Summary

Sweden has a comprehensive social security system which provides a range of old age, invalidity, sickness, unemployment and other social benefits, including family allowances and income guarantees. Entitlement to benefits generally derives from and individual’s contribution history, although some benefits arise due to residence in Sweden. Benefits from the Swedish system have the reputation of being amongst the most generous in Europe – but the cost for employers is very high.

Because of the high cost of contributions, and Sweden’s broad network of bilateral social security agreements, current market practice is generally to try to avoid becoming liable to Swedish social security.

Details

Contributions

The total employer contribution, covering all branches of the Swedish social security system, is 31.42% of gross earnings, with no cap. Employees are required to contribute 7% of their income as pension contributions, but this amount is fully deductible against their income tax liability. A lower contribution rate (approx. 20%) applies to employers without a Swedish permanent establishment.

Treaties

Sweden has social security agreements with all European Economic Area countries and around 12 non EEA countries, including the US, Canada, India and Japan. These agreements determine which country has the right the levy social security contributions, has the obligation to provide benefits, and prevent social security being levied twice on the same income. Most inbounds expatriates to Sweden therefore continue to pay home country social security rather than Swedish contributions.

Where individuals are assigned into Sweden from non-agreement countries, no Swedish social security liability arises if the intended duration is less than 12 months. If the stay exceeds 12 months, Swedish social security is due from Day 1.

Exemptions

Foreign experts employed by a Swedish company or a non-Swedish company with a PE in Sweden may apply for  'expert tax relief'. If the relief is granted, it exempts 25% of total income from social security charges for up to five years. Some benefits (e.g. school fees, moving allowances, and home leave) are also exempt from Swedish social security charges.

Administration

Where a liability arises and an employer has no permanent establishment in Sweden, the liability can be settled by the employee on behalf of the employer. The processes whereby businesses with a Swedish entity/PE and those without can pay over social security contributions are well established and reasonable straightforward to navigate.

Benefits

The Swedish Social Insurance Agency (Försäkringskassan) deal with most benefit applications even if the agency providing the benefit is different. Many benefits are income related and so not all will be payable to higher paid individuals, regardless of their contribution position.

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