Guides

#How you're taxed as a light entrepreneur

Short answer: like an employee. When you invoice through a light entrepreneurship company, that company is your employer for the assignment. It pays employer contributions and withholds preliminary tax from your gross pay before the money is paid out, just like any other employer. You therefore don't need to set aside money for tax yourself, pay in preliminary tax, or handle self-employed contributions.

The income is taxed as employment income and appears pre-filled in your tax return, together with any other wages you've had during the year. Your responsibility is the same as for any employee: check that the details are correct and file on time.

#Preliminary tax and A-tax: the concepts

Sweden's tax system is built on the idea that tax is paid continuously throughout the year, as you earn the money. This is called preliminary tax. For employees, this is handled by the employer withholding tax from each pay run and paying the amount to the Swedish Tax Agency (Skatteverket). Someone taxed this way has A-tax, which is the standard arrangement for employees, and it's also what applies to you as a light entrepreneur.

How much tax is withheld is governed by tax tables that depend on things like where you live and how much you earn, or by a special tax adjustment decision from the Tax Agency. The preliminary tax is exactly that – preliminary: the final tax is only determined once your tax return is complete. If too much has been withheld, you get money back; if too little has been withheld, you owe additional tax. Current tables and rules are available at skatteverket.se.

The opposite, F-tax, is used by business owners who are responsible for their own tax payments. As a light entrepreneur you don't need F-tax, since the light entrepreneurship company takes on that role vis-à-vis the Tax Agency.

#From invoice amount to pay: how it all fits together

Many are surprised by the difference between the invoice amount and their net pay. The difference consists of well-defined parts, and the chain looks like this:

1. VAT is subtracted. The VAT on the invoice belongs to the Tax Agency and never affects your pay. Everything below starts from the invoice amount excluding VAT.

2. The service fee is deducted. The light entrepreneurship company charges a fee for invoicing, administration and payout.

3. Employer contributions are paid. What remains needs to cover both your gross pay and the employer contributions, which for most people amount to 31.42 percent of gross pay. Gross pay is therefore calculated so that pay plus contributions together fit within the remaining amount.

4. Preliminary tax is withheld. Tax is deducted from your gross pay according to the tax table or your tax adjustment decision.

5. Your net pay is paid out. What remains after the tax deduction is transferred to your account, together with a payslip showing the full calculation.

If you want to know what a certain invoice amount results in as pay, use the light entrepreneurship company's pay calculator, or work backwards from the net pay you want when setting your price. Understanding the chain also makes you a better negotiator: you know exactly why your price needs to be where it is, and can explain that to the client.

#Tax adjustment: matching your withholding to your situation

The tax tables assume a typical situation, but reality is rarely typical. If you have several employers at the same time, uneven income across the year, or large deductions, the table-based withholding can end up too high or too low. In that case you can apply for tax adjustment with the Tax Agency, formally called a change in the calculation of tax withholding.

Tax adjustment means the Tax Agency calculates your expected annual income and decides how much tax should be withheld from your payments. You pass the decision on to the light entrepreneurship company, which then withholds tax according to the decision instead of the table. This can be especially valuable for light entrepreneurs, since assignment income often varies from month to month.

The easiest way to apply is through the Tax Agency's e-service at skatteverket.se. Keep in mind that the tax adjustment is based on your own forecast: if your income changes significantly during the year, you should update it.

#Final tax and filing your return

After the year ends, the light entrepreneurship company reports your pay to the Tax Agency, and the amounts appear pre-filled in your tax return. The final tax is calculated on your total annual income, from all employers and assignments combined. If the preliminary withholdings match the final tax well, nothing special happens; otherwise it's adjusted with a refund or additional tax to pay.

Always review your tax return, even when everything is pre-filled, and add any deductions you're entitled to as a private individual. If you have questions about your taxation, the Tax Agency is the right source, and for business questions in general there's verksamt.se.

#Tax handled with Truster

With Truster you invoice without a company of your own and get paid with tax and contributions handled: employer contributions are paid, preliminary tax is withheld, and you see the full calculation on your payslip. The platform is built by a payment institution authorized by the Finnish Financial Supervisory Authority (FIN-FSA). Truster is launching in Sweden by invitation: join the waitlist and we'll let you know when it's your turn.