No PE – no problem? - A study on the Swedish preliminary income taxes for foreign companies without tax liability in Sweden

Sammanfattning: New obligations for foreign companies operating in Sweden have been introduced on 1 January 2021. Despite the absence of a Swedish PE or other tax liability, payments for work performed in Sweden by foreign companies is subject to a requirement of withholding preliminary income tax. A refund of the withheld amount can be granted, but only once a final tax assessment has been completed after the end of the fiscal year. A fundamental principle of the Swedish system of preliminary income taxes is that preliminary taxes should be levied to an amount corresponding to an estimate of the final taxes. Yet, a foreign service provider without Swedish tax liability will have to abide with not getting paid in full, unless an administrative requirement involving registration or application for exemption is fulfilled prior to the payment. Additionally, new obligations have been introduced for these foreign companies opting for registration in Sweden. The purpose of this thesis is to describe and to critically analyse these changes by comparing the motives for the original rules to the presented objectives for the new rules. Moreover, the thesis evaluates whether the new measures on the withholding of income taxes might cause an incompatible restriction with the fundamental freedoms of EU law. The thesis presents the findings that the implemented changes are not compatible with EU law and that the new rules do not meet their purpose. The changes cause new difficult administrative and legal challenges and could have been designed differently for a more efficient and less restrictive outcome.