Risks and considerations of doing business in Sweden
High individual tax rates
Sweden has robust social services programs — including countrywide health programs and other benefits, such as generous parental leave — financed by high taxes on individuals. This may make it difficult to recruit talent from outside Sweden.
Complex labor laws
Sweden has strict labor laws that provide workers with strong protections, including collaborative bargaining agreements of individual labor unions.
Sweden does not have any rules in place that mandate a minimum wage, but trade unions may have their own agreements that set the standard for individual industries and types of work. Employers must follow certain formal rules when terminating employment. Navigating these requirements can be confusing, and it helps to leverage local expertise in these matters.
Cost of living
Sweden has a high cost of living, especially in innovative hot spots such as Stockholm and Gothenburg. The cost of living is estimated at two percent lower than the United States. But since the country’s individual tax rate is high, the cost of living feels much greater.
Long Swedish winters can be especially harsh, depending on the region. Average temperatures in the southern region are mild, but overall temperatures range from 23 to 35 degrees Fahrenheit, with the potential to drop lower than 5 degrees Fahrenheit.
Some may have more trouble adjusting to the lack of light. In December, Stockholm receives only around six hours of daylight.
Expand with greater success
Operating in a new country (even one as business-friendly as Sweden) can be a daunting task. Without a firm grasp on the evolving nature of local laws, regulations and business practices, expanding businesses can face difficulties such as delayed entry, rising costs and tax penalties — or even civil or criminal litigation.
In order to avoid these scenarios, it’s important to find a trusted partner with global reach and the experience to help ensure a smooth transition. CT can help you get set up, provide a single point of contact and provide you with customized solutions for all your needs.
Frequently asked questions
Why should I consider doing business in Sweden?
Sweden is known for its ease of doing business, ranking 10th out 190 jurisdictions according to the World Bank’s Doing Business report. Sweden boasts a strong economy and is a leader in innovation.
What challenges should I consider when expanding to Sweden?
Recruiting talent from outside the region can be difficult due to high individual tax rates and a high cost of living. Additionally, there are complex labor laws that require local expertise.
What is the corporate tax rate?
The corporate tax rate in Sweden is 21.4 percent. Additionally, there is a VAT rate of 25%, and other taxes may include excise duties; real estate, stamp and payroll taxes; Social Security fees; and more.
What are the business entity types available?
There are several entity types to choose from, including limited company, trading partnership, limited partnership, and branch office.