Sweden – Tax Agency Challenging Foreign Companies’ Work for Possible PE

Sweden – Tax Agency Challenging Foreign Companies...

Sweden’s tax authorities recently started to challenge the activities of employees of foreign companies on the basis that the activities constitute a permanent establishment (“PE”).

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Flash Alert 2014-009

Sweden has recently started to challenge the activities of employees of foreign companies on the basis that the activities constitute a permanent establishment (“PE”).  The KPMG International member firm in Sweden has learned of this from the Tax Agency’s inquiries in connection to applications for social security payment purposes. 

 

WHY THIS MATTERS

The constitution of a PE in Sweden can have major impact (from the corporate tax, transferpricing, and VAT perspectives, but also from an administrative burden perspective) forforeign companies. Therefore, it is advisable that companies contemplating any businessactivities in Sweden contact their professional tax advisers before proceeding.

In previous years it was possible for employees and employers to conclude agreements on social security payments and those employees reported the social security contributions through their tax return filings. Registration of the employer for social security payment purposes was in practice not necessary. However, starting in 2013, foreign companies with employees covered by the Sweden’s social security system must register with the Tax Agency (Skatteverket) and make monthly contributions (this responsibility can still be transferred to the employee through agreement – registration of the employer however is still required).

Please note that this will also apply for U.S. employers with employees holding a Certificate of Coverage.

KPMG NOTE

Foreign companies that wish to register with the Tax Agency only for social security paymentpurposes are now under narrow review of actual PE in Sweden. The Tax Agency is taking afairly aggressive approach in this assessment and we are frequently seeing that foreigncompanies registering for social security payment purposes have been deemed as having aPE in Sweden.

The information contained in this newsletter was submitted by the KPMG International member firm in Sweden.

© 2016 KPMG AB, a Sweden corporation and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved.

Flash Alert is an Global Mobility Services publication of KPMG LLPs Washington National Tax practice. The KPMG logo and name are trademarks of KPMG International. KPMG International is a Swiss cooperative that serves as a coordinating entity for a network of independent member firms. KPMG International provides no audit or other client services. Such services are provided solely by member firms in their respective geographic areas. KPMG International and its member firms are legally distinct and separate entities. They are not and nothing contained herein shall be construed to place these entities in the relationship of parents, subsidiaries, agents, partners, or joint venturers. No member firm has any authority (actual, apparent, implied or otherwise) to obligate or bind KPMG International or any member firm in any manner whatsoever. The information contained in herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.

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