Sweden: New ”economic employer concept” proposal; implications for foreign employers

Sweden: New ”economic employer concept” proposal

Sweden’s government on 23 June 2020 again presented a proposal to introduce the so-called ”economic employer concept” in Sweden.


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The proposal is for the provisions to be effective 1 January 2021.

If the economic employer concept is made part of Swedish law, it will have a major impact on Swedish and foreign companies that have foreign employees who work temporarily in Sweden.

The new proposal, if implemented, would change the rules in Sweden so that factors beyond who pays the employee’s salary would be considered in assessing who is the employer of an employee. The entity that is considered to be the employer of a worker would be critical in assessing if the employee is liable to tax or not when working in Sweden on a temporary basis. 

A previous proposal did not affect employees working within a corporate group, if the employee works for a maximum of five days in a row or 30 days in total during a calendar year in Sweden. 

Under the new proposal, the government has increased the day limit to a maximum of 15 days in a row or 45 days in total during a calendar year. The government intends to implement the new rules on 1 January 2021.

One question that has given rise to extensive discussions within Swedish companies is whether the Swedish entity would be able to report salary and pay taxes on behalf of the foreign entity (that is, a shadow payroll). This proposed solution could reduce the administrative burden for companies and was requested in response to the initial proposal. However, the government has not adjusted its position in relation to this comment, and according to the new proposal, the foreign employer would need to register as an employer in Sweden and pay withholding taxes.

KPMG observation

A basic challenge for companies would continue. Companies would need to have a process for keeping track of who is traveling to Sweden, how many days are spent in the country, and what people are doing while they are working in Sweden. For large organizations, this would be an administrative challenge not least because of an obligation to register and manage reporting for foreign group companies. 

Given the short period of time that remains between the proposal’s submission and the implementation of the new rules, it is crucial for companies who may be affected to review the proposal and to start building processes before the effective date of 1 January 2021. 

Read a June 2020 report prepared by the KPMG member firm in Sweden

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