Legal and Regulatory Guide for Czech Companies Expanding into Sweden

Expanding into the Swedish market offers Czech companies valuable opportunities, but also presents specific legal and administrative challenges. This guide clarifies the key steps, from company formation and tax obligations to the specifics of employment law, enabling you to make informed decisions and avoid costly mistakes under both Czech and international regulations.

Quick Summary

• The Swedish market is attractive for Czech companies due to high purchasing power, stability, and a traditional focus on values similar to those in the Czech Republic.
• Establishing a Swedish branch or subsidiary (AB – aktiebolag) requires meeting formal requirements, particularly minimum share capital and a specific board composition.
• The Swedish tax system, labor law, and regulatory requirements differ fundamentally from the Czech environment.
• The international legal team at ARROWS law firm in Prague routinely handles expansion into the Swedish market, helping your company shorten market entry time and minimize legal risks.

Why is the Swedish market interesting for Czech companies?

Sweden is one of the world's most advanced economies with a long-term stable environment that values precision, reliability, and long-term business relationships. Just as in the Czech Republic, thorough preparation, meeting deadlines, and clear communication are highly valued in Swedish business dealings. This cultural compatibility makes the Swedish market a natural target for Czech entrepreneurs who have already proven the quality of their products.

This high purchasing power means that Swedish companies and consumers are willing to invest in quality solutions if they believe in their value and long-term benefit.

Sweden also invests a significant portion of its GDP in research and development, making it an innovation hub in Europe. For Czech exporters in manufacturing, engineering, or IT, this market is particularly attractive. Our attorneys in Prague at ARROWS law firm have extensive experience in helping Czech companies successfully penetrate Nordic markets. Contact us at office@arws.cz if you are considering expansion to Sweden.

Basic legal framework for entering the Swedish market

Before your company decides to enter the Swedish market, it must understand the available legal structures and the obligations they entail. Sweden is a member of the European Union, meaning it follows many EU standards, but it also maintains its own legal tradition and specific requirements.

A Czech company essentially has three main entry options: establishing a Swedish joint-stock company (aktiebolag – AB), opening a branch (filial) of the parent company, or working with local partners. Each option has its own advantages and risks that must be weighed against your company's strategy.

Swedish limited liability company (aktiebolag – AB)

The most commonly used legal form for foreign investors is the aktiebolag (AB). Although the name evokes the Czech "akciová společnost" (joint-stock company), in practice for smaller firms, it functions more as an equivalent to a Czech s.r.o. An aktiebolag provides owners with limited liability protection, where liability is limited to the amount of the share capital contribution. The basic regulation is contained in the Swedish Companies Act (Aktiebolagslag 2005:551).

The minimum share capital for a Swedish private company (privat aktiebolag) is 25,000 SEK (approximately 2,200 EUR).

An interesting and very important rule for foreign entrepreneurs concerns the composition of the board of directors. While in the Czech Republic the statutory body is the executive director (jednatel), in Sweden, the company is managed by a board of directors (styrelse). According to the law, at least fifty percent of the board members and the managing director must reside within the European Economic Area, as stated by Bolagsverket (the Swedish Companies Registration Office).

However, it is necessary to have a service address in Sweden or an authorized representative for service of process if no one from the management physically resides in Sweden.

Procedural steps for establishing an aktiebolag

The process of establishing a Swedish company looks simple on paper, but in practice, it involves several important details. A typical procedure includes the following points:

• Preparation of founding documents. These must include the company name, business objects, share capital amount, number of board members, and other relevant data in accordance with the Aktiebolagslag.
• Subscription and payment of shares. The share capital must be deposited in full into a special bank account before the company is registered. Swedish banks are very strict regarding Anti-Money Laundering (AML) procedures and require extensive documentation.
• Registration of Ultimate Beneficial Owners (UBO). In accordance with EU directives, you must identify individuals who own or control more than 25 percent of the company. This registration is carried out with Bolagsverket under the Act on Registration of Beneficial Owners (Lagen om registrering av verkliga huvudmän).
• Business licenses. Freedom of trade applies in Sweden, and there is no general trade license. However, certain activities require specific permits.
• Registration with Bolagsverket. The final registration of the company with Bolagsverket is the act by which the legal entity is created. The fee ranges from approximately 1,900 to 2,200 SEK.
• Tax registration (F-skatt). After the company is formed, an application must be submitted to the Swedish Tax Agency (Skatteverket) for approval for corporate tax and VAT registration.

Related questions – Establishing a Swedish company

1. Do I need to go to Sweden in person to establish a company?
It is not strictly necessary; the entire process can be managed from the Czech Republic via power of attorney, although a personal visit may be required by the bank. Our Prague-based attorneys at ARROWS law firm regularly handle the establishment of foreign companies and can simplify the process for you (write to us at office@arws.cz).

2. How long does the establishment take?
The registration with the authority itself takes 1–3 weeks, but due to banking processes, expect a total of 4–8 weeks.

3. What are the total costs?
In addition to the minimum capital of 25,000 SEK, expect fees for registration, legal services, document translations, and potentially registered office fees.

The tax system in Sweden

The Swedish tax system is one of the biggest sources of surprise for Czech entrepreneurs. While the basic income tax rate is not dramatically higher, administration and penalties are set very strictly.

Corporate tax

The corporate income tax rate in Sweden is 20.6%. This is comparable to the Czech rate (21% as of 2024).

The Swedish tax system allows for certain tax adjustments, such as moving profits into reserve funds, which allows for the deferral of taxation on part of the profit for up to 6 years, according to Skatteverket information.

Corporate tax is paid in the form of installments. At the beginning of the year, the company submits a preliminary tax return with profit estimates, and the tax administration assesses monthly payments. A reconciliation takes place at the end of the year.

If you do not have a local representative, managing tax affairs from the Czech Republic is complicated, as communication with the authorities takes place primarily in Swedish.

Penalties for tax errors

The Swedish administration is uncompromising in the event of errors. If the tax authority finds that you have provided incorrect information in your tax return, it may impose a tax surcharge (skattetillägg). This usually amounts to 40% of the additional tax assessed.

In addition, late payment interest is charged. This means that if you make a mistake in your tax reporting, you will not only pay the underpayment but also a high penalty.

VAT and other taxes

The standard VAT rate (Moms) in Sweden is 25%. However, there are reduced rates of 12% and 6% for specific goods and services, such as food or passenger transport.

If a foreign company does not have a permanent establishment in Sweden but performs taxable transactions there, it may be required to register for VAT. It is necessary to examine the place of supply in detail under Swedish tax regulations.

Related questions – Tax obligations in Sweden

1. Do I have to pay Swedish taxes even if I only have a branch in Sweden?
Yes, a branch (filial) is subject to taxation in Sweden on its income attributable to that permanent establishment.

2. What are the deadlines for filing a tax return?
Deadlines depend on the end of the accounting period; usually, the return is filed by August 1st of the following year for electronic submissions.

3. What happens if I miss the deadline?
Late filing risks late penalties, which range in the thousands of SEK and increase over time.

Employment law and employment in Sweden

Swedish employment law differs significantly from Czech law. Sweden has a very strong tradition of collective bargaining agreements and a high degree of union organization, which affects even small firms.

Employment contracts and forms of employment

Under Swedish law, the main rule is employment for an indefinite period. Fixed-term employment is possible, but the law precisely defines the situations in which it can be used.

If an employee works on a fixed-term basis for the same employer for more than 12 months during a five-year period, the contract automatically converts to an indefinite term. The employer is obliged to inform the employee in writing of all essential terms of the employment relationship.

Collective agreements and their impact

In Sweden, there is no statutory minimum wage; it is set exclusively in collective agreements. If you do not sign an accession agreement, you are formally not bound, but in practice, unions may pressure you to sign.

Ignoring collective agreements can be very expensive. If you employ workers under conditions worse than what is customary in the industry, you risk conflicts.

Employer contributions

The Swedish social security system is primarily funded by employers. The employer pays social security contributions at a rate of 31.42% of the gross wage.

In addition to statutory contributions, it is common and, under collective agreements, mandatory to pay so-called contractual insurance. This increases labor costs by an additional approx. 5–10%.

Termination of employment

Termination by the employer must always be objectively justified according to Section 7 of the LAS Act. Reasons can be either a shortage of work or reasons on the part of the employee.

Related questions – Employment in Sweden

1. Can I hire an employee for a fixed term "on trial"?
Yes, the concept of a probationary period (provanställning) exists and can last a maximum of 6 months.

2. What is the minimum wage in Sweden?
There is no statutory minimum wage; you must follow the collective agreements for the given sector.

3. Do I have to hire employees directly, or can I use outsourcing?
You can use agencies, but beware of disguised employment, as authorities assess the actual state of work management.

Who can you contact?

Regulatory requirements and licenses

Before you start operating in Sweden, you must clarify whether your field requires special permits. In Sweden, there is no general trade license, but individual sectors may have specific requirements.

Regulated sectors include financial services, construction, electrical installations, food and alcohol sales, or transport. Each of these fields has its own registration authority.

Our attorneys in Prague can conduct an audit of your specific activities and determine what permits you will need under local regulations.

Data Protection (GDPR)

Sweden is governed by the General Data Protection Regulation (GDPR). The supervisory authority is Integritet Skydds Myndigheten (IMY).

Companies must conduct an audit of processed data, fulfill information obligations, and report security incidents. Sanctions for violations can be drastic.

IMY actively monitors the use of camera systems and employee monitoring.

Tax and regulatory risks for Czech companies

Let us now detail the specific risks awaiting a Czech company entering the Swedish market without adequate legal preparation.

Risks and Sanctions	How ARROWS helps (office@arws.cz)
Errors in tax reporting: Tax surcharge usually 40% of the assessed tax, plus late interest.	ARROWS attorneys collaborate with Swedish tax advisors.
Labor law violations: Disputes over the invalidity of termination, damages for non-compliance with LAS rules.	Preparation of contracts in accordance with Swedish law.
Missed registration process: Inability to invoice, blocking of activities by the bank, legal uncertainty.	ARROWS manages communication with Bolagsverket and banks.
Permanent establishment issues: A Czech company unknowingly creates a permanent establishment in Sweden and fails to tax profits.	Assessment of whether your activities meet the criteria of a permanent establishment.

Practical steps for entering the Swedish market

If you intend to enter the Swedish market, follow this structured plan:

Market research and strategy

Identify your potential customers, competitors, and partners. Swedish business registers are very transparent, and much information about companies is publicly available online.

Choosing a legal structure and registered office

Decide between establishing a subsidiary or setting up a branch. You will need a registered address in Sweden; while a physical office is more costly, it provides greater credibility than a virtual office.

Legal Preparation and Documentation

Prepare an extract from the Czech Commercial Register, copies of passports, and corporate resolutions regarding the expansion. ARROWS, a law firm in Prague, has extensive experience in preparing these documents for foreign entities (office@arws.cz).

Banking Onboarding

Opening a bank account in Sweden for a foreign entity is a complex operation. Swedish banks are extremely strict; therefore, be prepared to document the source of funds and provide a detailed business plan.

Comparison: Czech s.r.o. vs. Swedish AB

Criterion	Czech s.r.o.	Swedish AB
Minimum Share Capital	1 CZK	25,000 SEK
Statutory Body	Managing Director(s)	Board of Directors (min. 1 member)
Residency Requirement	Not strict	50% of board members must reside in the EEA
Employment Law	Czech Labour Code	Statute + strong influence of collective agreements
Employer Social Contributions	24.8%	31.42%
Corporate Tax	21%	20.6%
Registration Process	5–7 working days	2–4 weeks

Cultural and Business Specifics of the Swedish Environment

Janteloven and Egalitarianism

In Sweden, there is a cultural concept called Janteloven, which discourages displays of superiority. Emphasis is placed on teamwork, consensus, and equality, so aggressive marketing often does not work here.

Direct Communication and Flat Hierarchy

Swedish companies often have a very flat organizational structure. Decision-making may seem slow due to the search for consensus, but implementation is subsequently rapid.

Punctuality and Planning

Time is highly respected in Sweden, and it is essential to arrive exactly on time for meetings. Plan well in advance, as business life practically comes to a standstill in July and during Christmas.

Conclusion

Entering the Swedish market is a logical step for a Czech company. Although the environment is similar in many respects, details in legislation, taxes, and employment law can be fatal for an unprepared firm.

ARROWS, a Prague-based law firm, has long-standing experience with international projects. If you are considering expansion to the Swedish market and want to minimize risks, contact our Czech legal team at office@arws.cz.

FAQ – Frequently Asked Legal Questions on Entering the Swedish Market

1. Can I own a Swedish company from the Czech Republic?
Yes, a Czech parent company can own 100% of the shares in a Swedish subsidiary.

2. What are the costs of establishing a Swedish company?
In addition to the share capital, expect registration fees and costs for legal services, translations, and notary fees in the range of tens of thousands of crowns.

3. How long does it take before I can start doing business?
Realistically, expect 1 to 3 months, mainly due to banking procedures, although the purchase of a ready-made company is faster.

4. Do I need a Swedish lawyer?
It is advisable to have a legal partner who knows the local conditions; therefore, ARROWS cooperates with local partners to ensure comprehensive service.

5. How does dividend taxation work?
Thanks to the EU Parent-Subsidiary Directive, dividends paid by a subsidiary to a parent company within the EU are exempt from withholding tax under certain conditions.

Disclaimer: The information contained in this article is for general informational purposes only and serves as a basic guide to the issue. While we strive for maximum accuracy, legislation and its interpretation evolve over time. To verify the current wording of regulations and their application to your specific situation, it is essential to contact ARROWS law firm in Prague directly (office@arws.cz). We bear no responsibility for any damages or complications arising from the independent use of information from this article without our prior individual legal consultation and professional assessment. Every case requires a tailor-made solution; therefore, do not hesitate to contact us.

Read also:

• How to Set Up a Company or Branch in the Czech Republic for Swedish Businesses Legal Basics and Practical Tips
• How Swedish Companies Can Avoid Contract Mistakes in the Czech Republic: Practical Legal Tips
• How to Hire in in the Czech Republic as a Swedish Employer: Employment Contract Pitfalls
• How to Collect Debts in the Czech Republic for Swedish Businesses A Legal Guide
• How to Start Doing Business in the Czech Republic as a Danish Company: What you need to know.