Taxes

1. What is the difference between F tax, A tax and FA tax?

• F tax is the tax paid by an entrepreneur who is a natural person or legal entity.
• A tax is paid by a natural person or legal entity who has taxable earned income.
• You pay FA tax if you have employment and a business. You pay A tax on your income from employment and F tax for your business.

2. How is a sole trader or partner taxed?

As a sole trader or partner in a trading or limited partnership, you pay personal contributions and municipal tax on the company's profit. Income over a certain amount is also subject to state tax.

3. How is a limited company or economic association taxed?

Limited companies and economic associations pay corporate tax on their profit. If you are an active owner of the company or member of the association and receive a salary for your work, you are considered to be employed. The company pays employer contributions and preliminary tax deductions on your behalf to the Swedish Tax Agency. These are deductible expenses in the company.

You may also receive a dividend from the company or association. Dividends are subject to special taxation rules, which you can read about in the Tax Agency's brochures.

4. How do I calculate operating profit?

• Calculate your operating profit by deducting expense from income.
• Deduct a standard allowance of 25 percent of the profit.
• The remaining 75 percent is your profit and this counts as taxable income in your business. Partners in a trading or limited partnership are taxed on their own share of the business.

5. Can I subsequently change the information I submitted about the company's profit?

If during the course of the year you discover your operating profit will be higher or lower than initially stated in your notification of tax and contributions liability, you should submit a change notification to the Swedish Tax Agency. Otherwise, you may be liable for tax arrears or may pay too much tax during the year. If you have overpaid, this will be paid back when your preliminary tax is reconciled against your final tax. You can submit a change notification on a preliminary tax return.

6. Is it possible to enter a profit of SEK 0 on the notification of tax and contributions liability?

If you are having trouble estimating your profit, you can enter SEK 0 on the form. It is not the Swedish Tax Agency that requires you to make a profit; this is the purpose of your own business activity. At the end of the financial year, you will be taxed on the profit generated by your business.

You can also request deferment of payment of the company's preliminary tax during the first three months in a newly established company. Notify the Swedish Tax Agency in your notification of tax and contributions liability. The deferment is not a form of tax relief; the total tax is divided up into fewer months instead.

7. How do I report and pay tax?

The reporting and payment of taxes and contributions is determined by the legal form of business you have chosen and the size of your company's turnover.

The Swedish Tax Agency will send you special remittance slips for your tax payments. Preliminary tax is paid in equal monthly payments during the income year, normally on the 12th of the month. The size of the payments does not vary according to the results for a particular month.

Employer contributions and employees' tax deductions, and in some cases VAT too, are reported monthly on special tax returns. The form is sent to the company about one month before the deadline for its return.

8. What is required to qualify for F tax?

In Sweden, anyone can start a company in principle, although special rules apply in the case of minors. If you are bound by an injunction against trading (pursuant to the prohibition of trading act), are in a state of bankruptcy or have a custodian, as defined in the Children and Parents Code, you are not allowed to start a company.

Before the Swedish Tax Agency will issue you with an F-tax certificate, it must be satisfied that you are conducting business activity. If you have an F-tax certificate, you pay your own taxes and contributions to the Tax Agency.

To qualify for an F-tax certificate, you must meet the following three criteria. Your business must be:

• independent;
• permanent; and
• conducted for profit.

9. When might the Swedish Tax Agency reject my application for F tax?

If the business is not sufficiently independent, the Swedish Tax Agency may decide that the business activity is actually employment. Activity which is not conducted for gain is classified as hobby activity. Activity which is not conducted for gain is classified as hobby activity. Business of a more sporadic nature, such as the sale of a picture, does not count as business activity, and is taxed as income from capital.

The F tax certificate may be revoked if you do not conduct business activity or fail to report or pay your taxes and contributions or submit an income tax return.

10. What is value-added tax?

Value-added tax (VAT) is a tax we pay on virtually all consumption of goods and services. As a business owner, you make this payment to the state. VAT does not count as income or expense in a company, and does not affect its results.

As a business owner, you pay VAT on what you sell, and include a VAT charge in the cost. You pay the difference between the VAT you charge on your sales (output VAT) and the VAT you pay on your purchases (input VAT). The general rate of VAT is 25 percent, although certain goods and services have a lower rate.

11. How do I report VAT?

When you apply for F tax, depending on the company's turnover you can choose whether to report VAT to the Swedish Tax Agency once a year in your income tax return or quarterly or monthly in a special VAT and PAYE return.

If you decide to report VAT annually, the Tax Agency will include preliminary VAT in the calculation of your F tax.

• VAT for the 1st quarter (January - March) must be received by 12 May.
• VAT for the 2nd quarter (April- June) must be received by 17 August.
• VAT for the 3rd quarter (July - September) must be received by 12 November
• VAT for the 4th quarter (October - December) must be received by 12 February.

12. Can I make deductions for costs incurred prior to the business start-up?

Deductions for costs which arose before the company was established are only allowed for sole traders, not for trading partnerships, limited companies and economic associations.

As a sole trader, you may make deductions for your costs in the year of the business start-up and the year before. The costs must be associated with the business. The same applies to short-term equipment with an economic life of three years or less and equipment with a purchase value of below SEK 5,000 (excluding VAT). It is up to you to prove that the costs are associated with the business.

13. What deductions can I make in my business?

Use the Swedish Tax Agency's Avdragslexikon (deduction dictionary) to find out the deductions you can make when your business is up and running.