Doing Business in Sweden: Advantages & Disadvantages

Sweden is the fourth most competitive economy in Europe and often ranks as one of the highest-performing economies worldwide. Sweden is known for its strong business climate, global competitiveness, diverse language skills and commitment to innovation. A large part of this is due to the country’s free-market environment and a highly developed education system.

Sweden has a population of 10 million and a GDP of more than $560 billion (PPP) and provides a high standard of living for citizens.

Understanding Sweden’s local laws, rules, and regulations also comes with its challenges, and working with local contacts who are well-versed in these areas is essential for business expansion.

Advantages and benefits of doing business in Sweden

Ease of doing business

Sweden possesses a strong and stable economy, making it an attractive location for foreign investment. The country ranks 10th out of 190 economies for ease of doing business, according to the World Bank’s Doing Business report for 2020. Sweden offers several efficient processes that make business formation and operations easier, including online filing platforms for incorporation, taxes, property transfer, permitting and more.

This Scandinavian nation offers some of the lowest corporate taxes in the EU. Sweden authorizes a total tax deduction for interest and doesn’t have formal, thin capitalization rules.

Open economy

Sweden has an open economy that fosters innovation and competition. The government proactively invests to promote growth in sectors such as biotechnology and food processing. The government is open to trade and works to support growing markets, including the Baltic countries, India, and Brazil.

Petroleum products and automobiles are the country’s main exports. Other top exports include medicine, vehicle parts, and communication devices.

Innovation hub

Sweden’s reputation as an innovation hub is evident in the country’s high placement in the Global Innovation Index, European Innovation Scoreboard and the Bloomberg Innovation Index.

The government supports innovation and growth through various agencies and investments in infrastructure. Over three percent of the country’s gross domestic product is spent on research and development, and Sweden is known for facilitating collaboration across borders. Pharmaceutical development, biotechnology tools, and digital tools are all areas where Swedish industries have made great strides. The country is also a world leader in biomaterials, orthopedic implants, medical imaging and visualization, and regenerative medicine

Start-up nation

Sweden is a hot spot for startups, and its two largest cities, Stockholm and Gothenburg, are home to major technology companies. Sweden is second only to Silicon Valley for having more billion-dollar firms headquartered in the region per capita. Spotify and Skype were first launched as startups in Sweden.

Being a smaller market, Sweden is also a valuable location to test new ideas and products before rolling them out to larger markets.

Disadvantages and risks of doing business in Sweden

High individual tax rates

Sweden has robust social services programs — including countrywide health programs and other benefits, such as generous parental leave — financed by high taxes on individuals. This may make it difficult to recruit talent from outside Sweden.

Complex labor laws

Sweden has strict labor laws that provide workers with strong protections, including collaborative bargaining agreements of individual labor unions.

Sweden does not have any rules in place that mandate a minimum wage, but trade unions may have their own agreements that set the standard for individual industries and types of work. Employers must follow certain formal rules when terminating employment. Navigating these requirements can be confusing, and it helps to leverage local expertise in these matters.

Cost of living

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.

Weather considerations

Long Swedish winters can be especially harsh, depending on the region. Average temperatures in the southern region are mild, but overall temperatures range from 23 to 35 degrees Fahrenheit, with the potential to drop lower than 5 degrees Fahrenheit.

Some may have more trouble adjusting to the lack of light. In December, Stockholm receives only around six hours of daylight.