Split payment in Sweden – what agencies should know before choosing the structure

PART 1

What do you mean by split payment?

Arrangements where part of the compensation for work performed in Sweden is paid outside Swedish payroll. It could be a bonus paid by the agency, a payment to the candidate’s own company abroad, or a fee handled in the candidate’s home country.

It’s worth separating this from situations where someone genuinely works in several countries and the pay reflects that. That’s a different question.

Why do these arrangements come up?

Mostly because it’s natural to want as much as possible left after tax. Candidates coming from abroad compare what they would take home in Sweden with what they could earn elsewhere, and that comparison deserves to be taken seriously.

It’s also a question Sweden doesn’t always answer very well. I recently read through one of the official welcome guides written for international talent moving here. It mentions fika around fifteen times and gives it a two-page section, covering everything from cinnamon buns to “prinsesstårta”. Taxes get a single line telling you to register with Skatteverket.

Sweden should be competitive for cross-border placements, especially now. Major investments are under way, not least in data centres, energy and industry, and decision-makers should ask themselves some honest questions. Do we have the expertise in Sweden to build what we’re planning, or will companies need to recruit abroad? And where they do, is Sweden an attractive place to work, or are other EU countries with similar projects more appealing?

At the same time, it’s a balance. Swedish taxpayers need to feel the system is fair, and tax terms for foreign experts can’t be so generous that they undermine that trust. That’s a legitimate concern, and not an easy one for policymakers to resolve.

But that discussion belongs in the political arena. Until the rules change, they apply as they stand. We’ve examined split payment arrangements carefully, and our conclusion is clear: they don’t deliver the savings they appear to, and they carry risks that are easy to underestimate.

How does Swedish law view it?

The starting point is simple. If work is performed in Sweden for a Swedish economic employer, the full compensation is taxable in Sweden and should run through Swedish payroll. That holds regardless of who pays which part or what the payment is called.

This isn’t a new interpretation. Swedish case law has long treated payments made because of someone’s employment as employment income, even when they come from a third party. The economic employer concept, introduced in 2021, reinforced this. Skatteverket now looks at the substance: who controls the work and who benefits from it. For a candidate placed with a Swedish client, that’s typically the Swedish entity.

There is a narrow exemption for non-residents working in Sweden for no more than 15 consecutive days and 45 days in a calendar year. It’s rarely relevant for assignments of any real length.

Axel Joelsson Heurlin | CFO, Cool Company

PART 2

Doesn’t invoicing from abroad solve it?

Not really. Since 2021, the rules include a control mechanism that makes these structures visible.

Previously, a Swedish company only had to withhold tax on payments to a foreign company if that company had a permanent establishment in Sweden and lacked F-tax registration. When the economic employer concept was introduced, the legislator extended this obligation. Today, a Swedish company paying a foreign company’s invoice for work performed in Sweden must withhold 30 per cent of the invoice amount and pay it to Skatteverket. This applies whether or not the foreign company has a permanent establishment here.

The exceptions are when the foreign company holds Swedish F-tax registration or has a decision from Skatteverket that it isn’t taxable in Sweden. If it later turns out that no tax is due, the withheld amount is paid back.

The purpose is clear: to bring foreign companies into contact with Skatteverket. In practice, a structure where part of the compensation is invoiced from abroad doesn’t avoid Swedish tax. The 30 per cent is withheld at the source, the expected saving is consumed, and the underlying risks remain.

What if the payment goes to the candidate’s own company abroad?

The outcome is the same. Income from work in Sweden is taxable in Sweden, whether it lands in a personal or a company account.

It can also go further. Skatteverket may consider the candidate’s company to have a permanent establishment in Sweden. That can bring Swedish corporate tax, employer contributions, special payroll tax on pensions, withholding obligations and tax surcharges.

The candidate is personally exposed as well. Skatteverket can reassess up to six years back, with interest, plus tax surcharges of up to 40 per cent.

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And the agency?

An agency making recurring payments for work in Sweden may be seen as operating in the Swedish market, and therefore as having a permanent establishment here, with the same consequences. Skatteverket may also conclude that the agency is in fact the employer, which means liability on the full compensation, not just the additional payment.

These claims don’t stay in Sweden. Kronofogden, the Swedish Enforcement Authority, can pass them to the enforcement authority in the agency’s home country, including the UK. Nobody sets out to create that exposure, which is exactly why it’s worth understanding upfront.

What’s Cool Company’s approach?

We run all compensation for Swedish work through Swedish payroll. For us, that’s about giving our partners and their candidates certainty: no surprises years after an assignment has ended.

That doesn’t mean the commercial question goes away. If an agency has a specific target, such as a net salary for the candidate or a cost level for the client, we’re happy to work through compliant ways to get there.

What would you recommend to an agency considering this?

Take advice on the Swedish tax treatment before the assignment starts. It’s much easier to get the structure right from the beginning than to correct it afterwards. We’re always glad to look at a specific case together.