Today, the European Commission has decided to refer Sweden to the Court of Justice of the European Union for failing to comply with the freedom to provide services under Article 56 of the TFEU and Article 36 of the EEA Agreement.
Swedish clients paying contractors from other EU or EEA countries must withhold a 30% preliminary income tax unless approved by the Swedish tax authority (known as F-tax approval). The Commission believes this requirement infringes on the freedom to provide services when foreign contractors have no Swedish permanent establishment.
The Commission issued formal notices to Sweden in July 2023 and May 2024, asking for compliance with EU law. Due to insufficient action, the case is now referred to the Court of Justice of the European Union.
Background
Since 2021, Swedish clients must withhold preliminary tax on payments to foreign contractors without a Swedish establishment, unless pre-approved by the Swedish tax authority. This applies even to services performed abroad if under Swedish control.
Refunds of withheld taxes can take years, creating cash-flow issues for foreign contractors. The administrative burden of obtaining F-tax approval also poses a barrier to the freedom to provide services.
For More Information
Infringement decisions database
Infringement procedure Sweden (INFR(2023)4007)