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When you've started your own business, there's a lot to think about, from how best to generate profits from your business idea to how to find new customers for your business. Learning about taxes might not be the thing you're most looking forward to when you start your own business - but it's still an essential ingredient for success. Learn everything you need to know about taxes as an entrepreneur with this guide.

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How much tax do you pay?

There is no simple answer to this question. The amount of tax you pay depends on many factors, including your income, your age, where you live, the type of business you run, the deductions you are entitled to and more. If you earn less than €22,300 in an income year, you pay no tax at all, and if you earn more than €613,900 in a year, you pay around 50% tax. After reading this article, you will hopefully have a better understanding of how different taxes affect your income.

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Different types of income affect the tax you pay

When talking about taxes, it is good to first understand what the different types of income mean. There are three different types of income that determine the taxes you pay, and distinguishing between the types of income can make it easier to understand your overall tax situation. Within each type of income there are many different taxes that apply, so you can see the types of income as general categories.

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Income from business activities

The business income category is a relatively broad tax category that includes all types of business activities, such as sole proprietorships, partnerships, limited partnerships and limited companies. The business income category thus covers companies and not private individuals (although the boundary is fluid for sole proprietorships, for example).

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Income from employment

Income from employment includes money earned through an employment or assignment. If you run a limited company, you pay tax on your business income on behalf of your limited company and tax on your personal income as an individual.

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Capital income category

Capital income includes income and expenditure arising from the movement or sale of capital. This may include, for example, interest expenses or the rental of real estate. For shareholders, a common contact with capital income is when they receive dividends from their limited company and pay corporation tax.

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Taxes in a sole proprietorship

When you run a sole proprietorship, you are responsible for ensuring that the tax is paid, unlike when you are an employee and the tax is automatically deducted from your salary. The first tax you need to familiarize yourself with as a sole trader is F-tax (business tax). If you are employed alongside your sole proprietorship, you pay F-tax with conditions, known as FA-tax.

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Self-employed contributions in a sole proprietorship

Part of the tax you pay in your sole proprietorship corresponds to the social security contributions that employers pay to their employees. In a sole proprietorship, these are called self-employed contributions and consist of, among other things, health insurance contributions, parental allowances, old-age pension contributions, etc. As you pay your own contributions, you are entitled to sickness benefit when you are ill, parental benefit when you have a child, etc. even when you are self-employed.

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Own withdrawal sole proprietorship

When you run a sole proprietorship, you do not have a salary in the same way as when you are employed or run a limited company. All your profits, i.e. the amount left over after deducting expenses from income, are considered as income for tax purposes and can therefore be treated as a salary.

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Once you have paid the preliminary tax on your surplus, the rest of the money is free to be transferred to your personal account. When you withdraw money from your sole proprietorship in this way, it is called a personal withdrawal. When you make a personal withdrawal, your withdrawals are not taxed per se, but the money is already taxed as business profits.

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When you make a withdrawal, it is an expense to be recorded, but not an expense that affects the company's results. For example, if you have a surplus of €50,000 and you decide to withdraw the whole amount as a personal withdrawal, the profit and loss account will still show a profit of €50,000. All that will happen is that your personal account will receive more money, while your business account will receive less money and your cash will decrease.

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Taxes in limited companies

Many people tend to favor the limited liability company as a business form when the idea is to grow the company, thanks to the favorable tax opportunities. Below we review the most common taxes for limited liability companies.

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F-tax

Limited liability companies pay F-tax in the form of debited preliminary tax. Based on the preliminary income tax return or last year's result, you pay F-tax every month. When you receive your final tax assessment notice, you can either pay the tax arrears to the Swedish Tax Agency or receive a tax refund.

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Employer's contribution

Before a salary reaches an employee's wallet, a significant amount has already been taxed from the company's payroll. Employer's social security contributions are a tax that ensures that employees are paid when they are sick, on parental leave or when they retire. In 2022, total employer contributions will amount to 31.42% of gross pay.

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Corporation tax

Corporation tax is a tax paid on the profits made by a limited company during a financial year, so in the event of a loss year, no corporation tax is payable. The corporation tax rate for 2023 is 20.6% and is paid in the form of preliminary tax each month.

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At the end of the year, the tax paid is reconciled with the final tax. Corporation tax also covers capital gains in limited companies, such as dividends. Corporate income tax is therefore part of the first stage of taxation for limited companies. When you, as an employee of your own limited company, receive a salary, you are also taxed as a private individual in a second stage.

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State income tax

For high-income earners earning above a certain amount, the state income tax is added. This means that you will have to pay an additional 20% tax on the amount above the threshold.

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There are different limits to keep an eye on when you are close to the limit to be subject to state income tax; the layer limit and the cut-off points. For 2023, the threshold is SEK 598,500, i.e. if your taxable earned income, after the basic deduction has been deducted, exceeds SEK 598,500, you are subject to state income tax.

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As it can be difficult to know exactly how much the basic allowance is, you can instead use the highest income you can earn before the basic allowance is deducted. This is called the state income tax threshold, and there are two different thresholds depending on whether you are over or under 66.

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For persons younger than 66 years of age, the threshold for state income tax is SEK 613,900.

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For persons aged 66 or over at the beginning of the year, the threshold for state income tax is SEK 683,200.

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The difference is due to the higher basic allowance for pensioners.

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Provisional tax

F-tax is usually paid on a monthly basis in the form of a debited preliminary tax. The amount you pay is based on the amount of tax you paid last year or the amount you declared in your preliminary income tax return. At the end of the financial year, your tax paid is reconciled with your final tax.

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When do you get a tax refund?

If you have paid more preliminary tax than you should, you will get money back from the Swedish Tax Agency. Many people wonder when you will get money back from the tax, and the answer varies depending on when you submitted your income tax return.

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If you filed your tax return before March 30, you will receive a refund on April 5-7.

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If you filed your tax return after March 30, you will receive a tax refund between June 8 and 9.

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Basic deduction

The basic deduction is a deduction made to reduce your taxable income and thus reduce your tax. If you are a sole trader, the basic deduction is deducted from your business income and if you are a limited company, the basic deduction is deducted from your salary. You don't need to apply or register for the basic allowance - it is deducted automatically.

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The purpose of the basic deduction is to reduce taxes for the income earner and equalize taxes between different income groups. The basic deduction is higher for low- and middle-income earners and lower for high-income earners. For people earning less than 22,300 in the income year 2023, the entire amount falls away under the basic deduction - meaning you don't have to pay any tax at all. For an exact list of the basic deductions for different income brackets, visit the website of the Swedish Tax Agency.

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Working tax credit

The earned income tax credit is another deduction that reduces your tax base. Like the basic deduction, the earned income tax credit is not something you need to apply for, but is deducted automatically by the Swedish Tax Agency.

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To qualify for the earned income tax credit, you must receive your income through work or business activity; if the income comes from sickness benefit, parental benefit, unemployment benefit or similar, you are not entitled to the earned income tax credit.

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The earned income tax credit can only be deducted from municipal tax; it does not apply to state income tax, property tax or property charges. The amount of the earned income tax credit depends on your income.

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Municipal tax

Municipal tax is a tax that goes to your registered municipality and county council. Municipal tax is the largest tax paid by income earners and in 2022 amounted to just over 32% on average in Sweden. There are variations around the country, with a lowest rate of just under 29% and the municipality with the highest municipal tax having just over 35%.

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Moms

VAT is a value added tax that applies to the majority of goods and services bought and sold. There are three different VAT rates: 25%, 12% and 6%, with the first being the most common. As a business owner, it's important to keep track of VAT, as you add the VAT rate to your price. For example, if you want to invoice SEK 1 000 for a job, you need to add 25% to the invoice to get the right amount.

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VAT is not a tax that affects a company's bottom line because you will always break even in the end. If your outgoing VAT expenses are greater than your incoming VAT income during a VAT period, you will receive a refund from the Swedish Tax Agency, and if your incoming VAT is greater than your outgoing VAT, you will need to pay the difference to the Swedish Tax Agency.

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Marginal tax

The name "marginal tax" is somewhat misleading as it is not a tax that you pay. Marginal tax is a term for the total tax you pay on an increase in income. It is usually said that marginal tax is the tax you pay on your last earned krona.

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For example, if your salary increases by SEK 1,000 and SEK 700 lands in your payroll account, the marginal tax rate is 30%. Usually, the marginal tax rate is about the same as the municipal tax rate, but as you approach the state income tax threshold, the marginal tax rate increases significantly.

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If your salary exceeds the threshold for state income tax of 20%, the marginal tax rate is usually around 50%. If your salary increase of SEK 1,000 means that you get SEK 500 more in your salary account, the marginal tax rate is 50 percent.

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Taxation of benefits

Sometimes employers provide compensation to their employees in addition to their salary; if such compensation pays for a private living expense, it is called a benefit. One of the most common types of benefits is a company car. Like cash compensation, benefits also need to be taxed, both by employers and employees. Employers pay social security contributions on the benefit and employees pay tax.

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As a rule, all benefits are taxable, but there are exceptional cases that are regulated to be tax-free, such as wellness allowances.

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Excise duty

In addition to all the taxes already mentioned, there are specific taxes on particular goods and services, known as excise duties. Excise duties are an effective way for the government to regulate consumption in a desirable direction and also increase tax revenues. Tobacco tax, alcohol tax and tax on plastic carrier bags are all examples where you want to influence consumption through a higher price.

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Bokio makes tax easy

With Bokio's accounting software, you hardly need to think about tax. When you pay your salary, the tax is calculated automatically and the correct amount is deducted. An employer's declaration is then generated, which you simply submit to the Swedish Tax Agency.

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In collaboration with Bokio, Froda customers get a 20% discount on Bokio Premium. ‍

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Go to the offer.

As a business owner, it is easy to spend all hours of the day making your services and products as good as possible for your customers. It's easy to forget that this doesn't matter if your target audience doesn't know you exist. The following article lists marketing strategies that will increase your exposure while adding value to your business.

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Most people with experience of running a business know that marketing is vital to winning customers. Thanks to the internet, there are now several ways to market yourself that are both cheap and effective. In this article, we suggest

1. Marketing via social media
2. Cooperation with other companies
3. How to increase your company's publicity

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Social media marketing

As a business owner, you can use several social channels to reach out to your customer base. You can start a blog, an Instagram account or choose to set up a free business page on Facebook, where you can share everything from other people's posts to your own photos and videos. You can also pay to advertise on social media, where you choose the audience you want to reach and how much money you want to spend on your advertising. This is a great way to reach the public as most people use some form of social media on a daily basis.

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It is easier to build a relationship with your customers via social media, as you can keep a more personal tone than on your website, for example. This type of media also allows you to reach a lot of people very quickly, as your posts can be instantly seen by your network and then in turn spread to their network in just a few minutes via likes and shares. Make sure you create posts that others want to share - encourage this through competitions and discounts. Another advantage of social channels is that they are relatively cheap to use, even for advertising.

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Cooperating with other businesses

Modern marketing is very much about building relationships - not just with your customers. Collaborating with other businesses is very effective. For example, you can use influencers to promote you through their channels, or work with companies with the same target audience as yours to reach out to each other's customer bases. It will increase your exposure and need not cost you anything.

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Another way to collaborate with businesses is to co-host events - the cost is lower when there are more of you. For example, if you have a plumbing company, you can contact construction companies and work together to carry out turnkey projects for customers.

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Marketing doesn't have to cost the earth and doing a good job increases the value of your products and services. Ultimately, it leads to an improved customer experience for your current customers and can result in them recommending you to their loved ones.

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Increase your publicity

Publicity is important - everyone loves exciting news. Does your company have something new to present that a journalist would like to write about? You can also comment on blogs and debate on a topic related to your business, thus drawing attention to your company. The most important thing for a business is to be seen, and preferably to be seen through positive publicity. Always think about the purpose of your publicity, who you want to target and what emotions you want to evoke.

It's getting closer to the time of year when it's time to file your tax return. As an entrepreneur, you need to file both your personal tax return and your company tax return. Below we provide some tips on what you should think about, important dates to keep track of and how the declaration differs depending on the type of company you have.

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Key dates to watch out for in 2024

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3 March

Last day to get a digital mailbox to receive your tax return digitally.

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March 4 - March 8

The declaration is sent out digitally

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March 15 - April 15

The declaration is sent by post for those who do not have a digital mailbox.

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19 March

The declaration opens.

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May 2

Last day to declare.

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13 May

The last day to submit the VAT return for those who account for VAT once a year.

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November 14th

Any tax withheld must be paid, unless your final tax statement states a different date.

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Sole Proprietorship

As a sole trader, you file your business tax return at the same time as you file your personal income tax return. You do this by first preparing your annual accounts and then completing and submitting the NE annex that you receive with the tax return. If you have a turnover of less than SEK 3 million, you can prepare a simplified annual accounts. If you do this digitally, you can then transfer the information directly to the NE annex in the tax return.

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General Partnership

If you are a partner in a partnership, you must submit your N3A annex together with your income tax return, in which you account for your share of the partnership's profits. If you also have to declare for the partnership, this is done in income tax return 4. When this should be done depends on the company's financial year.

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Limited company

The declaration process for partners in a closely held company is similar to that for partners in a partnership. In addition to your personal income tax return, you also have to file a K-10 schedule where you report dividends from the company and any profit or loss if you sold shares in the company. When the limited liability company's own income tax return must be filed depends on its financial year.

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Check the data

As with your personal income tax return, it is important to check the pre-printed information for your company. If there are errors in the control data, there will also be errors in the declaration if you do not correct the data.

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See what deductions you can make

As an entrepreneur, you can deduct expenses that are necessary to run your business - regardless of the type of business you have. However, the difference is that if you run a sole proprietorship, you make the deductions in your income tax return, while the deductions are made in the company's tax return if you run a limited company or partnership. If you run a sole proprietorship, you can use the Swedish Tax Agency's Deduction Dictionary to see what deductions you can, and cannot, make.

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A common deduction is if you run your business from your private home. If you are a sole trader, you can deduct the cost regardless of whether you have a specially equipped workroom or not. If you run a limited liability company or a partnership, the workroom must be furnished in such a way that it can no longer be used for residential purposes for you to be able to deduct it. Instead, you can rent out part of the property to the company. In this case, the company can deduct the rental cost while you, as the owner, pay 30% capital tax on the excess rent.

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Reserves for sole proprietorships

As a sole trader, you should look at the possibilities to reduce your taxable income. This can be done either by moving part of your income from business activity to income from capital by making a so-called positive interest distribution. You can make a positive interest allocation when the capital base in the business is higher than SEK 50,000 at the beginning of the year. You can also make allocations to an accrual fund or expansion fund to postpone the tax effect and to be able to offset future deficits.

After a few tough years for Sweden's entrepreneurs, it finally looks like we're heading for brighter times. 2023 was marked by high inflation, rising interest rates and a sharp increase in the number of bankruptcies. But if the storm clouds were gathering at the beginning of 2023, we are now starting to see a brighter picture on the horizon at the beginning of 2024. The National Institute of Economic Research predicts that wages will rise faster than prices during the year and, after two years of policy rate hikes, the Riksbank is expected to cut it in 2024. This will give both households and companies greater scope for consumption and investment. This may benefit smaller companies in particular, which are generally more sensitive to interest rates and have less room to face tougher times than larger ones. 

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Beyond the economy, there are trends in artificial intelligence, marketing and customer relations that are worth keeping an eye on for business owners, which we'll cover in this article.

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Economy 

As mentioned, the biggest area that will affect entrepreneurs will continue to be the economy and economic developments. Inflation fell at the end of 2023 to levels just above the Riksbank's inflation target of 2% and is expected to fall further during the year. High inflation has been the driving factor behind the Riksbank's increases in the policy rate and as it now falls, the Riksbank is expected to cut the policy rate during the year, which will mean relief for entrepreneurs on several fronts. A cut in the policy rate will lead to a reduction in interest expenditure for both individuals and companies, thereby increasing the scope for consumption. Business owners can thus look forward to a year with fewer headwinds, where sales revenues increase and economic stress decreases. Interest rate cuts may also mean that opportunities for entrepreneurs to raise external capital, and the conditions for doing so, will improve. Initiatives and investments that have been put on hold in recent years therefore have the potential to be realized when it becomes easier to finance them again. 

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Looking ahead, the government also presented two proposals in the fall budget that will make it easier for entrepreneurs both in terms of costs and administration. One is that the turnover limit for when companies need to report VAT is planned to be raised from SEK 80,000 to SEK 120,000 on January 1, 2025. Thus, more smaller companies will not have to add and account for VAT. The second is that they have launched a simplification package and established a simplification council that will work to reduce the regulatory burden and administrative costs for companies in order to free up more time for core business. 

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Artificial intelligence

One of the major themes of 2023 was the development and widespread adoption of AI. AI and machine learning have actually been part of our lives for a long time without us really reflecting on it, but with the developments in generative AI over the past year, interest in AI has completely exploded. For business owners in general, and small businesses in particular, developments in AI offer great opportunities for the future. Many administrative tasks that previously needed to be done manually can be automated with the help of AI, future projections will become more accurate and tasks that previously required external expertise will be able to be performed by the companies themselves in the future. As an entrepreneur, there is therefore value in starting to familiarize yourself with how AI could be used in your business to both free up time and contribute to increased growth. 

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Marketing

The conditions for successful marketing as an entrepreneur have improved significantly in recent years. You no longer need an agency, expensive equipment or a huge media budget to produce high-quality materials and get them distributed. Most entrepreneurs can now do their own marketing with the help of digital tools, a plan for what they want to achieve, and a continuous commitment of time. Marketing is also an area where generative AI can have the greatest impact for entrepreneurs as it will simplify everything from the production of text and visual material, to the development of plans and media investments. Something that will free up time that can instead be spent on analyzing trends and customer behavior in order to adapt marketing accordingly.

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Customer relations

As economic pressures are likely to ease and purchasing power in society increases, it also means that entrepreneurs will need to spend less of their time being reactive and can instead start to look ahead and be more long-term in their priorities. One area that is therefore likely to receive increased focus is trying to build strong and long-term customer relationships. Technological developments mean that it will be possible for smaller companies to offer tailored customer experiences in a way that previously only larger companies with extensive resources could do. AI will also make available more advanced data analytics that business owners can use to better understand their customers' behaviours and preferences, and thus develop more targeted, relevant and personalized offers. 

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Problems in supply chains, shortages of raw materials, and rising electricity and fuel prices have led to a troubled global economy, with rising inflation and interest rates. In these turbulent times, it is easy to feel uncertain, so in this article we offer tips on how you, as a business owner, can deal with the uncertainty.

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Price and cyclical sensitivity

The price and cyclical sensitivity of your industry is one of the first things you should consider as a business owner. Are you offering a product or service that customers will continue to use even if times get worse, or will you need to adapt your offer? The cyclical nature of your business will also affect how price-sensitive your customers might be in case you need to raise your prices due to increased costs. If you sell a product or service that your customers desperately need, they will be prepared to pay more for it. However, if you operate in a cyclical industry, price increases can have a major impact on your demand.

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Planning for the long term

During a recession, both society and the economy can become tense. In such situations, it is easy to become reactive if you do not have a long-term plan to follow. Making adjustments and ensuring your company's finances can withstand tougher times is of course important. Sooner or later, however, the economy will turn into a boom again and if you have only adapted your business to the current situation, there is a risk that your company will fall behind the competition. Having a long-term plan and having the courage to stick to it also reduces the risk of making hasty decisions that could backfire at a later date. By planning for the long term, you give your business the opportunity to grow and develop during tougher times, and to be well equipped to gear up even more when the economy picks up.

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Review your contracts

When interest rates and commodity prices go up, it's a good idea to review your contracts - both from suppliers and to customers - to avoid incurring increased costs while revenues decrease. Therefore, review your local and supplier contracts and see if you can tie them up for a period of time to avoid increasing their prices. Even if it would not be possible to lock in the contracts, it will give you an overview of the potential cost increases you might face, and you can then budget for them. Similarly, you should not lock in prices to your customers too much to give yourself the option to increase prices if your costs increase.

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Stocks and liquidity

As a business, it's always good to have strong liquidity to pay off debts in the short term. However, in times of recession, it is especially important to have a buffer in case you are hit by increased costs, which is why it is good to start planning how you can strengthen the liquidity of your business. Another tip is to review your possible inventory. If you have the opportunity, it might be a good time to stock up a little more than you normally would. This will ensure that you have access to products or components that may run out from your suppliers, as well as delaying the impact on your business of any price increases in the supply chain.

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Marketing

Many businesses choose to cut back on marketing during a recession when they cut costs in general. While reduced spending may look good in the short term, it doesn't necessarily mean it will benefit your business in the long run. Instead, if you choose to invest more in marketing when your competitors are cutting back, you have the opportunity to increase your sales and gain further market share. Something that will not only benefit your business for the moment, but also by giving you a head start when the economy turns up.

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Take the opportunity to adjust activities

When the economy in society is at its peak, it is easy to overlook things that are not really working or performing at the level intended. A recession can therefore be a time when it becomes easier to get rid of, or wind down, parts of your business that are slowing others down or are more trouble than they're worth. By doing so, you can have more time and resources to spend on parts of the business that generate better returns. It can also be a good opportunity to diversify the activities of your business to find new sources of income and to spread your risks.

Christmas is approaching, and for many businesses it means the busiest time of the year. By planning smart and acting in time, you can not only increase sales but also deal with challenges in a way that gives you and your business peace of mind. Here are some tips on how to prepare your business for Christmas in the best possible way.

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1. securing the warehouse

The increased demand of Christmas can quickly put pressure on stocks and logistics. Start with a thorough inventory of your products to identify what needs to be replenished. If you rely on imports, be aware that supply chains are often affected by holiday delays. Order goods well in advance and prioritize your best sellers.

• Analyze sales data from previous years to better predict demand.
• Use inventory management systems to optimize the flow.

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2. streamline invoicing

Invoicing can easily become a stress factor if left to the last minute, so act in advance. A clear invoicing plan will allow you to focus on driving sales during the Christmas period instead of dealing with financial administration.

• Review and follow up on outstanding invoices.
• Automate invoicing using digital tools to save time.
• Create clear payment terms for customers to minimize the risk of late payments.

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3. Build relationships with Christmas gifts for customers

Christmas is a great time to show appreciation for your customers. Recognizing your customers with Christmas gifts strengthens customer relationships and can also help promote your business.

• Promotional products with your logo, gift cards or personalized products.
• Consider sustainable or locally produced gifts to create a positive impression of your business.

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4. Plan for next year 

Christmas marks not only the end of one year, but also the start of a new one. By preparing for the year ahead now, you can go into next year with a clear strategy and less stress.

• Create a budget for the coming year and identify key investments.
• Make sure everything you need for January is in place, so you can start the year strong without delays.

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5. Reflect on the year's successes and challenges

Christmas is the perfect time to evaluate your business. Think about what has worked well and what needs to be adjusted to make it even better. Analyzing the past year will help you set realistic goals for the future, and a concrete plan will give you a clear direction that motivates both you and your team to reach new heights.

• Create a list of success factors and areas for improvement.
• Set measurable sales, customer satisfaction and development targets for the next year.

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6. Prioritize recovery

The holidays can be hectic, but it's important that you as a business owner also take care of yourself. By planning and preparing well in advance, you can free up time for family time and rest.

• Delegate tasks where possible and automate processes that save time.
• Try to make time for recovery so that you can enter the new year full of energy.

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Executive summary

Preparing your business for Christmas involves a combination of planning and consideration for both your business and your customers. By following these steps, you can ensure that you and your business are ready to deal with the opportunities and challenges of the festive season - while making time to enjoy Christmas. Need help financing an investment for Christmas? At Froda, you can access financing tailored to your business needs.