For foreign companies in Sweden, there are mandatory requirements to fulfill if you conduct business activities in Sweden. All foreign companies do need a Swedish F-tax certificate, or a Withholding Exemption. Learn more about it in this article.
What is Swedish F-tax?
Sweden's F-tax (F-skatt) certificate system has been in place during a long time. Basically, a business that holds a F-tax (F-skatt) certificate is responsible to pay its taxes to the Swedish Tax Agency on its own. Therefore, no tax withholding shall be done on payments to a company/business that is approved for F-tax (F-skatt). This means that the non-Swedish company get its invoices fully paid - i.e. without withholding.
Why do I need Swedish F-tax?
Before 2021, only Swedish businesses and foreign businesses with a permanent establishment were required to hold a F-tax certificate in order to avoid withholding on payment of invoices for services. However, as of 1 january 2021, all foreign businesses are as a main rule required to hold a F-tax certificate, in order to have their invoices fully paid for work performed in Sweden.
If a company that conducts business in Sweden does not hold a F-tax certificate, or a withholding exemption decision, 30 % of payments for work in Sweden will be withheld by the customer. This means that only 70 % the business's invoices will be paid. If no withholding is done, the payer risks tax penalties.
Therefore, in many cases Swedish companies have the policy that non-Swedish companies has to be approved for F-tax, or have a withholding exemption decision, before the Swedish company will make any payments to the non-Swedish company.
Besides the tax requirement for getting F-tax, a very big reasons for foreign companies needing to get F-tax is ID06, which is a Swedish identification system that is used on construction sites in Sweden. Read more about ID06 and F-tax in our article on ID06 for foreign companies in Sweden.
Example of the F-tax rules
Let's illustrate the rules with an example. If a Polish construction company, XY LTD, comes to Sweden to perform construction services for a Swedish company, it is clear that XY LTD will invoice the Swedish company for services performed in Sweden.
If XY LTD is not approved for F-tax or has a withholding exemption decision, the Swedish company will be required to withhold 30 % on any invoice for work performed in Sweden, implying that XY LTD will only have 70 % of the invoice paid. The remaining 30 % will be reported to the Swedish Tax Agency. It can take a considerable amount of time and effort to receive a reimbursement of the withheld amount.
Therefore, it is important that non-Swedish businesses have applied and received the F-tax certificate, in order to avoid any withholding.
Is it better to get a withholding exemption decision?
In many cases this is more wise. Going for the witholding exemption decision can be a smart choice in some situations, by reason that one avoids to be required to file so-called "specific information", which is sort of a tax return. Us, the team at TaxHelpSweden, often experience that applying for a withholding exemption is the best way to go for many foreign businesses, since it is often cheaper, less risky and more convenient. Also, the processing times at the Swedish Tax Agency are generally must faster for a withholding exemption decision, compared to F-tax.
Need a F-tax certificate? Read more about our offer for F-tax here.
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