Guides

#Who handles VAT under light entrepreneurship?

Short answer: the light entrepreneurship company. When you invoice through light entrepreneurship, the light entrepreneurship company is the seller in relation to your customer. It applies the correct VAT rate to the invoice, receives the payment, and reports the VAT to Skatteverket (the Swedish Tax Agency). You don't need to register for VAT, file VAT returns, or keep track of reporting periods.

What you do need to understand, though, is how VAT affects your price and your pay. VAT is added on top of your price and is never your money: your pay is always calculated on the invoice amount excluding VAT. Anyone who mixes up amounts including and excluding VAT during price negotiations risks losing a significant part of their intended pay.

#VAT basics: what is VAT?

VAT, value-added tax, is a consumption tax charged on the sale of most goods and services. The seller adds VAT on top of the price, collects it from the buyer, and pays it to the state. VAT isn't a cost for the seller as such, but money that simply passes through on its way to Skatteverket.

VAT-registered companies can, in turn, deduct the VAT they themselves pay on purchases for the business, known as input VAT. That's why VAT between two businesses is often described as a zero-sum game: the business customer normally gets the VAT back and therefore mainly cares about the price excluding VAT.

For private individuals, on the other hand, VAT is a real cost, since they can't deduct it. That distinction is worth keeping in mind when you set prices for different types of customers.

#VAT rates in Sweden

The standard VAT rate in Sweden is 25 percent, and it applies to most goods and services, including most consulting and freelance services. If you invoice for things like design, development, writing, or advisory work, a 25 percent VAT rate generally applies.

Reduced VAT rates apply to certain goods and services, for example within parts of the food, culture, and tourism sectors, and some activities are entirely exempt from VAT. Which rate applies is governed by VAT legislation, not chosen by the seller. A current, complete overview of VAT rates and exemptions is available at skatteverket.se.

As a light entrepreneur, you don't have to make that call yourself: the light entrepreneurship company determines which VAT rate applies to your assignment based on what you're selling. So always describe the assignment accurately when you create your invoice request.

#VAT on your invoice as a light entrepreneur

Here's how the flow looks in practice. You agree on a price excluding VAT with the customer. When the invoice is created, the light entrepreneurship company adds VAT, and the invoice shows the amount excluding VAT, the VAT rate, the VAT amount, and the total. The customer pays the total to the light entrepreneurship company.

After that, the money is split: the VAT is reported to Skatteverket, and the amount excluding VAT forms the basis for your pay. From that, the light entrepreneurship company's service fee and payroll costs are deducted before your pay is disbursed. So VAT never affects your pay, either up or down, as long as the price you've agreed on is excluding VAT.

#Business customers and private customers: same VAT, different experience

For business customers, always quote your price excluding VAT, since that's how businesses compare prices and because VAT-registered customers can normally deduct the VAT. For private individuals, it's the opposite: consumers expect prices including VAT, and for them VAT is a real part of the cost.

That means the same price excluding VAT will feel more expensive to a private customer than to a business customer. Keep that in mind when you send quotes to private individuals, and always be clear about whether your price is including or excluding VAT.

#Common misconceptions about VAT

The most common misconception is that VAT is part of your pay. It isn't: it simply passes through to Skatteverket. The second is that you can choose your own VAT rate or skip VAT to lower your price. The VAT rate follows from the rules for what you're selling, and a correct invoice must include the right VAT.

A third misconception is that VAT and income tax are the same thing. VAT is a tax on the sale paid by the customer, while income tax is deducted from your pay. They're handled separately, and both are taken care of by the light entrepreneurship company when you're a light entrepreneur.

#VAT without the headache, with Truster

With Truster, you invoice without a company of your own: the correct VAT is added to the invoice, VAT is reported correctly, and you get paid with tax and fees handled. 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 if you want to invoice without worrying about VAT.