I’m currently live in Sweden, and running a one-man limited company(AB) in Sweden to do IT outsorce work for a company abroad. It was good slotion because its fixed income every month and I can pay myself good salary and left a little bit in the company account. Recently I have another international client so I do extra work and doubled the income. The problem now I see is I have much more money left in the company (about 1 million sek )and I will have to pay 20% company tax before I can use these money to pay myself in the future. (I can pay myself in diviend or rise salary, but both will end up a high tax rate).
I wonder is there any solution to optimize it.
I heared I can open an off-shore company in Estonia which they have 0% company tax. So I can ask my client to split the payment partly over there. But As long as I own that company I will have to pay the same amount of company tax (20.6%) in Sweden.
Or should I switch to sole-trader? Is it better in this situation?
I also would like to invest some in tjänstepension.
By sole-trader you mean “Enskild näringsverksamhet”? in that case it’s worse than AB when your yearly profits are above the threshold for state income tax.
You could put more into tjänstepension, there is a maximum limit of whichever is lower of 35% of your salary or 10 PBB (525000 SEK for 2023). But tjänstepension is taxed as income when you start getting paid out from it, so you need to calculate if it’s worth it to push the money and taxes to the future or not.
Moving money via estonia (or other low tax country) will probably not work, as long as you live in sweden or have substantial connection to sweden (for example by owning a company in sweden where you have a controlling interest).
If you don’t need the money for at least 5 years you can look into the 5:25 rules, since you can get money out with low taxation by putting the company on hold for 5 years, but it can be problematic if you continue working with the same type of tasks in another company you own.
Thanks a lot for the advice! Yes sole-trader is the Enskild näringsverksamhet.
I will consider the tjänstepension seems its easier to handle. I need talk to bank how to change my tjänstepension because I signed a contract with them but its a low amount.
The 5:25 rules, Do you mean the periodiseringsfond? (That I can save 25% of the company money into this fund) and then keep it for 5 years and even out if my company has low income in the future while I can pay myself same amount salary.
The 5:25 rules is in regards to “trädabolag”, where you can put the company on hold for 5 years and then close it and take out all the money with 25% tax, it can be beneficial if you have a lot more money saved up in the company compared to what you will be able to take out with the 3:12 rules (the special low 20% dividend tax up to a threshold in small companies). You would still have to pay the company tax though.
Perodiseringsfond is more for spreading out taxable profits over multiple years, which in practice becomes delaying taxation for parts of the profit for up to 5 years.
Sweden is high tax country so it’s difficult to pay less than approximately 50% in taxes (when counting both company taxes and personal taxes, which is reasonable to do as self-employed).
I assume you’re already taking out salary right up to the threshold for state income tax (613900kr for 2023), and dividend according to 3:12 rules of which you should fulfill the criteria for using the salary rule, so that you can get low (20%) tax on dividend up to half the salary amount (306950kr dividend taxed at 20% (but company will also have paid 20.6% in company tax on that money) in 2024 if you take 613900kr in salary for 2023).
Thanks very much! I didn’t know that before. Its’ good to learn. But I still have a question. First this method only works when company is put on hold. When the company is on hold, can I still use the company money to reinvest in saving/stocking etc?
