Life in Sweden is smoother if you have a permanent job, and pretty tough if you’re a freelancer -- this is the common perception among those living and working in Sweden. We did some research and found out this opinion might not all be true. Here’s the what, how, and why of being a freelancer in Sweden. And it’s not all that complicated if you plan and get your basics right!
Essentials of starting off as a freelancer in Sweden
Self-employment registration in Sweden
If you want to work as self-employed in Sweden, you will have to register yourself as a sole trader. An alternative is to open your own limited company. Apart from these two, there are other types of companies, such as general partnership, limited partnership and economic association. Being a sole trader is the simplest way to get started. That doesn’t mean registering a limited company is difficult.
You should register both at the Swedish Companies Registration Office (Bolagsverket), and the Swedish Tax Agency (Skatteverket). You can understand both the processes below:
1. Sole trader
- Responsible for their business as an individual person and don’t require starting capital.
- You should apply for so-called Company registration (Sw. Företagsregistrering) for your business as a sole trader, with the Swedish Tax Agency. The application covers tax (so called F-tax) and if needed VAT-registration. If you have employees, you should also register as employer in the same application.
- You can register your business name with the Swedish Companies Registration Office to protect it (optional).
- Registration with Bolagsverket is optional, and only to protect your business name.
- Registration with Skatteverket for F-tax should always be done. Registration as employer is only needed if you have employees working in Sweden. Registration for VAT is needed if you sell services/goods that are liable to VAT.
- If you have a Swedish personal identity number, it’s easy to register your business name, and apply for F-tax as a sole trader.
- You can register through the Swedish Companies Registration Office website, and through the Swedish Tax Agency website.
2. Limited company
- Require capital to register as a limited company (at least SEK 25,000)
- Your company will be granted a unique identity number, which is allocated by the Swedish Tax Agency.
- One of the most essential parts of this is registering for F-skatt (F-taxes, F stands for entrepreneur) and VAT registration. Registration as employer should also be done if you have employees (this includes yourself if you receive salary) working from Sweden.
- You can register through the Swedish Tax Agency website.
- You can register a limited company online on the Swedish Companies Registration Office website.
Freelancer Taxes in Sweden
Unlike salaried individuals, freelancers have to pay their own corporate income tax, VAT, and social welfare costs. The financial year in Sweden runs from January 1 to December 31. Tax returns are subject to the May 2 due date for individuals, whereas the deadline for companies is July 1.
Let’s understand the income, expenses and tax structure for freelancing sole traders through a simple example:
- Say you are a freelance writer and you do business as a sole trader. In a particular month, you wrote content for four clients and the amount that you invoiced for all four assignments is 20,000 kronor.
- You must add VAT when you invoice for this amount of 20,000 kronor, which will be 25% of the amount.
- So in this case, you will get paid 25,000 kronor.
- But, the VAT amount of 5000 kronor is not your money. It has to be paid to Skatteverket minus deductible VAT on your costs in the business.
- Out of the 20,000 kronor with you, you will have to pay overhead costs such as editing software, and any other costs involved in the assignments, etc. Say it amounted to 5000 kronor.
- You’ll be left with 15,000 kronor.
- You will also have fixed costs such as phone bills, rent, etc. Say the amount is 5000 kronor.
- So now you’re left with 10,000 kronor.
- From this, you will have to pay social welfare costs, which amounts to 28,97 %. Most of these costs are deductible when filing the annual tax return. Therefore, to simplify the calculation, we regard the social welfare costs as 0.
- Now, you are liable to pay income tax on your income. This is taxed with the same rates as for employment income, i.e. between 30-52 % depending on your annual income.
- If you have a relatively low income, you are taxed with 30 %. You’ll in that case be left with 7,000 kronor. This amount belongs to you.
So what about if you are freelancing through your own limited company? Let’s see what is different compared to acting as a sole trader.
- You can choose to pay salary to yourself as an individual, but the company is then required to pay social security fees (31,42 %), on the gross salary. You, as an individual, will also have to pay progressive income tax (30-52 %) on the salary received.
- If the end result of the financial year for the company is a profit, corporate tax (20,6 %) should be paid by the company on the profit. After having paid the corporate tax, you can distribute the profit as dividend to yourself as shareholder. You, as an individual, will be taxed when you receive such dividend.
From the above example, you can plan your monthly and yearly financial goals. Your financial goals will help you determine how much you must charge from clients and how many projects you would need to meet your goals. Once you’ve figured that, your life as a freelancer will become easier.
Income Tax Return for Freelancers in Sweden
As a self-employed sole trader, you will have to submit the income tax return every year.\
Here’s how that works:
- In the application for Company registration you will estimate your profits: your income - your expenses.
- Skatteverket will work out your monthly tax liability and social welfare costs based on your preliminary profit.
- You have to maintain a day-to-day book of expenses and accounts. At the end of the year, this will come handy to calculate your year-end accounts.
- The above will help you calculate your income and expenses for your income tax return.
- After you send your income tax return, you will get a final tax assessment from Skatteverket.
- The tax amounts to between 30 % to 53% of your profits.
- Depending on whether you paid less or more preliminary tax, you will either have to pay more tax, or receive a tax reimbursement.
If you act through a limited company, you will also have to submit an income tax return once every year. However, the tax on profits is 20,6 %. If the company has any employees (including you!), you will have to withhold and report preliminary wage tax, as well as social security fees, on a monthly basis. Your company will also be required to report VAT to Skatteverket. This can all be done through Skatteverket’s e-services.
Pro tip: Since there is preliminary/advance tax involved, you must ensure that you not only meet your goals of landing well-paying assignments, but also collect your payments on time.
Government services for registrations for self-employed in Sweden
Register as sole trader here.
Register for F-tax and VAT as a sole trader here.
Register for a limited company here.
Register for F-tax and VAT as a company here.
Get all useful detailed information on Verksamt.se.
Find an advisor to help you on Verksamt.se.
All said and done, a little planning and research can help immensely when you’re just about to start out as a self-employed in Sweden. Create a plan with goals whether you’re registered as a sole trader or act through a limited company. Include financial matters in this plan so that you know how much you expect to earn, spend as expenditure, and pay as taxes. Get your day-to-day bookkeeping right to the tee.
Note. This content was generated by Jigna Padhiar and reviewed by a certified tax advisor Felix Schöttle in Sweden.