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In Sweden as in many other countries, there are several structures you can choose for your business activity. This article will focus on the setup for self-employed people conducting individual business activity. Those people are considered sole traders (Enskild Näringsidkare).
This type of business form is called Enskild Firma (individual company, sole proprietorship) and requires no start-up capital. Let's see what is the process to set-up as a sole trader in Sweden.
Please bear in mind that this article doesn't substitute legal advice. Information in this article was collected from the British government's official website and other online resources. Please always check official websites or seek legal advice before you take action.
Apply for registration as a sole trader
Firstly, you need to have a personal identification number (Personnummer) and then apply for registration as a sole trader at Swedish Tax Agency (Skatteverket). You can even apply online by using the e-services available on verksamt.se, which is the government website for businesses. Keep in mind that this website is available in Swedish.
In addition, you need to meet certain conditions to register as a sole trader. You must not:
- Be younger than 16 years old
- Be declared bankrupt
- Be subject to trade prohibition
- Have a custodian as stated in the Swedish parental code
If the sole trader is older than 16 but younger than 18 years old, these additional documents need to be submitted:
- The guardian's consent (the parents or a public guardian)
- A chief guardian's consent. If you live in Sweden you will find a chief guardian or a board of chief guardians in your municipality (kommun).
The guardian and the chief guardian's consent must be attached to the application form.
Business name registration
When registering as a sole trader, you can also register a business name at Bolagsverket. It's not mandatory to register a business name with Bolagsverket but it brings you protection and gives you exclusive rights to the name in the country where you will be operating. The Bolagsverket decides whether the proposed business name can be approved and makes sure that it differs from other business names and trademarks.
In the registration form 903 e, describe in detail your business activities so the Bolagsverket can examine the name proposal correctly. The name can be linked to your business activities. This means you can choose a name that describes your sector of activity such as, for example, your name or initials and a word related to the activity: "John Johnson Carpentry", "JJ Consultancy".
You can also have a secondary business name. It is a trading name under which you can promote part of your business activities and refer to a specific part of the business activities.
Bear in mind that Sweden is divided into counties (län in Swedish), which are administrative regions. It means that if you choose to register your business name, the protection will be given within the county where the registration happened. You should, therefore, register the business name in each county you want to carry out your business so the protection brought by the registration will be effective in each of them. There is a registration fee charged in each county in which you register the business name. Registering as a sole trader costs SEK 1,400 (around USD 140), applying for a secondary business name, as well as changing the business name costs SEK 1,100 (around USD 110) per name. These fees are not subject to VAT.
Furthermore, there are some rules that need to be considered when choosing a business name. A sole trader may not use the word "bolag" (it means a company in Swedish) or a name that indicates the company is run by more than one person.
As a sole trader, you are required to register at the Swedish Tax Agency (Skatteverket) in order to apply for F-tax and VAT registration, as you are responsible to pay monthly tax and social insurance fees.
The registration for F-tax and VAT can be submitted online if you have the Swedish identity number and e-identification on verksamt.se (website available in Swedish). You can also apply for registration by submitting the SKV 4620 form. If you don't have the Swedish identity number (if you are a foreigner, for example), you can apply for registration by submitting the Tax application for foreign entrepreneurs form (SKV 4632). The original form has to be filled in, printed, signed, and submitted to the Swedish Tax Agency. For more information on how to fill the Tax application for foreign entrepreneurs, please check here.
Responsibilities of Sole Traders
Costs, taxes and VAT
As mentioned above, there is no start-up capital required for sole traders. Once the income taxes are paid to the Swedish Tax Agency, all profits belong to the sole trader. Make sure that you keep records of income and expenses, and keep your private and business records separated. To make it easier to keep track, you can set up a business bank account.
Here is an overview of the responsibilities of a sole trader:
- Income tax payment
- VAT payment
- Social welfare costs
- Business expenses
You have to add VAT to the invoice you make. The VAT portion must be paid to the Swedish Tax Agency (Skatteverket). On the amount remaining after VAT has been paid, you have to pay your variable costs, the costs of goods purchased as well as your fixed costs. Then, keep in mind that self-employed pay their own social welfare costs (these usually add up to around 40%). After that, you have to pay income tax.
The final amount after all these costs have been paid belongs to you.
VAT represents the tax on goods and services you have to account for through a VAT return on behalf of the Swedish Tax Agency (Skatteverket).
- VAT arises whenever you sell or buy something
- You account for VAT in your books
- VAT is reported to Skatteverket
- Either you pay or have VAT refunded
- VAT returns are to be submitted periodically; whether you want to account for VAT monthly, quarterly, annually.
- How? VAT returns can be submitted through Skatteverket e-services or on a form that Skatteverket will send you, according to the period chosen.
- The VAT for most goods and services is 25% even though there are some exceptions for specific kinds of goods and services. For instance, the rate is 6% for taxis.
For more detailed information on how VAT works in Sweden, you can click here.
Finally, as a sole trader, you will have to submit an income tax return each year. Before the year starts, you have to send a preliminary income tax return with an estimation of your profits. The Swedish Tax Agency (Skatteverket) then calculates what you have to pay in preliminary tax per month. During the year, keep accounts, maintain day-to-day bookkeeping. The preliminary tax is paid monthly in advance and is checked by the tax agency with your final tax when you submit the income return.
At the end of the year, your reports are compiled into year-end accounts. From these accounts, you have to report your income and expenses in your income tax return. Once your tax return is sent, you will get a final tax notice from Skatteverket that will examine your tax return and calculate the total amount of tax you have to pay. It is often around 40% of your profits. If you haven't paid enough preliminary income tax during the year, you will need to cover the difference owed. On the contrary, if you have paid more than what's owed, you will get a refund for the remaining amount.
For more detailed information on how to fill in your income tax return, you can go on the skatterverkert.se website or on the verksamt website for more information about bookkeeping.
A sole trader is a natural person who runs their own business and who's personally liable for it. Therefore, the sole trader who carries on the business is personally liable for all business debts and paying those debts as well as income taxes and for keeping contracts. Also, in case of debts caused by the business, the sole trader might need to resort to their personal assets to settle them.
The Swedish Social Insurance Agency (Försäkringskassan)* provides compensation in case of illness for instance. The compensation is based on something called your *sickness benefit qualifying income (SGI), which is calculated depending on your business type (in this case sole proprietorship). There are two authorities working with social insurance – the Swedish Social Insurance Agency (Försäkringskassan) and the Swedish Pensions Agency (Pensionsmyndigheten). Entrepreneurs, as well as employers, pay for the insurance through taxes and paying social security contributions.
If you are running a sole proprietorship, some of your self-employment contributions go towards your health insurance and old-age pension.
Setting up as a sole trader when residing abroad
Residing inside the EEA
Residing abroad means that you are not registered in the Swedish population register. In that case, in order to set-up as a sole trader in Sweden, you must have a co-ordination number (Samordningsnummer) which is an identification number that you must mention in your registration application. This co-ordination number is delivered by the Swedish Tax Agency (Skatteverket). A copy of your passport or other identity documentation must be attached upon registration.
Residing outside the EEA
You must bear in mind that if you live in a country outside the European Economic Area (EEA) and want to set up as a sole trader in Sweden, you must appoint a manager who has to be registered with Bolagsverkert.
To register a manager, use the form 943e. A fee of SEK 800 will be charged for the registration. You must submit the manager's power of attorney with the registration. Appointing a manager entails giving this person the power of attorney. You will be personally liable for the decisions the manager takes if the manager carries out their duties in accordance with the power of attorney.
The manager must be at least 18 years old, a Swedish resident with a Swedish identity number. Similar to sole trader's requirements, the manager must not be declared bankrupt, be prohibited from carrying on business, or have a custodian.
The manager will be responsible for the business in Sweden and commit the sole trader to contracts. The appointed manager has also a duty to represent the sole trader in courts and similar matters. Finally, the manager may be held liable for exceeding their authority in the performance of duties. More information can be found here.