Sweden is an attractive destination for global businesses expanding into Europe thanks to its innovation-driven economy, transparent regulatory framework, and strong focus on sustainability. With full foreign ownership allowed, competitive corporate tax rates, and a highly skilled workforce, setting up a subsidiary in Sweden provides a strategic base for reaching Nordic and EU markets.
Suppose you’re in tech, clean energy, life sciences, or professional services. In that case, this guide covers everything you need to know about setting up a subsidiary company in Sweden, from selecting the right legal structure to registration, taxation, and ongoing compliance.
Key Takeaways
- Setting up a subsidiary in Sweden is a relatively efficient process, typically taking between 2 to 4 weeks through the Swedish Companies Registration Office (Bolagsverket).
- Sweden offers a competitive corporate tax rate of 20.6%, with additional deductions available for companies investing in research, development, and sustainability initiatives.
- There is no requirement for a local director in Sweden, allowing foreign entities to appoint non-residents to the board, as long as at least one board member resides within the European Economic Area (EEA).
- Sweden permits 100% foreign ownership in most sectors, enabling full control of the company without the need for local shareholders.
- The country provides strong legal and intellectual property protections, ranking high globally for transparency and legal reliability, which helps safeguard business assets and operations.
What are the Types of Subsidiaries in Sweden?
Foreign companies looking to expand into Sweden look at different types of subsidiaries when setting up a subsidiary company in Sweden, depending on ownership and strategic goals:
1. Private Limited Company (Aktiebolag – AB)
This is the most common form of subsidiary in Sweden.
Key Features:
- Must have at least one director and one deputy director if there’s only one board member.
- Can be wholly owned by a foreign parent company.
- Operates as a separate legal entity, responsible for its own debts and obligations.
- Must register with the Swedish Companies Registration Office (Bolagsverket).
Ideal For:
Foreign companies looking to operate independently in Sweden with limited liability.
2. Branch Office (Filial)
Not a subsidiary in the strict legal sense, but commonly used as an alternative.
Key Features:
- Not a separate legal entity from the foreign parent.
- Must be registered with Bolagsverket.
- Requires a managing director residing in the European Economic Area (EEA).
- The parent company is fully liable for the branch’s obligations.
Ideal For:
Foreign companies wanting to enter Sweden without creating a new legal entity.
3. Economic Association (Ekonomisk förening)
Though rare for subsidiaries, this structure may be used for cooperative ventures.
Key Features:
- Must promote the economic interests of its members.
- Requires at least three members.
- Not typically used by foreign parent companies for subsidiaries.
Ideal For:
Joint ventures or cooperatives rather than traditional subsidiaries.
4. Public Limited Company (Publikt Aktiebolag – AB (publ))
Used for larger operations that may intend to offer shares to the public.
Key Features:
- Can be listed on a stock exchange.
- More rigorous reporting and governance requirements.
Ideal For:
Large-scale subsidiaries with public or institutional investment plans.
5. Holding Company
A Swedish subsidiary may be structured purely to hold shares in other companies.
Key Features:
- Can be set up as a Private or Public Limited Company.
- Used for tax planning, asset management, or investment control.
Ideal For:
Groups managing multiple investments or entities within or outside Sweden.
Step-by-Step Guide to Setting Up a Subsidiary in Sweden
Setting up a subsidiary company in Sweden involves a well-defined legal and administrative process:
- Choose Legal Structure: Most subsidiaries are set up as a Limited Liability Company (AB – Aktiebolag).
- Reserve a Company Name: Apply for a unique company name through the Swedish Companies Registration Office (Bolagsverket).
- Prepare Articles of Association: Draft and sign the Articles of Association, detailing company structure, operations, and governance.
- Deposit Share Capital: Deposit the minimum share capital of SEK 25,000 (approx. €2,200) into a Swedish business bank account.
- Register with Bolagsverket: Submit the registration application, Articles of Association, and bank certificate to Bolagsverket.
- Obtain an Organization Number: Bolagsverket issues an organization number once approved, officially registering your entity.
- Register for Taxes with the Swedish Tax Agency (Skatteverket): Apply for F-tax certificate (for income tax), VAT registration, and employer registration (if hiring).
- Ongoing Compliance: Ensure regular tax filings, annual reports, and bookkeeping per Swedish accounting standards.
These steps are essential to follow when understanding how to establish a subsidiary company in the Sweden market.
Key Benefits of Establishing a Subsidiary in Sweden
There are a number of benefits associated with establishing a subsidiary in Sweden. Here is a look at some of them:
- Gateway to the EU and Nordic Market: Sweden provides direct access to the European Union and Scandinavian economies.
- Strong Legal and Business Infrastructure: Transparent laws, efficient administration, and strong IP protection create a secure business environment.
- Highly Educated Workforce: Benefit from Sweden’s multilingual and tech-savvy talent pool.
- Innovation-Friendly Environment: Sweden ranks high in innovation and digital readiness, making it ideal for startups and tech companies.
- Attractive Tax Environment for Businesses: Reasonable corporate tax rate (20.6%) and generous R&D incentives.
Essential Documents for Registering a Subsidiary
For setting up a subsidiary company in Sweden and its registration, you’ll typically need:
- Proposed company name and address
- Articles of Association
- Minutes of the board meeting or resolution from the parent company
- Proof of identity and authority for directors/shareholders
- Bank certificate for deposited share capital
- Registration form for Bolagsverket
- Tax registration forms for Skatteverket
Optional but useful:
- Business plan or operational outline (for certain sectors)
- Power of attorney (if using a local representative)
Legal Structures Available for Subsidiaries in Sweden
Foreign companies usually choose from these business entity types when setting up a subsidiary company in Sweden:
1. Aktiebolag (AB) – Limited Liability Company
- The most common form for subsidiaries.
- Shareholders are not personally liable beyond their capital contribution.
2. Handelsbolag (HB) – General Partnership
- Less common for foreign entities.
- Two or more partners share profits, responsibilities, and liabilities.
- No minimum capital requirement, but partners have unlimited liability.
3. Kommanditbolag (KB) – Limited Partnership
- Includes general and limited partners.
- General partners have unlimited liability; limited partners are liable only for their contribution.
4. Branch Office (Filial)
- Technically, it is not a subsidiary but a legally dependent extension of the foreign parent company.
- No share capital requirement.
- Must be registered with Bolagsverket and follow Swedish accounting laws.
Taxation Rules and Incentives for Subsidiaries in Sweden
Sweden imposes a flat corporate income tax rate of 20.6% on profits earned by Swedish subsidiaries. This rate applies to both domestic and foreign-owned entities registered in Sweden.
Tax Incentives and Deductions
- R&D Tax Deductions: Sweden offers favourable tax deductions for companies investing in research and development. Social security contributions can also be reduced for R&D staff.
- Group Contributions: Swedish tax law allows profit transfers between group companies (including subsidiaries) under certain conditions, enabling tax optimization within the group.
- No Withholding Tax on Dividends (EU Parent-Subsidiary Directive): Dividends paid to EU-based parent companies are typically exempt from Swedish withholding tax if conditions are met.
- Loss Carryforwards: Operating losses can be carried forward indefinitely to offset future taxable income.
Regulatory and Compliance Requirements
When setting up a subsidiary company in Sweden, you must comply with the following ongoing obligations:
1. Annual Reporting
- All companies must submit an annual report to the Swedish Companies Registration Office (Bolagsverket).
- Larger entities must also submit audited financial statements.
2. Tax Filings
- File corporate income tax returns annually with the Swedish Tax Agency (Skatteverket).
- VAT returns (monthly, quarterly, or annually, depending on turnover).
- Employer tax returns if the subsidiary hires staff.
3. Accounting
- Maintain books in accordance with Swedish Generally Accepted Accounting Principles (GAAP) or IFRS (for larger entities).
- Financial records must be retained for at least 7 years.
4. Employment Compliance
- Adhere to Swedish labour laws, union agreements, and workplace safety standards.
- File monthly income statements and social contributions for employees.
Do You Need a Physical Address for a Subsidiary in Sweden?
Yes, a Registered Address is Mandatory for the business incorporation of a subsidiary. All subsidiaries must have a registered office address in Sweden. This is where official correspondence from Swedish authorities will be sent.
Alternative Options
If you don’t have a physical presence yet:
- Virtual Office Providers can supply a compliant legal address for registration.
- Some firms (like Commenda) offer local representative services, which may be required for certain legal or tax purposes.
Operational Setup for a Subsidiary in Sweden
Setting up a subsidiary company in Sweden involves more than just registration. Key considerations include:
1. Staffing
- Sweden has a highly skilled and multilingual workforce.
- Employment contracts must comply with local labour laws and collective agreements.
- Hiring locals can simplify communication and compliance.
2. Office Setup
- Subsidiaries may rent a commercial space or use a shared office/co-working space initially.
- Remote operations are allowed, but a registered address is still required.
3. Payroll & HR
- Must register as an employer with the Tax Agency.
- Handle monthly payroll reporting, social security payments, and pension contributions.
- Comply with employee insurance and sick leave regulations.
4. Technology and Data Compliance
- If handling customer or employee data, ensure GDPR compliance is maintained.
How to Open a Business Bank Account for a Subsidiary?
Opening a business bank account for a subsidiary in Sweden is a crucial step in operationalising the company. Here’s a step-by-step guide on how to do it, along with the documents you’ll need and practical considerations:
- Incorporate the Company: First, register the subsidiary with Bolagsverket and receive an organisation number.
- Select a Bank: Choose a reputable bank such as SEB, Nordea, Handelsbanken, or Swedbank.
- Submit Documentation
Required documents typically include:- Certificate of incorporation
- Articles of Association
- Board meeting minutes or power of attorney
- Personal ID/passport of directors and authorised signatories
- Proof of registered address in Sweden
- Swedish organisation number
- Compliance Check: Banks will conduct KYC (Know Your Customer) and AML (Anti-Money Laundering) checks. The parent company’s financials or business plan may also be requested.
- Deposit Share Capital: Deposit the minimum required share capital to activate the account.
- Get Bank Confirmation: A certificate of deposit from the bank is used to finalise company registration if you haven’t already submitted it.
Opening a business account may require in-person verification or the help of a local representative, depending on the bank. Following this practice will help you figure out how to set up a parent company with subsidiaries in the Sweden market as well.
Is an Operating Agreement Necessary for a Subsidiary in Sweden?
While Sweden doesn’t legally require an Operating Agreement (like in some other jurisdictions), having a Shareholders’ Agreement or internal corporate governance rules is highly recommended for subsidiaries, especially if multiple stakeholders are involved.
This document helps:
- Define ownership rights and responsibilities
- Clarify decision-making processes
- Outline profit distribution and exit strategies
- Avoid future disputes within the parent or group structure
It’s particularly important when the Swedish subsidiary is part of a joint venture or has external investors.
Opening a Branch vs. a Subsidiary in Sweden: What’s the Difference?
Opening a subsidiary in Sweden and opening a branch serve different purposes in terms of investment and especially the incorporation procedure. Here is a look at their differences in detail:
| Feature | Branch Office | Subsidiary (AB – Aktiebolag) |
| Legal Identity | Not a separate entity | Separate legal entity from the parent |
| Liability | Parent company bears full liability | Liability limited to the subsidiary’s capital |
| Taxation | Taxed as part of the foreign company | Taxed independently in Sweden (20.6% corporate tax) |
| Regulation | Fewer setup formalities but limited freedom | More control, easier to scale operations |
| Ownership | Owned and managed directly by the parent | Can be 100% foreign-owned |
| Recommended For | Temporary or limited operations | Long-term business presence in Sweden |
How Commenda Can Help You Expand in Sweden?
Commenda simplifies how to establish a subsidiary company in Sweden market by offering end-to-end subsidiary setup services. With deep local expertise and a streamlined approach, Commenda ensures you’re compliant, operational, and ready for growth.
Commenda’s Services Include:
- Entity registration with Bolagsverket
- Preparation of incorporation documents
- Tax ID and VAT registration with Skatteverket
- Local director/representative appointment (if needed)
- Virtual office or registered address services
- Opening a corporate bank account
- HR/payroll setup & local employment compliance
- Post-registration compliance advisory (tax, accounting, reporting)
Talk to an Expert today and get started with our easy-to-follow registration services!
FAQs
Q. How much does it cost to set up a subsidiary in Sweden?
- Government fees: ~SEK 2,200
- Minimum share capital: SEK 25,000
- Additional costs for legal, advisory, and virtual office services vary.
Q. How long does it take to register a subsidiary in Sweden?
- Typically, around 2 weeks, assuming all documents are correctly prepared.
- Bank account setup may take additional time due to KYC checks.
Q. Can a foreigner fully own a subsidiary in Sweden?
Yes. Foreign individuals or companies can own 100% of a Swedish subsidiary (Aktiebolag) as it’s convenient to learn how to form a subsidiary in the Sweden market.
Q. What are the common challenges when opening a subsidiary in Sweden?
- Opening a corporate bank account (due to strict AML/KYC laws)
- Understanding employer obligations and collective agreements
- Language barriers in documentation and local communication
Q. Do subsidiaries in Sweden need a local director or representative?
It is not legally required, but having a local representative or contact person can simplify communication with authorities and banks when figuring out how to create a subsidiary in the Sweden market. Some banks may also prefer a local presence during onboarding.
Q. What are the annual compliance requirements for subsidiaries in Sweden?
- File annual accounts with Bolagsverket
- Submit corporate tax return and VAT returns
- Maintain proper accounting records (Swedish GAAP or IFRS)
- Submit monthly employer declarations (if hiring)
Q. Can a subsidiary hire employees directly in Sweden?
Yes. Once registered as an employer with the Swedish Tax Agency, a subsidiary can legally hire staff and must meet all local employment standards.
Q. What happens if a subsidiary fails to meet compliance rules in Sweden?
- Fines and penalties from authorities
- Risk of deregistration or blacklisting
- Legal action against directors in severe cases
- Damage to the parent company’s reputation and operations
