employees (Board Representation) Act (lag 1987:1245 om styrelserepresentation för privatanställda), if the company has at least 25 employees, the employees can appoint two deputy representatives to the board of directors.
Reregistering as a public company
25. What are the requirements for a business to reregister as a public company?Both private and public companies are regulated by the Companies Act (Aktiebolagslag 2005:551).The fundamental difference between private and public companies is that public companies can turn to the general public to raise capital. However, the designation "public company" should not be confused with the concept of "listed company", "stock market company" or other designations for companies whose shares are traded on the stock market.There are no restrictions on the minimum or maximum number of shareholders in a public company.To become a public company, a private company's general meeting must adopt a resolution by a two-thirds majority, in accordance with the rules regarding changes to the articles of association. The resolution must be notified for registration with the Swedish Companies Registration Office. Registration can only take place if all the following conditions are met:
- The company's registered share capital is at least SEK500,000.
- The company submits a statement, signed by an authorised or approved public accountant or a registered accounting firm, stating that there is sufficient coverage for the registered share capital.
- The company's name does not violate the legal provisions governing the names of public companies (that is, the company's name must be followed by the word "public" or the abbreviation "publ").
The company becomes public on registration.In addition, a public company must have:
- An auditor.
- At least three board members.
- A managing director who can also serve as a board member (but cannot be the chairperson).
There are different requirements on the manner in which notice of general meetings must be given. Private placements by closely related persons and public companies, but not private companies, are subject to:
- Prospectus requirements under the Financial Instruments Trading Act (Lag (1991:980) om handel med finansiella instrument).
- Directive 2003/71/EC on the prospectus to be published when securities are offered to the public or admitted to trading.
- Regulation (EC) 809/2004 implementing Directive 2003/71/EC as regards prospectuses and dissemination of advertisements.
26. What main taxes are businesses subject to in your jurisdiction?All company income forms one category of business income and is taxed at a flat rate of 20.6% (21.4% still applies on for entities that have a financial year that started before 31 December 2020). There are no municipal income taxes imposed on companies in Sweden.The value added tax (VAT) system is harmonised with the corresponding EU rules. VAT is charged on the supply of goods and services in the course of business and on the import of goods and services. VAT is paid by all consumers, but businesses make the payments to the state. The general rate is 25% and is chargeable on most goods and services. Reduced rates apply to a few goods and services. For example, the VAT rate is 12% on food products, the letting of rooms in hotels and boarding houses, and the letting of camping sites. Books, newspapers, passenger transport, entrance fees to concerts, zoos, circus performances, theatres, and some services associated with sporting activities are subject to a VAT rate of 6%.Companies are required to pay a social security contribution for their employees in Sweden. Most social security contributions are paid either by employers as a payroll tax at a normal rate of 31.42% (2021), or by self-employed individuals at the rate of 28.97% (2021). Lower rates apply to individuals over 65, since parts of the social security system are no longer applicable. In addition to this, taxpayers are charged a general pension contribution at a rate of 7% (2021), which is automatically reduced from the taxpayer's income tax on salary and real estate. A foreign enterprise without a permanent establishment in Sweden pays a lower payroll tax at the rate of 19.8% (2021).27. What are the circumstances under which a business becomes liable to pay tax in your jurisdiction?
A non-tax resident company becomes liable to pay taxes on:
- Income from a permanent establishment in Sweden.
- Income from real estate situated in Sweden.
- Certain royalty payments.
Under Swedish tax law, a foreign company conducting business from a permanent establishment in Sweden is liable to pay tax on its business income attributable to the permanent establishment. A permanent establishment is considered to be any fixed place through which a business is run, either in whole or in part. A permanent establishment may be a place of management, a branch, an office (including home office) or a factory. The definition of a permanent establishment in the Swedish Income Tax Act is in line with the definition in the OECD Model Tax Convention on Income and on Capital. There are no regulations regarding the minimum number of employees that would trigger designation of the business as a permanent establishment.28. What is the tax position when profits are remitted abroad?Dividends paid by Swedish limited liability companies to non-residents are generally subject to a 30% flat rate withholding tax. However, non-resident legal entities are often exempted from withholding tax, either under Swedish domestic law or tax treaties.29. What thin-capitalisation rules and transfer pricing rules apply?As a starting principle, interest expenses on loans are deductible, but interest paid to affiliated entities is deductible only if certain requirements are met and to the extent that the arm's-length principle is complied with. A general limitation on the right to deduct interest expenses applies on "negative" net interest. The right of deduction is based on an earnings before interest, taxes, depreciation and amortisation (EBITDA) rule with a 30% deduction limit. Negative net interest not allowed to be deducted according to this rule can be carried forward during a six-year period. According to a safe harbour rule, net interest expenses up to SEK5 million within a corporate group can be deducted for tax purposes.Sweden's transfer pricing regulations are based on the arm's-length principle, which requires that the pricing between related parties is comparable to the pricing that independent parties would use. The OECD Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations is regularly used by the Swedish Tax Agency to guide its interpretation of Swedish regulations.
Grants and tax incentives
Employment grants or regional investment grants for regional development are available to assist foreign companies in establishing a business in certain regions in Sweden. However, Sweden does not have a wide range of incentives.
Sweden offers an attractive tax package for foreign corporate investors through a favourable holding regime with the following advantages:
- No taxation of capital gains on business-related shares.
- No taxation of dividends received on business-related shares, except if the dividend payment is deductible at the level of the distributing (foreign) company.
- No stamp duty on securities.
- No withholding tax on interest paid.
Besides a competitive corporate tax rate and the tax rules that apply for Swedish companies, Swedish tax legislation offers favourable taxation to foreign key employees, such as executives, experts, researchers, and others with sought-after skills that are difficult to find in Sweden. These employees may qualify for a special tax regime that reduces their income tax by 25% and lowers the employer's social security costs by the same percentage. The legislation creates incentives for companies to retain or establish top executive functions in Sweden rather than choosing another country.The foreign expert regime helps to strengthen Swedish technology, research and development and enable companies to offer salaries and compensation competitive with European levels. The reduction applies for a five years period of employment in Sweden and there is a requirement that the stay in Sweden is intended to be a maximum of five years at the grant of the tax relief. In addition, foreign key employees may also receive tax-exempt contributions from employers for travel to their home country, moving expenses (to and from Sweden), and school fees for children.This tax relief applies only to employees of a Swedish company, either Swedish or foreign-owned. The tax reduction does not apply to Swedish citizens or individuals who have been resident in Sweden for a five-year period before the start of their employment. If qualified foreign personnel change jobs, the tax authorities will make a new assessment.
- Employment Protection Act (lag (1982:80) om anställningsskydd).
- Employment (Co-determination in the Workplace) Act (lag (1976:580) om medbestämmande i arbetslivet).
- Public Employment Act (lag om offentlig anställning (1994:260)).
- Work Environment Act (arbetsmiljölagen (1977:1160)).
- Working Hours Act (arbetstidslagen (1982:673)).
- Annual Leave Act (semesterlagen (1977:480)).
- Discrimination Act (diskrimineringslagen (2008:567)).
- Prohibition of Discrimination of Employees Working Part Time and Employees with Fixed-term Employment Act (lag om förbud mot diskriminering av deltidsarbetande arbetstagare och arbetstagare med tidsbegränsad anställning (2002:293)).
- Parental Leave Act (föräldraledighetslagen (1995:584)).
- Sick Pay Act (lag (1991:1047) om sjuklön).
- Posting of Workers Act (lag (1999:678) om utstationering av arbetstagare).
- Contracting out Workers Act (lag (2012:854) om uthyrning av arbetstagare).
Swedish employment laws generally apply to all employees, irrespective of citizenship, who work in Sweden on a permanent basis. Under Regulation (EC) 593/2008 on the law applicable to contractual obligations (Rome I), Swedish law applies if the employee habitually carries out his or her work in Sweden, if the employer is based in Sweden, or if it appears from the circumstances as a whole that the employment contract is closely connected with Sweden (a dominant connection).An employee who is posted to Sweden by his or her non-Sweden based employer for a limited period is afforded some of the rights provided under Sweden's primary employment laws during the period work is carried out in Sweden. The core rights that apply to the posted employee during his or her time in Sweden are minimum level rules, and are as follows:
- Maximum working hours and minimum rest periods.
- A minimum number of paid days of annual leave.
- A minimum salary (not a general requirement, see below regarding industrial action).
- Safety, health and hygiene in the workplace.
- Safety measures and leave entitlements for pregnant employees and employees who have recently given birth.
- Equal treatment of female and male employees and other rules regarding non-discrimination.
The employer must notify the Swedish Work Environment Authority (Arbetsmiljöverket) of postings that will last for more than five days. The obligation for non-Swedish employers to comply with these rules regarding core rights is based on Directive 96/71/EC concerning the posting of workers (Posted Workers Directive). Swedish trade unions are allowed to use industrial action to persuade a non-Swedish employer to enter into a Swedish collective bargaining agreement (CBA) with the trade union. Industrial action is, however, only allowed if the trade union is demanding employment terms which correspond to terms in a central CBA that is applied throughout Sweden to employees in the same type of industry as the non-Swedish employer. In addition, a trade union can only use industrial action if the requested employment terms are limited to minimum salary requirements or other minimum level requirements within the areas generally described above. Finally, industrial action is only permissible if the requested employment terms are more beneficial to the employees compared to the rules/rights that apply to the employees under Swedish law. This means that industrial action is not allowed if the non-Swedish employer can show that the employment terms of the employees posted in Sweden are in line with the applicable CBA. The Swedish Work Environment Authority, employers' organisations, and trade unions can provide information regarding which CBA (including minimum salary) is relevant for a certain non-Swedish employer.Swedish employment laws apply to every employment or work site with a dominant connection to Sweden or to Swedish matters. This generally means that if a Swedish employee works abroad, Swedish employment laws apply if the employer is a Swedish legal entity and the employee is a Swedish citizen. Subsidiaries of Swedish companies are not regarded as Swedish legal entities and are therefore not bound by Swedish employment laws. Therefore, a Swedish employee working for a foreign employer abroad generally cannot claim any rights under Swedish employment laws. Under the Posted Workers Directive, if a Swedish employer posts an employee to a country within the EU or to Switzerland for a limited period, the Swedish employer must apply the receiving countries national laws that implement the Posted Workers Directive.Rome I applies in Sweden, which means that a choice of law is not valid to the extent that it deprives an employee of rights to which he or she is entitled to under mandatory Swedish employment laws (Swedish law is applicable if no choice of law has been made). The main mandatory provisions under Swedish employment law (provisions which cannot be contracted out of by the parties) include:
- Protection against arbitrary dismissal.
- Obligation for the employer to dismiss employees with a shorter duration of employment instead of employees with a longer duration of employment in the event of redundancy.
- Right to re-employment in the event of redundancy.
- Minimum number of paid days of annual leave.
- Right to parental leave.
- Freedom of association, such as the right for an employee to belong to a trade union.
32. What prior approvals (for example, work permits, visas, and/or residency permits) do foreign nationals require to work in your jurisdiction?The provisions on work permits in Sweden are mainly set out under Chapter 6 and 6a of the Aliens Act (utlänningslag (2005:716)). The provisions apply whether the employee is employed by a Swedish company or a non-Swedish company. Work permits are granted for a specific period and may refer to a specific type of work. Other conditions may be attached to the work permit.Decisions on work permits are generally issued by the Swedish Migration Board. A work permit can be granted under the condition that a foreign worker has been offered employment and the following conditions are met:
- The foreign worker has a valid passport.
- The employment enables the foreign worker to support himself or herself.
- The employer gives the relevant labour unions an opportunity to comment on the terms of employment in the employment offer.
- The salary is at least SEK13,000 per month.
- The salary, insurance cover and other terms of employment are not worse than the terms that follow from Swedish collective agreements or practice within the profession or sector.
In addition, the offered employment must be in accordance with the principle of Community preference (meaning that EU/EEA producers must be treated more favourably than non-member country producers). For new recruitments, the principle requires the employer to allow residents of Sweden, other EU/EEA countries, and Switzerland to apply for the job. In Sweden, this requirement is fulfilled by advertising the job through the Swedish Public Employment Service for a minimum of ten days before an employee is chosen for the job. However, as a main rule under Swedish law, ultimately the employer can choose which candidate to employ, as long as no legislation such as the Swedish Discrimination Act is violated.A foreign worker who works in Sweden for more than three months will, in addition to a work permit, need a residence permit. Normally, the residence permit must be approved before the applicant for the permit arrives to Sweden. The residence permit can be applied for together with the work permit. The residence permit is normally contingent on the application for the work permit being approved.A work permit is granted for two years or for the period of employment, whichever is shorter. Work permits can be renewed on one or more occasions. Any request for an extension must be made from within Sweden. The total term of the work permit cannot exceed four years. However, under certain circumstances, it is possible to extend the work permit for another two years, that is, six years in total. After four years, the employee normally receives a permanent residence permit.The first time a work permit is granted, it is connected to a particular employer and a certain type of work. After two years, this temporary work permit is only connected to a certain type of work. Family members may be granted a residence permit as co-applicants to the person obtaining the work permit.Highly qualified employees can apply for a specific type of work permit, the EU blue card. A blue card can be applied for by a foreign national who has a university degree or five years of work experience provided that the following conditions are met:
- The foreign worker's salary in Sweden will exceed 1.5 times the average gross salary in Sweden.
- The employment will last for at least a year.
- Other requirements for a normal work permit are fulfilled.
A foreign worker who received a blue card in one EU country can apply for a blue card in another EU country. A blue card is valid for two years and can be extended for another two years.EU/EEA citizens and their families (regardless of nationality) as well as Swiss citizens do not need a work permit in Sweden; and neither does a foreign worker with a permanent residence permit in Sweden. Certain professionals are also exempted. In addition, exceptions from the work permit requirements can be made, in certain situations, for specialists who are working temporarily in Sweden for a multinational company group, as well as employees of an international group that will participate in some kind of traineeship or other competence development at a company in Sweden that is part of the group (for a total of three months within a 12-month period). Unless reasons pertaining to the purpose of the residence permit indicate otherwise, a foreign worker with a temporary residence permit will be granted a work permit.
Proposals for reform
33. Are there any impending developments or proposals for reform?On 1 June 2020, a government-appointed group presented a proposal to modernise certain key aspects of Swedish employment law. The proposal included major changes to the Swedish Employment Protection Act (lag (1982:80) om anställningsskydd). However, the proposal was largely criticised by the labour market parties, especially the trade unions. In August 2020, employer and employee organisations commenced discussions regarding the proposed changes and in December 2020 the employers’ organisation Svenskt Näringsliv, the white collar unions and some of the blue collar unions agreed on (among others) how the Swedish Employment Protection Act should be amended. This agreement will now form the basis for the amended legislation. The government was expected to announce its proposals by 15 May 2021. However, the announcement has been delayed. The intention is for the changes to take effect by the middle of 2022.Legislation to implement the Whistleblowing Directive (EU/2019/1937) will come into effect on 1 December 2021.
Håkan Fohlin, Partner
Professional qualifications. Member of the Swedish Bar AssociationAreas of practice. Corporate; M&A.Recent practice.
- Adviser to Harvard University in the controversial climate research experiment with a test flight from the Esrange space base in Kiruna, Sweden.
- Adviser to Chinese Alibaba Group with investment in Swedish e-sports platform Challengermode.
- Adviser to medical diagnostic service provider SYNLAB on the sale of its Analytics & Services (A&S) business to Swiss inspection group SGS.
- Adviser to ICTA in the sale of the international digital consulting group FFW.
- Adviser to VC-firm Meritech Capital Partners with investment of USD 25M in the security tech company Yubico.
- Adviser to Zhejiang Yinlun Machinery Co., Ltd, the leading company in China’s industry of automobile radiators, in the acquisition of Swedish Setrab.
- Adviser to Smartrac, a global leader in Radio-frequency identification (RFID) products and Internet of Things solutions, with investment in 4E Antenna AB, a leader in green antenna technology.
- Adviser on the sale of the majority in the NP Gruppen to SolTech Energy Sweden AB (publ).
- Adviser to Drug Free Sport (US) in the merger with International Doping Tests & Management (IDTM-Sweden)), the world's leading providers of anti-doping testing.
- Adviser to Andreessen Horowitz (A16z), leading Silicon Valley VC-firm for investment in security tech company Yubico.
- Adviser to world's largest cork company Portuguese Corticeira Amorim in a Swedish acquisition.
- Adviser to Amsterdam-based Scotch & Soda establishment in Sweden.
- Adviser to Wallenius Lines in the merger with Norwegian Wilh. Wilhelmsen.
- Adviser to Indian Tata Technologies in its acquisition of Escenda Engineering AB.
- Adviser to Belgian PE firm Korys in the acquisition of shares in Greenbyte AB.
- Adviser in the establishment of Södertälje Science Park with Scania, AstraZeneca, Acturum, KTH Royal Institute of Technology and Södertälje Kommun..
- "Legal Aspects of doing business in Europe" (Sweden), Juris Publishing, Inc (2012-2018).
- International Liability of Corporate Directors, Juris Publishing, 2019.
- Revamp of the VC market? Advising the entrepreneur on raising capital, The International Bar Association CHGE Committee e-bulletin, September 2010.
- Multiple Representations in Auctions, M&A Report, April 2008.
Niclas Hermansson, Partner
Professional qualifications. Member of the Swedish Bar Association.Areas of practice. Tax; corporate.Recent transactions
- Adviser to Octopus Renewables Infrastructure Trust plc concerning tax structuring in connection with its acquisition of the wind farm project Ljungbyholm of 48 MW from OX2.
- Adviser to National General regarding tax matters in connection with its divestment of Swedish insurance company Euro Accident.
- Adviser to Ascelia Pharma regarding tax matters in connection with its listing at Nasdaq Stockholm.
- Adviser to True Software Scandinavia regarding tax matters in connection with inter alia the acquisition of Backwater Technologies and implementing of Global Incentive Schemes.
- Adviser to Better Collective regarding tax matters in connection with listing on Nasdaq Stockholm.
- Adviser to the sellers regarding tax matters in connection with Zmarta Group's acquisition of Elskling, Sweden's leading online comparison platform for electricity.
- Regular adviser to a Swedish insurance company regarding tax structuring of cross border investments in alternative investment funds.
Henrik Kjellander, Partner
Professional qualifications. Member of the Swedish Bar AssociationAreas of practice. Employment and labour law.Recent transactions
- Head of investigation for TV4, a major Swedish broadcasting company, relating to local metoo/discrimination matters, and head of report that will be made public.
- Adviser to a public authority in respect of a misconduct/dismissal matter.
- Adviser in a large number of transactions in respect of employment/restrictive covenant matters.
- Adviser to a leading Swedish PE company in its internal employment matters.
- Unfair Trading Practices, Center for International Legal Studies, 2016.
- Articles in Dagens Industri, Dagens Juridik and editor of newsletters to clients since 2014.