Starting a business in Sweden: Benefits and Challenges

By Mark Baggs, Head of Global

sweden at night

Alongside it’s rolling hills and extensive coastlines, Sweden is renown as a prime place to do business. It's the home of IKEA, Volvo and Sportify to name just a few global businesses who originated from there. Sweden is the sixth most competitive economy in Europe and often ranks as one of the highest-performing economies worldwide. So, it's easy to see why starting a business in Sweden is a popular choice for many. 

Infamous for its strong business environment, diverse talent pool and innovative workforce, the country offers lots to those wanting to take their business into the Swedish marketplace.

However, before expanding into the country, it’s important to understand its local laws, rules, and regulations.

What are the benefits of doing business in Sweden?

Ease of doing business

According to the World Bank’s Doing Business Report 2020, the country ranks a very respectable 10th out of 190 economies for ease of doing business. It also boasts a strong and stable economy, which offers some of the lowest corporate tax rates in the EU of a 20.6% flat rate. The tax rate is also based solely on a company’s annual profit; no other license tax or local corporate tax is charged.

An open and innovative economy

Sweden’s economy promotes innovation and competition. Their place on the Global Talent Index, European Innovation Scoreboard and the Bloomberg Innovation Index emphasises this further.

Their government also has many policies with the purpose of fostering innovation and ‘incentives for investments in knowledge and entrepreneurial activity.’ Access to government support, alongside a high degree of equality mean it’s a hub for innovation.

Alongside this, investment in research is among the highest in the world in relation to GDP. The cleantech, infrastructure and creative services industries are also among some of the fastest growing sectors in the country. 

Educated and innovative population

Sweden is a large country, but thanks to its well-functioning infrastructure, including its rail links, telecommunications and broadband, the country is able to be innovative. The government supports this further by introducing policy geared towards accessing technology and the internet. In the 1990s, the Swedish government provided Swedes with early access to fast internet alongside subsidised computer-lending. In 2016, the government also adopted a new broadband strategy. It aims to get all of Sweden connected to high-speed internet by 2025.

 It’s population has the greatest percentage, after the US and Canada, to have continued on to higher studies after secondary school. Figures from 2019 show around 37% of the Swedish population had attended post-secondary education, most of which lasted three years or more.

What are the challenges of expanding into Sweden?

The climate

 Sweden does have a moderate climate, with average temperatures in the summer ranging from 20-25C and in the winter, between -7 and 2C. In the peak of winter, the country often experiences around just six hours of daylight per day. 

High living costs

Sweden has a high cost of living, especially in innovative hot spots such as Stockholm and Gothenburg. The cost of living is estimated at two percent lower than the United States. But since the country’s individual tax rate is high, the cost of living feels much greater.

 Steep rent and a lack of housing in areas like Stockholm make attracting younger talent challenging, in comparison to other European cities. Tuition fees are also steep for students outside the EU, which could impact the variety of talent in the country.

High individual tax rates

A perk of Swedish living is its high-quality social services programs, which spans health programs, long parental leave, higher education, and child and elderly care. This high level of public spending means higher taxation rates. In 2018, Denmark's tax-to-GDP ratio was at 44.9%, Norway's at 39%, and Sweden's at 43.9%. This compares to a ratio of 24.3% in the United States. These high rates may make it challenging to recruit talent from outside Sweden, to come work in the country.

Complex labour laws

Sweden’s labour laws are strict and offer workers protections in the form of collaborative bargaining agreements of individual labour unions. Collective bargaining exists both at industry and company level, but bargaining takes place foremost at industry level.  However, there is no law on minimum wage, as this is considered the responsibility of the robust trade unions and employers organisations. The minimum wage tends to hover near 60% to 70% of the average wage in Sweden.

Swedish law limits the workweek to 40 hours, just like in the U.S. However, it also dictates that all workers are entitled to 25 paid vacation days and 16 additional public holidays each year.

Expand into a new country quickly and seamlessly

Operating in a new country, even one with a friendly business environment like Sweden, can come with plenty of challenges. From navigating the local laws and regulations to the costs, taxes and maintaining compliance.

When working with a partner like Procorre Global, you can be sure your business will have a smooth transition into another country. While we take care of all the business and HR admin, you can focus on growing your business. Request a call back from a member of our team today, to start your global expansion journey.

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