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Sweden to Introduce Economic Employer Concept from 2021

The Swedish Government announced on 5 September 2019 that it is planning to implement legislative changes from 1 January 2021 for the introduction of the economic employer concept. Currently, Sweden applies the formal employer concept, which means that the employer is considered to be the company that is legally responsible for the employee and that pays the employee's remuneration. With the economic employer concept, the employer is considered to be the company for which work is actually performed.

The change in concept impacts the application of the 183-day rule, which generally provides for a tax exemption on employment remuneration received by a resident of one treaty partner country in respect of employment performed in the other country, subject to certain conditions. Under the current formal employer concept, the 183-day rule is generally applied when a foreign employee works in Sweden for a temporary period and receives remuneration from a foreign employer, which is not subject to Swedish tax. With the planned change to the economic employer concept, the 183-day rules would not apply for employees working temporarily in Sweden for the benefit of a Swedish company, in which case remuneration for the work in Sweden would be subject to Swedish tax from the date of arrival.

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