Sweden: basic areas of accounting

Swedish law regulates top-down rules relating to bookkeeping, which is at the same time the basis for doing business. This makes it possible to balance income and outgoings in the company and to control expenses. This has a direct impact on the development of the company. In addition, invoices should contain a range of information, without which they are useless. On the other hand, knowledge of the rates and deadlines for tax settlements with the authorities will help to avoid unpleasant consequences. Find out how to function in the space of Sweden - accounting. The Swedish Accounting Standards Board, Bokföringsnämnden (BFN), oversees the legal regulations covering accounting in Sweden. The need for bookkeeping extends to every entrepreneur, regardless of the type of business and the scale of the company. The basic legal acts in this respect are: The Accounting Act - bokföringslagen - of 1999; and the Annual Reports Act - årsredovisningslagen - of 1995. Current legislation stipulates that a Swedish company's accounting can be carried out either by its owner or by a certified accountant. However, no matter what, the entrepreneur is liable for all irregularities. Hence, it is advisable to use services of registered bookkeepers with Revisorsinspektionen. In this way, we can quickly and conveniently check whether the accountancy office of our choice in Sweden has the right competence to undertake such obligations.

It is a requirement of the state authorities that only certified accounting software is used. Swedish company accounting carried out via spreadsheet software such as MS Excel is not in accordance with current regulations. The entrepreneur is obliged to record all business transactions of the company. Records must be kept in the manner prescribed by the relevant national regulations imposed on entrepreneurs in Sweden. Bookkeeping of a company in Sweden also involves meeting deadlines set by the relevant authorities. Failure to meet obligations, deadlines or any shortcomings in this respect imply various types of penalties, e.g. increased tax audits.

Swedish bookkeeping is not only limited to the company's tidiness, as it also influences the opinion of authorities, banks (e.g. when granting credit), customers, suppliers (e.g. when purchasing goods with a deferred date) and possible business partners. Thus, a company's accounting directly affects its credibility, which in business is the basis for good cooperation. Swedish invoices are increasingly taking electronic form. Private companies, when issuing such a document, must include strictly defined information in it, concerning the transaction. Swedish e-invoices are stored in a specially dedicated programme with state security certificates, hence the ban on the use of programmes such as MS Excel. What else is needed to issue an invoice?

The correctness of the invoices issued is extremely important, as this document forms the basis for claiming the counterparty's receivables. Every Swedish business gets an identification number when registering, which, like a company bank account number, is necessary for issuing an invoice. In addition to this, the following details should be included:

• date of issue;
• date of delivery or date of payment;
• the document number;
• details of the parties to the transaction: name, surname, company name, address;
• the VAT number of the vendor - as well as the rate of tax. This is necessary in order to benefit from the possibility of subsequent tax deduction;
• optionally, the VAT number of the buyer;
• type of transaction;
• the price for the good or service;
• the amount to be taxed;
• the amount of VAT;
• the terms of payment;
• the terms of delivery of the good or service.

Bookkeeping for a company in Sweden is very important in the event of late payment by contractors and a tax inspection by the authority - Skatteverket. All kinds of operations performed through the company should be recorded. Accounting accounts in Sweden are used for this purpose. In this way, each economic event is assigned to different types of accounts, collectively forming a chart of accounts, i.e. a summary of the accounts booked by a specific company.

All financial operations, irrespective of their scope (be it procurement, production or sales of goods and services), should be properly classified so that they can be correctly matched to the correct accounting account. After all, the account balances are entered in the annual tax return. By choosing a standard chart of accounts, or BAS, or by configuring a chart of accounts to suit the company's needs, a Swedish entrepreneur should be able to show the course of economic events from a specific period.

Each accounting account in Sweden is made up of four digits, which are assigned a specific meaning. The first digit denotes the class of the account: 1 - assets; 2 - liabilities; 3 - income; 4 - 8 - expenses. The second digit of the account number indicates the account group, while all four digits identify a specific accounting account:

1000 - company assets (fixed assets);
2000 - debt and equity (settlements with suppliers, authorities and banks);
3000 - company revenue (net revenue invoices);
4000 - purchases (purchase of materials, domestic purchases, foreign purchases);
5000 - operating expenses (business travel, advertising);
6000 - operating costs (hiring of temporary staff, purchase of office supplies, tools and work clothes);
7000 - depreciation and staff costs (salaries, cash equivalents, benefits in kind);
8000 - financial income and expenses (annual financial result, credit interest).

A Swedish company should have a bank account that will be used for all financial operations related to its business. In the case of companies, a company account at a Swedish bank is also for depositing start-up capital in a certain amount. Keeping records in the company not only gives transparency in the running of the business, but is also an important element during possible tax audits. An entrepreneur in Sweden is obliged to keep records for at least seven years. In addition, invoices are essential for tax clearance. Hence, verification of current receivables and liabilities is the best way to maintain a transparent financial situation.

Swedish company records can be kept in two forms: electronic and paper. The form of the invoice is dictated by its initial appearance, i.e. if the document was issued on paper, it should be stored that way - the same relationship applies to digital documents. Archiving can be carried out by the company or a selected external company, which is, however, obliged to make available appropriate documentation in the event of an inspection.

An entrepreneur in Sweden should segregate documents according to two categories: primary and secondary. The need for audits only applies to certain forms of business. The Swedish auditor must have competences, acquired through specialized training in this field. In practice, two types of auditors can be encountered: authorized - auktoriserad revisor - or approved - revisor godkänd.

The audit obligation applies to:

• business associations - ekonomisk förening;
• commercial companies - handelsbolag, abbreviated to HP;
• limited liability companies - aktiebolag, abbreviated AB.

In the case of small business associations, the audit can be carried out by a person without the title of authorized or approved auditor, but it still has to be a qualified person. Meanwhile, sole proprietorships, small trading companies and small limited liability companies - are completely exempt from the audit obligation.

The audit, which is carried out in this way, takes place without interfering with the Swedish company's accounts. The auditor's only task is to confirm the reliability of the company's records. Opening a company in Sweden is relatively simple. For Polish citizens, things become even simpler due to Poland's membership in the EU and EEA. This gives both Poles and Swedes the same right to do so.

The establishment of a new company in Sweden, as already mentioned, is not very complicated. However, the registration process and the time required depends on the type of company. Thus, the most common companies established by foreigners in Sweden include:

• sole proprietorship - enskild näringsidkare;
• civil partnership - enkelt bolag;
• commercial company - HB - Handelsbolag;
• branch of a company - filial.

The other types are:

• limited partnership - KB - kommanditbolag;
• limited liability company - AB - Aktiebolag;
• business association - ekonomisk förening;
• foundation - stiftelse;
• european joint-stock company- Europabolag.

The aforementioned types of business in Sweden are available to foreigners, but the procedures are more complicated and the starting capital rate is much higher. The Swedish sole proprietorship is one of the most convenient forms of business. Self-employed people can also keep the accounts of their company themselves. All that is required is a knowledge of the basics of accounting, the foundation of which is the Accounting Act for the correct accounting of a company's financial transactions.

Opening such a company also generates certain obligations. One of these is the payment of tax on the income received. Important in this context is the fact that a sole proprietorship in Sweden is treated as a physical entity, not a legal entity. Thus, Swedish income tax is declared on a single form. The general income tax is the sum of the national tax and the local tax, while the local tax consists of the municipal tax (komun) and the regional tax (landstig). The tax rate may vary depending on the income received and the place of residence or location of the permanent establishment. In 2020, the personal income tax in Sweden was:

• 0% national tax for income between SEK 0 and 490 700 and 30 - 35% local tax;
• 20% national tax with income above SEK 509,300 and 30 - 35% local tax.

During the tax year, which in Sweden coincides with the calendar year, advance payments of income tax are made by the 12th of each month, except in January and August, when the time is extended to the 17th. The amount of the advance payment is calculated on the basis of the income previously declared to the tax office. At the same time, it is worth emphasizing that the owner of a sole proprietorship company vouches for all the company's liabilities with his or her own assets, as the Swedish legal system considers the company's income to be the owner's income as a natural person.

Any sole proprietorship distributing services or goods subject to VAT is obliged to charge the appropriate rate on each transaction. VAT in Sweden is accounted for on a declaration specially prepared for this purpose, which is submitted to the office once a month, once a quarter or once a year. When it comes to companies, in a country like Sweden, accounting is quite complicated. Hence, it is worth seriously considering hiring a qualified accountant. Just starting up this type of business is an expensive venture, as it requires depositing start-up capital, which can range from SEK 50,000 to as much as SEK 500,000. The advantage is that the owners of a Swedish company are only liable for the company's obligations with the amount of share capital.

Every company in Sweden has a legal personality. Legalization requires a number of formalities, including a deed of incorporation, certified by a notary public. Then, a maximum of six months after that, registration with Bolagsverket, the Swedish Companies Register, is required.

The Swedish income tax paid on the company is 28% on the income. Throughout the tax year, a total of 12 advance payments are made towards this liability. The amount of the advance payment is determined on the basis of the income initially declared to the tax office. Taxpayers have until the 12th of each month to pay. In January and August, the deadline is the 17th of the month.

A Swedish company offering goods or services subject to VAT must be registered, as well as charge and pay the rate prescribed for the category of goods or services:

• the standard rate covers most goods and services and is equal to 25%;
• the reduced rate is 12% and applies to, among others, foodstuffs, hotel services and handicrafts;
• the low rate of 6% covers newspapers, books, passenger transport, etc.

It is clear that running one's own business involves certain costs. Companies in Sweden incur expenses related to both the establishment of the company itself and its subsequent operation. The nature of the services provided, the type of activity and the size of the company have a not insignificant impact on the fees.

1. Initial capital. This is the first and basic cost to be borne by the Swedish entrepreneur. Depending on the type of company, the value of the contributed budget will range from SEK 50,000 to SEK 500,000.
2. Taxes. A company in Sweden is subject to taxation:
   • on income - for individuals the rate varies between 30 and 55%, while a fixed threshold of 28% is stipulated for corporate entities;
   • VAT - here 3 thresholds can be distinguished: 25% - basic rate, 12% - reduced rate, 6% - low rate;
   • from the employer - the tax base is the gross remuneration of employees and other benefits. The total rate is 31.42%.
3. Fixed and variable costs. Their amount is dictated by the category of expenses and confirmed by invoices from suppliers. We can include in fixed costs such expenses as:
   • the cost of renting premises;
   • telephone or internet subscriptions
   • depreciation and expenses related to the use of a car;
   • hiring employees.
   Variable costs should include all those charges that cannot be predicted because they depend on the current needs of the company, e.g:
   • materials or goods;
   • tools or equipment;
   • business travel and subsistence expenses;
   • representation costs;
   • advertising;
   • office supplies;
   • training, licensing and authorization costs.

Verification of the correctness of the invoices received is important both in the case of audits and when claiming allowances, e.g. only invoices that state the VAT rate for a service or goods are reimbursable. It is therefore advisable to pay particular attention to amounts or company identification data. Companies in Sweden pay a portion of their profits for the purposes stipulated by the tax system. The group of taxes that a Swedish entrepreneur pays most often includes: income tax, employer tax and VAT.

1. Income tax in Sweden is paid by all Swedish tax residents, i.e. also by company owners. This type of taxation is made up of minor obligations:
   • national tax paid to the state treasury. Corporate tax is invariably 28% of the tax base, while the rate for individuals is set each year. In 2020, these were respectively:
     • 0% on income between SEK 0 and 490,700;
     • 20% for income above SEK 509,300.
   • Local tax, which is the result of the combination of:
     • municipal tax - kommun;
     • regional tax - landsting.
     The rate depends on the place of residence or location of the company. While national tax is different for the self-employed and entrepreneurs, local tax is paid by everyone and usually ranges between 30-35%.
   Throughout the year, taxpayers are required to pay monthly advance payments by the 12th day of each month. Only in January and August does the date move to the 17th. The amount of the advance payment is determined at the time of registration of the company with the tax office. At that time, the owner submits the estimated profits of the company, which form the basis for calculation. Any deviation from the declared income is dealt with in the company's annual return. In later years, estimated profits must also be prepared.
2. The owner of the company becomes the employer when the first employees are hired. Registration with the authorities is then required. As a result, the entrepreneur, as a Swedish employer, is obliged to pay tax and contributions. The employer tax (arbetsgivaravgifter) consists of:
   • payroll tax - 11.62%;
   • pension contribution - 10.21%;
   • health insurance contributions - 3.55%.
   The total tax rate is 31.42%.
3. Swedish VAT, which is charged on certain goods and services, covers entrepreneurs who distribute such goods or services. It applies to each stage of the transaction, namely:
   • the sale of goods;
   • the supply of services;
   • exchange;
   • own payment from the company.
   At the same time, VAT is deductible. A Swedish company with this right only pays the difference between the output tax charged on sales and the input tax paid on purchases. VAT rates in Sweden are:
   • 25% - standard rate;
   • 12% - reduced rate (groceries, hotel services, handicrafts, etc.);
   • 6% - low rate (newspapers, books, passenger transport services, etc.).
   The obligation to register falls on the company when:
   • moves goods necessary for its business to another EU country without changing ownership;
   • sells goods or services to other EU countries;
   • sells goods or services to countries outside the EU.
   VAT in Sweden is settled on the tax return. The frequency of settlement is affected by the size of the company and its annual turnover:
   • small companies with a turnover of less than SEK 1 million per year file the return once a year, once every three months or once a month;
   • medium-sized companies with a turnover between SEK 1 million and SEK 40 million must settle once every three months or once a month;
   • large companies with an annual turnover exceeding the SEK 40 million limit settle once a month.
   The VAT return in Sweden is submitted by the 12th of each month. Medium-sized companies may pay tax until the 26th of each month.

The growth of a company often requires the hiring of employees. When a Swedish entrepreneur decides to do so, he/she becomes an employer, which in turn entails legal obligations towards both his/her subordinates and the authorities. This is because the employer in Sweden becomes liable for special tax.

Depending on the type and origin of the employees, the procedures are somewhat different. Temporary employees who do not live in Sweden and are not tax resident in the country should be reported by the company owner to the Swedish Work Environment Authority and the Swedish Tax Agency - Skatteverket. European Union citizens do not need a work permit. However, the situation is different for non-EU members, who should apply for a permit from the Swedish Migration Board - Migrationverket.

In addition to formalities, the creation of workplaces in a company involves costs, which are divided into fixed and variable costs. All expenses for this purpose must be properly documented and archived. Fixed costs can include:

• employer's tax - arbetsgivaravgifter - this tax consists of several elements:
• payroll tax - 11.62%;
• pension contributions - 10.21%;
• insurance premiums - 3.55%.
The total rate is 31.42% on the tax base;
• employee salaries.

Variable costs, i.e. those whose amount is not always the same, include:

• sickness benefit - granted to employees temporarily unable to work due to illness. The amount of the benefit is 80% of the average salary, including any employee allowances;
• employee training - some of the basic training that employees undergo is, for example, health and safety training, job training. Everything is really dictated by the type of business in Sweden. Some of these cannot be overlooked because of the Working Environment Authority, or Mynak, which is tasked with verifying that an employer in Sweden complies with its obligations under health and safety legislation.
• workwear.

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