Direct distributionOwnership structures
May a foreign supplier establish its own entity to import and distribute its products in your jurisdiction?
Yes, foreign suppliers are welcome to establish legal entities in Sweden. This can be done in one of three ways: through a branch office, establishing a Swedish subsidiary or by entering into an agreement with a trade agent with operations in Sweden.
The Swedish Tax Agency has published a guide for foreign companies planning to operate in Sweden that contains basic information on the different options and steps that needs to be taken.
Foreign suppliers that are established within the EEA do not have to establish their own entities in Sweden; they can operate through their EEA establishment.
May a foreign supplier be a partial owner with a local company of the importer of its products?
There are no restrictions in Sweden regarding foreign ownership of Swedish companies. A foreign supplier is therefore free to start a joint venture in Sweden together with a Swedish or other foreign investor, or buy shares in an existing Swedish legal entity.
What types of business entities are best suited for an importer owned by a foreign supplier? How are they formed? What laws govern them?
A foreign supplier wishing to do business in Sweden can choose between two main options. Either registering a branch office or establishing a Swedish legal entity.
A branch office is not an independent legal entity in Sweden. Instead, the branch office is considered an outsourced part of the foreign supplier’s business. The branch office is best suited for companies that expect to have limited need of employees in Sweden or limited sales to the Swedish market. The reporting requirements for a branch office is limited and it can therefore be maintained for a low cost.
The other option is to establish a Swedish legal entity, of which a limited liability company is preferable. The limited liability company is better suited for businesses that expect to have larger operations in Sweden and are need of local representatives and offices. Depending on the size of the annual turnover, different reporting requirements needs to be fulfilled. Smaller companies (annual turnover of approximately €300,000 and more than three employees) do not need to appoint a Swedish auditor and can therefore be maintained for a low cost.Restrictions
Does your jurisdiction restrict foreign businesses from operating in the jurisdiction, or limit foreign investment in or ownership of domestic business entities?
No, there are no restrictions on foreign investments in Swedish companies. However, there are restrictions on how foreign businesses may conduct business operations in Sweden. Businesses established outside the EEA are required to either register a branch office or subsidiary, or operate through a trade agent.Equity interests
May the foreign supplier own an equity interest in the local entity that distributes its products?
Yes, there is nothing restricting foreign suppliers from owning an equity interest in a local entity that distributes its products.Tax considerations
What are the tax considerations for foreign suppliers and for the formation of an importer owned by a foreign supplier? What taxes are applicable to foreign businesses and individuals that operate in your jurisdiction or own interests in local businesses?
When establishing an entity owned by a foreign legal supplier, it should first be determined whether the entity constitutes a permanent establishment according to article 5 of the OECD Model Tax Convention, which in such case entails tax liability for the income attributable to that entity. According to the Swedish Income Tax Act, foreign legal persons are subject to limited tax liability, which in this case means that the supplier, as the owner of the importer, is taxed for the income from the permanent establishment in Sweden.
If the supplier on the other hand establishes a subsidiary in Sweden, it would entail an unlimited tax liability for all income (according to Chapter 6, sections 3 and 4 of the Swedish Income Tax Act).
Law stated dateCorrect as of
Give the date on which the information above is accurate.
2 December 2020.