One entrepreneur’s guide to navigating the Swedish tax system

Starting your own company and navigating taxes can be, well… taxing. But for the many international professionals who move to Sweden to start a new life and a new business, taxes in a new language can prove even more challenging. Nicole Michaelis is an entrepreneur who has done just that.

One entrepreneur's guide to navigating the Swedish tax system
Photo: Nicole Michaelis

After splitting her time and her studies between the US and Germany, Nicole began looking for opportunities to study a Master’s degree in marketing. She found a course that appealed to her at Stockholm University and in 2014 she moved to Sweden.

“I’d visited Sweden one single time before, three years before I moved, on a weekend in the summer, so it was obviously really nice,” she says.

Before moving to Stockholm, Nicole owned her own company and was freelancing as a writer. She decided to put those activities on hold in order to concentrate on her studies full-time.

While studying for her Master’s she began working for various startups on a part-time basis and realised that there was a great need for native English-language copywriting and content marketing.

“I feel very strongly about writing. I write poetry in my free time, so it was important for me to somehow make writing my main living and income and that’s why I thought I would just start the company here,” says Nicole.

Selecting a type of company

She registered her company, Nicole Tells with the Swedish Tax Authority (Skatteverket) as a sole trader (enskild firma) in 2016.

“I settled on that type of company because I wasn’t sure it would be successful and when you start an AB (limited company) you have to invest 50,000 SEK and there’s more work to set it up and I just wasn’t ready for that,” she explains.

Nicole says the prospect of doing company taxes in another country and another language was, understandably, daunting.

Learn more about the different types of Swedish companies

“I didn’t feel comfortable enough with all the taxes to start an AB and with an enskild firma it sounded as easy to legally invoice clients as it would with an AB but with a lot less paperwork”.

Operating her company as a sole trader proved to be a useful training ground for Nicole. Once she gained confidence that her business would be successful, she decided to take it to the next level and turn it into a limited company.

“I could kind of test out how it would work, but now I’ve come over a certain amount of income it makes sense to have an AB because you save on taxes,” she says.

Business expenses and taxes

She says the border between what is considered a personal expense and a business expense is very slim, so it was difficult to deduct expenses when she was operating as a sole trader.

“There are a lot more options to work with the taxes and make your business sustainable if you have an AB. For example, with an AB you can decide to roll a certain revenue over to the next year and not pay taxes on it,” she explains.

According to Swedish company taxation laws (3:12 regler), Swedish limited liability companies are generally required to pay a lower, flat rate of tax and in some cases have the ability to postpone taxation.

Nicole says that although she found some resources in English, she discovered more information through other expats who’d been through the process before. She also enlisted the help of her Swedish partner.

“It can be quite challenging because a lot of the terms you don’t use in your everyday life, so it can feel quite risky if you’re not 100 percent sure what it means. I had my partner sit next to me and we tried to figure it out together and it was still challenging,” she recalls.

Read more about the Swedish tax system

Nicole says there are easier options if you’re considering testing the waters before fully committing to opening a company.

“If people are considering starting their own business but they’re not sure how much income that would generate or how long they would do it, there are companies like Cool Company and Frilans Finans that help you set that up and do all your taxes for you for a certain percentage of your earnings,” she says.

Whether you choose to set up your own company or use an umbrella company, Nicole advises all budding business owners to keep detailed records of their finances.

“If you do start a company, make sure you track all of your invoices from day one. It can be as easy as an Excel sheet if you don’t want to invest in some kind of software, but make sure that you find a system that works for you because that’s going to make your life a lot easier later on,” she advises.

Nicole highly recommends getting all the information and then taking the leap to become a Swedish business owner.

“Just do it. Sweden, specifically Stockholm is a super entrepreneur-friendly place. People are really supportive, there are great opportunities to do business, to grow and to work with some really cool players. You’re met with so much respect when you go in and it’s a really nice working culture,” she says.

This article was produced by The Local Creative Studio and sponsored by

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EXPLAINED: Will Swedish housing prices plummet as interest rates rise?

The Swedish financial supervisory authority warned on Wednesday that rising interest rates could lead to house prices falling "quite sharply". How likely is it that this will happen?

EXPLAINED: Will Swedish housing prices plummet as interest rates rise?

What financial circumstances might make it difficult for borrowers to repay loans?

With an increase in the cost of living, including rising interest rates and rising electricity prices, there are plenty of circumstances that may make it difficult for borrowers – especially those holding large debts in relation to their income – to repay their mortgages.

Households with large debts are therefore more sensitive to an increase in interest rates, according to the Swedish financial supervisory authority, known in Swedish as Finansinspektionen (FI).

The agency published its annual Swedish Mortgage Market report on Wednesday.

“Large debts also mean a higher sensitivity if you were to suffer unemployment during an extensive recession,” said Henrik Braconier, the authority’s chief economist.

Other factors that could stretch borrowers’ finances include rising energy prices, higher food prices, and growing inflation.

“Apples, oranges, tomatoes have gone up by 30 percent,” said Américo Fernández, a household economist at SEB. “Wheat is coming from Ukraine and it’s getting harder and harder to get hold of.”


Will homeowners become unable to repay their mortgage loans?

Not according to Fernández.

“One of the last things Swedish households will fail to make their payments on is their mortgage and their houses,” he said. “They would rather decrease their spending on vacations abroad, or restaurants.”

The FI report noted that most new mortgages include margins that allow for fluctuations in the borrower’s finances. This means that mortgage holders have a cushion that allows them to handle financial changes.

“Our stress test shows that they can handle increases in the interest rate and also loss of income,” said Magnus Karlsson, FI’s director of macroanalysis. “New mortgages have margins in them calculating discretionary income, and will be able to absorb increases in interest rates and loss of income.”

SEB foresees an interest rise of up to three percent over the next two years, Fernández said,an increase that can be absorbed by most households.

Both Fernández and Karlsson agreed that if homeowners have to cut back on spending, those cuts will not come from debt repayment, but from their disposable income – the money they might ordinarily spend on entertainment, eating out, or travelling.

So while household spending may have to change, financial stability is not at stake for most households.

What’s going on with the housing market?

Right now, a record number of mortgage-holders have loans that are worth more than 4.5 times their income. This year, more than 14 percent of new mortgagors took on such large loans, compared to 6.3 percent last year.

A “low interest rate, increase in housing prices, increase in disposable real income and a housing market that is not functioning well” are all factors in the large debts that homeowners have incurred today, Karlsson argued.

Fernández noted that there is an imbalance between the low supply of housing and the high demand for housing, which is in part responsible for the high housing prices we see today.

He said a decrease in price of a few percentage points would not be surprising: “We’re coming from two years of exaggerated prices.”

Will housing prices begin to decrease after two years of increasing prices?

Calculations for three different scenarios tested by FI show that housing prices will decrease, Karlsson said.

While the agency does not predict housing prices, its report shows that under three different scenarios – the first an increase in mortgage interest rate, the second an increase in energy prices, and the third a combination of the first two with a reversal to pre-pandemic housing preferences – prices will decrease.

The Local Sweden reported last year about increasing housing costs in Sweden, spurred on in part by a desire for bigger homes further away from urban areas during the COVID-19 pandemic.

Fernández called the two years of increasing housing costs “surprising.”

“10-12 percent two years in a row, that’s historical in these uncertain times,” he said, noting that prices were still increasing in figures for March this year.

What sorts of housing will see the largest price decrease?

The FI report also included various scenarios of how the price of different types of housing may fluctuate based on changes in the interest rate.

One scenario assumed a 1 percent increase in interest rates this year and a 0.5 percent increase next year, and predicted that while the price of apartments owned in a cooperative – called bostadsrätter – would fall only slightly, the price of detached houses would fall by 10 percent.

Another calculation that accounted for rising electricity prices and a decline in new housing purchases found that the price of bostadsrätter and detached houses risked falling by an average of 30 percent.

Is there a plan to let borrowers end their mortgage terms early?

“We believe it needs to be simpler and more inexpensive for households to repay their mortgages early,” FI Director General Erik Thedéen is quoted as saying in a press release published by the agency on Wednesday.

To that end, Thedéen said at a press conference that the agency had sent a request to the government to change the calculation model for how banks are compensated when mortgages are terminated early.

“When you terminate a loan agreement and the bank incurs costs, it must be reimbursed,” Thedéen said. “But at present the banks are overcompensated, that is what our calculations show. If the government follows our line and changes the model and follows our line, then the banks must simply adapt.”

When asked about the likelihood of this request being granted, FI recommended reaching out to the Ministry of Justice for comment.

What does this mean for foreigners in Sweden?

If you’re already a mortgage holder, then as Karlsson and Fernández assured, mortgage calculations include a cushion that allow for changes in your financial circumstances.

If homeownership is in your future, housing prices may begin to decrease in the near future, so it’s worth keeping an eye on your local real estate listings.

By Shandana Mufti