Sweden: Guidance regarding permanent establishment determinations for employees working from home
New statement regarding when an employee's working from home gives a foreign company a permanent establishment in Sweden
Permanent establishment determinations for employees working from home
The Swedish Tax Agency published a new statement regarding when an employee's working from home gives a foreign company a permanent establishment in Sweden, replacing a prior statement on the same issue from 2015.
The new statement attaches greater importance to whether there is an implicit requirement for the employee to work from home and includes several examples. The result of the statement is that permanent establishments arise in fewer situations compared with the statement from 2015.
At the company's disposal
In order for a permanent establishment to arise, a foreign company must have a place at its disposal, which could be a home office. However, it is not enough for an employee to work from home for the home to be considered to be at the company’s disposal—greater importance is attached to whether the company requires the employee to work from home or not.
The decisive factor is whether the company is considered to have an implicit requirement on the employee to work from home. An implicit requirement could be that the company does not provide an office to the employee despite that the work requires an office. Circumstances that are considered in the assessment are whether there is any advantage for the company that the work is performed in Sweden, for example if the company has customers in Sweden that the employee works for or if there is any connection between the company's activities and the geographical location. Another important circumstance is if it is an important condition for the employee's tasks that they are performed in Sweden.
Working from home because of regulatory restrictions
A situation when working from home cannot be considered an employer requirement is when an employee works from home because of regulatory restrictions to prevent the spread of disease, as was the case during the coronavirus (COVID-19) pandemic. A permanent establishment does not arise in such a situation.
The employee's wishes
If the employee works from home because of the employee's own wishes, and there is no commercial interest for the company, the home is not considered to be at the company's disposal. This does not change if the working from home is regulated in the employment contract or if the company has accepted the working from home.
Read a May 2022 report prepared by the KPMG member firm in Sweden
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