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Articles
Establish a Subsidiary in Sweden
Updated on Thursday 16th November 2023
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A foreign company can activate on the Swedish market through its subsidiaries. These are locally registered companies, in which the sole owner can be a foreign legal entity (these are the wholly owned subsidiaries or, as needed, they can be partly owned by a foreign legal entity).
Both a subsidiary and a branch are valid options to establish the foreign operations in Sweden, however, the subsidiary allows for a greater level of flexibility and, as a result of the fact that the locally registered company is independent, the foreign company abroad will not be liable for the debts and obligations of its Swedish subsidiary. In this article, our company formation experts in Sweden present the main advantages of opening a subsidiary in the country, as well as the general incorporation process for this business form. If you have additional questions, or if you require assistance during the subsidiary incorporation, we invite you to reach out to us for more details.
| Quick Facts | |
|---|---|
| Applicable legislation | The Swedish Corporate Law |
|
Best Used For |
Small, medium, or large companies |
|
Minimum share capital |
SEK 25,000 (approx. EUR 2,150) for the private limited company |
| Time frame for the incorporation (approx.) | 1-2 weeks |
| Documents to be filed by the parent company |
The subsidiary's Articles of Association and Memorandum, along with other documents |
| Management |
The foreign company can appoint a foreign manager for its Swedish subsidiary; no residency requirements apply. |
| Legal representative required |
No, however, one can be appointed. |
| Local bank account |
Yes |
| Independence from the parent company |
The subsidiary is a separate legal entity from the foreign company. |
| Liability of the parent company | Generally not liable for its Swedish subsidiary |
| Corporate tax rate |
20.6% |
| Annual accounts filing requirements |
Annual reports are filed within seven months from the end of the financial year. |
| Possibility of hiring local staff |
The subsidiary can hire employees just like any locally-registered company. |
| Travel requirements for incorporating branch/subsidiary |
Our company formation agents in Sweden can act on your behalf for part of the subsidiary incorporation steps. Please reach out to us for details. |
| Double tax treaty access | Yes |
The main characteristics of the Swedish subsidiary
The subsidiary is essentially a locally incorporated company, most commonly in the form of a private limited liability company. For investors who wish to register a subsidiary in the country in 2023, the general steps to follow remain those needed for opening an LLC.
Other characteristics are the following:
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A company is considered a Swedish subsidiary only if a big part of its capital or a majority of voting shares is owned by the foreign company;
-
A subsidiary opened in Sweden is considered a legal entity and may conclude contracts or hire personnel without the foreign company’s approval;
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The subsidiaries are established as limited liability companies in Sweden, where the liability of the members is determined by their contribution to the capital;
The foreign company may establish as many subsidiaries as it wishes in Sweden.
Expanding the business activities through a subsidiary in Sweden in 2023 is an important business decision. Our team is ready to answer any needed questions about the incorporation steps and about the chosen legal entity.
The subsidiary can be incorporated as a private or a public company. The following differences apply:
- The private company cannot sell its shares to the public;
- The minimum capital for the private limited company is 25,000 SEK and 500,000 for the public limited company;
- The private company has at least 1 board member while the public one has at least 3 members;
- The public company needs to appoint a managing director and an auditor while these steps are optional for the public company.
The steps to open a subsidiary in Sweden
The process of incorporation of a subsidiary in Sweden starts with opening a bank account and depositing the company’s capital in it. A written statement from that bank is issued and must be deposited along with the foreign company’s decision of opening a subsidiary, articles of association (which will contain information regarding the name of the subsidiary, the name of the founders and their address, the name of the shareholders and their contribution to the capital, the total amount of capital, the way the company can be reorganized or liquidated and a duration period, if necessary) at the Swedish Companies Registration Office.
As a result, the Registration Office will issue a registration certificate, necessary for the last step of incorporation, the registration at the Swedish Tax Agency. Below, our team lists the main steps, in order:
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Prepare the company documents: these are the articles of association and the memorandum of the company, drawn up both in the case of the private and the public limited company;
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Subscribe: the parent company abroad will then purchase shares in the company and will be listed as a shareholder in the company in its constitutive documents; the amount is deposited in the corporate bank account;
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Sign the company documents: once the articles of association and the memorandum are drawn up and the shareholding structure is determined, the founders sign the constitutive documents;
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Register the subsidiary: the company is registered with the Swedish Companies Registration Office (Bolagsverket) by using a special form and submitting the needed documents; the application for registration can be submitted no later than 6 months after the articles and the memorandum were signed.
Please note that the list above is presented for informative purposes and, in practice, subsidiary creation in Sweden may also include additional steps. We advise you to reach out to our team of company formation experts for complete assistance during the incorporation process.
Opening a subsidiary in Sweden takes around 13 days and the company may begin its economic activities only after all the above steps are taken.
Investors who open a company in Sweden are subject to a number of fees, as they are imposed by the Swedish Companies Registration Office. For the registration of a limited company, the fee that was in force at the time this article was written was 2,200 SEK.
Licenses may be required from the Swedish Financial Supervisory Authority, Police authorities, municipalities or the County Administrative, depending on the business field in which the subsidiary will activate.
Foreign companies that set up a company in Sweden in the form of a subsidiary can rely on our complete assistance during the registration process. We can also answer questions about the mandatory tax authority registration, the approval for Swedish F-tax, or the employment of staff (including of non-EEA nationals). You can reach out to us for complete information on starting a business.
Subsidiary taxation in Sweden in 2023
In terms of taxation, a locally registered limited liability company and a branch are treated similarly, meaning that the corporate income tax applies in both of these cases with the same rate. Parent companies and the subsidiaries they have in the European Union and subject to certain European Directives. Our agents who specialize in company formation in Sweden can give you more details. Below, our team lists the main types of taxes applicable to subsidiaries:
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- Corporate income tax rate: 20.6% - this is the standard corporate income tax rate applicable to all companies in the country; there is no reduced or branch tax rate;
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- Withholding tax: 0% in case of residents and 30% in case of foreign companies on dividend distributions from Swedish companies (subject to certain exemptions or reductions under a tax treaty; Sweden has concluded more than 100 income tax treaties);
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- Value-added tax: the standard rate is 25% and there are also two reduced rates of 12% and 6%; some types of goods and services are zero-rated and other are exempt.
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- Others: social security contributions of 31.42% (in some cases), real property tax, and stamp duty.
The subsidiary will need to pay social security contributions for its Swedish employees. It is not subject to payroll in Sweden, as this is not levied as a separate tax, however, the subsidiary will beat the social security contribution which has a rate that varies according to the age of the employee. A maximum charge applies, however, the employer is not subject to the pension insurance fee for income of up to a certain amount.
Swedish subsidiaries follow the country’s accounting and reporting requirements and timeline. The corporate income tax assessment is based on the income generated in the previous tax year, and there are four dates on which the annual corporate income tax return can be filed, depending on the chosen financial year. A preliminary return is also filed, and penalties apply for companies that file the return too late or when incomplete information is submitted.
Foreign corporations that want to enter the Swedish market can choose to open a subsidiary in the form of a limited liability company. The subsidiary based in Sweden will act as their Nordic headquarters, allowing these companies to enjoy the business advantages available when doing business in Sweden.
According to Statistics Sweden, the investment rate among companies increased by 22% in 2022, compared to the previous year. The total investments value amounted to SEK 415.5 billion, an increase of SEK 75,8 billion, compared to 2021. The largest investments in 2022 were in the real estate sector.
If you want to open a company in Sweden, in the form of a subsidiary, in 2023, contact us for more information as well as ongoing assistance during the incorporation process.
Meet us in Stockholm
Call us now at +46 70 419 44 36 to set up an appointment with our lawyer in Stockholm, Sweden. Alternatively you can incorporate your company without traveling to Sweden.
As a VS Jurist client, you will benefit from the joint expertize of local lawyers and international consultants. Together we will be able to offer you the specialized help you require for your business start-up in Sweden.
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