In its May 2024 list of infringement package, the European Commission has decided to take a decision to send a reasoned opinion to Sweden for its failure, in the Commission’s view, to amend the law governing preliminary income taxation of contractors established in other Member States providing services in Sweden.
In Sweden, in an company/other legal persons engages contractors who are established in EU Member States (or EFTA-EEA states) other than Sweden, the Swedish tax authority (Skatteverket) under national tax law demands that such companies/other legal persons are obligated to withhold a 30% ‘preliminary income tax’ on the payment unless that contractor established elsewhere has been individually approved by the Swedish tax authority (‘F-skatt/F-tax approval’).
In other words, Swedish tax law makes a strong distinction between resident service-providers and non-resident service-providers, to the detriment of non-resident service providers.
Given that many service providers established elsewhere in the EU (and the EEA) do not have F-tax approval, them receiving less remuneration at first infringes the free movement of services given that service providers domiciled in Sweden are not subject to the same treatment.
The Commission has previously requested that Sweden amend its national taxation law to bring it into compliance with the freedom to provide and receive services under Article 56 TFEU and Article 36 EEA, by removing or amending such a withholding, but to no avail. The case was opened in 2023 by the Commission’s Directorate-General for Taxation and Customs Union (DG TAXUD), when it first decided in July 2023 that a letter of formal notice would be sent to Sweden.
Now that a reasoned opinion has been sent to Sweden in May 2024, this is the final step that the Commission proposes to Sweden whereby it must amend its national law. Sweden now has two months to respond and take the necessary measures to correct the national law. If Sweden fails to act, the Commission is thereby entitled to bring the matter before the Court of Justice of the European Union (CJEU) for a declaration.
More on the infringement proceedings case, logged as INFR(2023)4007, can be found here.