Swedish accounting

The basis for the proper functioning of a company is knowledge of the rules regarding accounting, regardless of where one does business. In order to avoid problems with the Skatteverket (Swedish Tax Agency), an entrepreneur who intends to do business in Sweden should familiarize himself with the invoicing procedures, as well as with the deadlines for settlements with the authority and the applicable tax rates. The business owner also has the option to leave the detailed aspects of bookkeeping in Sweden to specialists. Up-to-date knowledge of accounting will enable the company to operate smoothly and in compliance with regulations. The Swedish Accounting Standards Board - Bokföringsnämnden (BFN) - oversees the regulations and laws that relate to accounting. Swedish accounting is regulated by two laws:

• bokföringslagen - the 1999 Accounting Act,
• årsredovisningslagen - the Annual Accounts Act of 1995.

What else is worth knowing about accounting in Sweden?

1. In order to be able to record the transactions of your business, you must have access to a suitably secure, certified accounting programme. It is not permitted to use spreadsheet software such as Microsoft Excel for this purpose.
2. All entrepreneurs, regardless of the scale and type of business, are required to keep accounts.
3. According to the Act, bookkeeping in a Swedish company may be carried out by the company owner or a qualified accountant. In either case, it is the business owner who is responsible for its proper maintenance. When choosing an accounting office in Sweden, it is advisable to use those that offer registered, trained accountants who are qualified to practice this profession in Sweden. Revisorsinspektionen makes it possible to check an accountant or accounting office.
4. The business owner can handle the accounts and financial affairs of his or her business on his or her own, or use the services offered by an accounting office.

Entrepreneurs are required to record all transactions that relate to their business. They must also keep company documents in accordance with current regulations.

The correctness of accounts and meeting deadlines set by the authorities is very important in Swedish accounting, as failure to meet deadlines, obligations and accounting deficiencies may result in frequent inspections from the Skatteverket - the tax authority.

From the point of view of authorities, banks and contractors, a company's accounting in Sweden is important, as its accounts and financial situation are taken into account by:

• potential investors;
• the tax authorities (for VAT, income tax and social security settlements);
• financial institutions (if the owner plans to take out a loan);
• suppliers (if the company buys goods with deferred payment).

It is mandatory for every entrepreneur in Sweden to keep invoices, which are the basis for settlement. The Swedish company documentation should be kept by the entrepreneur in a clear and reliable manner. It is advisable to keep the documents in order, especially when the deadline for settlement with the tax authorities is approaching or when an audit is conducted in the company. Documents should be kept for at least seven years from the date of issue, while archiving should take place in the same form as the document - electronic in digital form and paper in hard copy. The archiving of documents can be carried out by the entrepreneur on the company's premises or outsourced to an external company. It should be borne in mind that in the event of an inspection from the authority, the warehouse is obliged to make the stored documentation available.

The best way to maintain a transparent financial situation is to verify current liabilities and receivables and to monitor payments regularly. Invoices in Sweden are usually issued according to the Svefaktura standard, as an electronic document. Swedish companies are making it easier to deal with authorities and contractors along the lines of state bodies and government agencies by handling e-invoices. Paper printouts are gradually being phased out of general circulation.

The standard form of an invoice issued by a Swedish company contains basic information that relates to the seller, the buyer and the objects of the transaction (goods or services). What else is worth knowing about invoices in Sweden?

1. When a limited liability company issues an invoice, it should also include the company name, identification number and the company's place of business in Sweden (city or municipality).
2. A company in Sweden must be assigned an identification number and have a company bank account number in order to be able to issue invoices.
3. If companies are obliged to pay VAT, they should include the correct tax rate on their invoices. Deduction of input tax is possible if the VAT on the Swedish invoice is correctly stated.
4. It is important that the invoices issued are correct, as this document is the basis for claiming reimbursement from the counterparty.
5. According to current legislation, the invoice should be prepared with the date on which the goods or services were delivered to the customer.
6. The owner of the company can either do the bookkeeping in Sweden himself or have it done by a professional external company.
7. It should be noted that only professional certified software is accepted for invoicing, and Microsoft Excel cannot be used for this. A programme that meets all security requirements should be used to store documents.
8. It is particularly useful to keep the company's documentation in order and to check that the invoices are correct when there are arrears on the part of contractors or when the Swedish authority carries out an inspection.

Economic events that occur during the course of business are recorded in the accounting accounts. All accounts together form a chart of accounts, while each account is used to record specific economic events.

An entrepreneur in Sweden has the option to configure the chart of accounts himself and adapt it to the company's needs, or he can use the BAS (standard chart of accounts).

The chart of accounts enables the Swedish entrepreneur to list the economic events of a given period. It is a summary of the accounts booked by the company in question. The BAS, or standard chart of accounts, contains a chart to qualify the event. The account balances are entered in the annual tax return, so it is important to ensure that the economic event is correctly matched to the individual accounting accounts. Swedish accounting accounts are made up of four digits. The class of the account is indicated by its first digit. It determines whether an event belongs to a particular account.
1 - indicates assets
2 - indicates liabilities
3 - indicates revenues
4-8 - indicates expenses.

The second digit of the account determines the account group and all four indicate a specific accounting account.

A company should have a bank account for all financial operations that are related to its business in Sweden. In the case of Swedish companies, a bank account is also used to deposit start-up capital. It is the Swedish entrepreneur's responsibility to prove the reasonableness of company costs. Having your own business in Sweden enables you to control financial matters as well as have a real influence on the amount of profit. The own business also entails costs. The amount and extent of the costs depends on the type of business and the nature of the services provided.

The entrepreneur is obliged to carefully control the correctness of the data contained in the invoices, in particular the amounts shown in them, the value of goods and VAT rates, as well as the identification data of the company. Company costs are calculated on the basis of cost invoices issued by suppliers. These provide evidence of the costs actually incurred.

Taxes as a basic company cost
Taxes are a basic company cost in Sweden. VAT, employee taxes and income tax, are paid periodically according to specific rates and deadlines set by the Skatteverket.

Income tax in Sweden is 30-55% of a company's profit, while for corporations it is 28%. Employer's tax in total is 31.42% on the gross amount of the employee's salary and other benefits, while VAT rates are 25%, 12% and 6%.

As far as companies are concerned, the cost is to create start-up capital of SEK 50,000 to SEK 500,000. This must be deposited in a company bank account.

Fixed and variable costs
Costs in Sweden are divided into fixed and variable costs. Fixed costs are costs that can be determined in advance as they are incurred on a regular basis. Variable costs fluctuate according to the company's current needs and usually relate to materials, equipment and office supplies that are necessary to run the business. Due to being part of the European Economic Area (EEA) and the European Union (EU), Polish entrepreneurs have the opportunity to set up a company in Sweden, just like Swedish citizens. Establishing a business is not complicated, while the course and duration of the process depends on the type of business the Polish entrepreneur intends to start. The most popular types of businesses are sole proprietorships, due to the variety of formalities and requirements involved in registering a business. Limited liability companies and limited partnerships are the most inaccessible to foreigners due to the need to bring in share capital of a large amount and complicated formalities.

The most common types of companies in Sweden are:

• Sole proprietorship (enskild nӓringsidkare),
• Civil partnership (enkelt bolag),
• Commercial company (HB),
• Branch of a foreign company (Filial).

Bookkeeping in a Swedish sole proprietorship is relatively simple. It does not require the employment of a professional accountant. The business owner should become familiar with the basics of accounting if he or she wants to run a smooth business and properly account for the financial transactions of the company. The Accounting Act provides all the arrangements. The owner of a Swedish sole proprietorship is liable for the company's obligations with all his/her assets.

Income tax is settled according to the rules for individuals, as a sole proprietorship in Sweden has no legal personality. Income tax is divided into national and local tax. The tax rate depends on the income earned in a given tax year. Local tax is paid to the municipality (kommun) and the region (landsting). It is based on the place of business or residence.

Income tax rates for individuals in Sweden for 2020:
Income between SEK 0 and, 490 700: national tax is 0%, while local tax is 30-35%.
Income above SEK 509 300: national tax is 20%, while local tax is 30-35%.

In Sweden, income tax is paid in the form of advance payments. These are paid each month on the basis of the profit declared at the beginning of the respective tax year.

A sole proprietorship is required to add the appropriate rate of VAT (moms) to each transaction if it sells services or goods subject to VAT. This tax is settled by means of a tax return filed monthly, quarterly, or annually. Swedish bookkeeping is more complicated for companies than for sole proprietorships. For this reason, it is advisable to hire an accountant or use an external professional accounting firm.

The owners of a company in Sweden are responsible for the company's obligations with the amount of share capital.

In order to set up a company in Sweden, a certain amount of share capital must be contributed, which must be deposited in a company account at a bank. The initial capital ranges from SEK 50,000 in limited liability companies to SEK 500,000 in joint stock companies.

The articles of association of a Swedish company are the basis for its incorporation. It must be signed in the presence of a notary, and within six months of signing the document, it is mandatory to register with the Swedish Companies Register (Bolagsverket). A Swedish company has legal personality.

Swedish income tax is calculated on the basis of the profit made in the tax year. It amounts to 28% and is paid in the form of monthly advance payments, which are calculated on the basis of the company's declared income. It is possible to correct the initial declaration during the course of a given year.

Deadlines for payment of advance income tax payments:

• until 17 January
• until 12 February
• until 12 March
• until 12 April
• until 12 May
• until 12 June
• until 12 July
• until 17 August
• until 12 September
• until 12 October
• until 12 November
• until 12 December

When a company in Sweden sells services or goods that are subject to VAT, the company should be declared by the owner in the VAT register and pay, as well as charge, the appropriate rate of tax. Swedish VAT is 25%, 12% and 6%. It is settled through a tax return, which is sent to the office once a month, once a quarter or once a year. The owner of a company that employs employees has certain obligations towards the authorities as well as towards the employees. The employer's costs relate not only to wages and employee benefits, but also to the payment of employment taxes.

When a company employs temporary workers who come from outside Sweden, it is obliged to report this to the Swedish Work Environment Authority. The employment of employees must also be reported to the Swedish Tax Agency (Skatteverket). If the employee comes from an EU country, a work permit is not required, but if the employee is a citizen of a country outside the EU, the Migration Board (Migrationverket) must be contacted.

Costs for an employer in Sweden
The costs that a Swedish employer incurs if it hires employees can, like company costs, be divided into fixed and variable costs. Each of these must be properly documented and recorded. The employer's tax is calculated on the tax base, i.e. the gross amount of salary and other benefits. It amounts to a total of 31.42%. The employer is obliged to pay the taxes and contributions that are included in the arbetsgivaravgifter. These include payroll tax (11.62%), pension contribution (10.21%) and insurance contributions (3.55%). In Sweden, the Swedish Work Environment Authority (Mynak) is responsible for health and safety issues. The employer's obligations in this respect, as well as job training and the provision of work clothes, are differentiated by the nature of the business.

Sickness benefit in Sweden is 80% of the average wage, including employee allowances. It is granted to an employee when he/she is temporarily unable to work due to illness. The employer in Sweden should determine the amount of sickness benefit due on the basis of the salary and other benefits paid. Selected companies in Sweden are required to be audited. Auktoriserad revisor is the Swedish authorized auditor, while revisor godkänd is the approved auditor. An auditor is a person who has completed specialized training and has qualifications confirmed by a passing examination.

The auditor does not intervene in the Swedish company's accounting, but confirms the reliability of the documentation. The purpose of the audit is to assess the company's annual accounts and to spot irregularities.

Sole proprietorships, small trading companies and small limited liability companies are exempt from the audit. An audit in small business associations can be carried out by a person who does not have the title of authorized or approved auditor, but must be qualified. The obligation to pay taxes applies to all companies in Sweden. Entrepreneurs are required to pay income tax, VAT and employee employment tax.

Employer tax
When an entrepreneur in Sweden employs employees, he or she is obliged to pay the tax and contributions that make up the arbetsgivaravgifter (employer's tax). These can include: insurance premiums (3.55%), pension contribution (10.21%) and payroll tax (11.62%).

Employer tax in Sweden is a total cost of 31.42% on the tax base (the amount of gross salary and other employee benefits).

Income tax
Swedish income tax applies to both individuals and corporations, i.e. any entrepreneur who operates in the country. The income tax consists of two parts - the national tax and the local tax, which is designed to finance either the municipality (kommun) or the region (landsting).

National income tax for individuals is calculated on the basis of the income earned in a given tax year. For corporations, this tax is 28% of the company's profit. Local income tax depends on the place of residence or permanent establishment of the company - it varies between 30-35%.

Income tax rates for individuals in Sweden for 2020:
income between SEK 0 and 490 700: national tax is 0%, while local tax is 30-35%;
income above SEK 509 300: national tax is 20%, while local tax is 30-35%.

In Sweden, income tax is paid in the form of advance payments, which are determined on the basis of a declaration of the expected profit for the year. The company's income is estimated at the company registration stage and at the beginning of each subsequent year.

Tax on dividends
In Sweden, dividends are taxed at a rate of 30%. This includes local and foreign entrepreneurs. An advanced reduction of this tax is made possible by double taxation treaties agreed by Sweden with other countries (including Poland).

VAT (moms)
VAT, in Sweden (so-called moms), applies to companies offering taxable sales of services or goods. It is charged on every transaction, regardless of the stage of distribution and production. A transaction is understood to be the provision of services, the exchange and payment of one's own money from a company or the sale of goods.

The obligation to pay Swedish VAT is linked to its deductibility. A company in Sweden with such a right pays only the difference between the tax due on sales and the input tax paid for purchases.

A Swedish company should be declared in the VAT register if:

• moves goods necessary for its business to another EU country without changing the owner of the goods;
• sells services or goods to other EU countries;
• sells services or goods to countries outside the European Union.

The Swedish VAT rates are:

• 25% (basic rate)
• 12% (reduced rate for hotels, groceries, handicrafts, etc.).
• 6% (low rate for books, newspapers, passenger transport, etc.).

Swedish VAT is settled by means of a tax return. The frequency of its filing depends on the size of the company and the company's annual turnover. The owner must determine the frequency of the tax return when he/she applies for registration of the company at the Skatteverket (tax office). VAT in Sweden can be settled:

• once a month, once every three months or once a year - when the company is small and its turnover does not exceed one million Swedish kronor per year;
• once a month or once every three months - when medium-sized companies have a turnover of between one million and forty million SEK per year;
• once a month - when large companies have a turnover of more than forty million Swedish kronor per year.

VAT is paid on the 12 day of each month. Medium-sized companies have the option to pay it by the 26 day of each month.