Sweden referred to the Court of Justice of the European Union over F-skatt requirement for European companies

On the 7th of May 2025 the European Commission announced its decision to refer Sweden to the Court of Justice of the European Union (CJEU) for breaching the principle of the freedom to provide services, enshrined in Article 56 of the Treaty on the Functioning of the European Union (TFEU) and Article 36 of the EEA Agreement.

The case concerns Sweden’s requirement that Swedish clients must withhold 30% preliminary income tax when paying for services performed in Sweden by European contractors established in other EU or EEA countries—unless those contractors are registered for so-called F-tax with the Swedish Tax Agency. Notably, this obligation applies even if the European service provider has no tax liability in Sweden due to the absence of a permanent establishment.

The European Commission considers that this rule creates a disproportionate and unjustified barrier to the freedom to provide services across borders. Despite earlier steps—such as a letter of formal notice in July 2023 and a reasoned opinion in May 2024—the Commission has concluded that Sweden’s response has been insufficient, and is therefore taking the matter to the CJEU.

Commentary: A systematic burden on European companies providing services in Sweden

This latest development reinforces the concerns raised in the public debate published by Momentius in May 2024 on Dagens Juridik. At that time Momentius described how European companies can recover the withheld amount only after a potentially lengthy administrative process—which may take up to two years—while at the same time being required to meet tax obligations in their home country. To avoid the deduction, providers must either register for F-tax in Sweden or apply for an exemption, a seemingly simple process that in practice can be administratively burdensome, especially for those operating in Sweden temporarily. Furthermore, applications for exemptions must be submitted for each individual engagement, making it a recurring administrative hurdle.

Effectively, these providers face a dilemma: either accept a significant liquidity disadvantage or engage in an onerous administrative process. Alternatively, they may choose to avoid the Swedish market altogether. Likewise, Swedish clients may avoid contracting with EU-based service providers to sidestep the risk and complexity of managing tax obligations for foreign entities. No matter the scenario, the result is the same—a clear disincentive for cross-border service provision.

This legal framework places a significant and unjustified burden on EU-based service providers and constitutes a restriction on the freedom to provide services guaranteed under EU law. The internal market principle is clear: EU-based companies must be able to offer services across borders on equal terms, and national rules that hinder this are not permissible—even if intended to ensure tax compliance.

The European Commission’s decision to proceed with formal legal action signals a conviction that the Swedish rules are in clear breach of the Treaty. Importantly, the likelihood that Sweden will lose the case is high. This is not the first time the CJEU has ruled on similar issues. In Case C-433/04, the Court held that requiring service providers from another EU country to register for local taxation violates EU law. In Case C-290/04, it found that providers not liable for tax in the host country cannot be required to apply for an exemption from withholding tax. These precedents strongly suggest that the CJEU will find Sweden’s rules incompatible with EU law.

This case is not only about taxation—it is about ensuring that all service providers in the EU can operate on equal terms, without unjustified national barriers. How Sweden responds will have long-term implications for its credibility in upholding the principles of the internal market and EU law.

Momentius will continue to monitor developments closely. If your company operates within the EU and is affected by these rules, or if you need guidance on how to manage legal and tax compliance when providing services in Sweden, do not hesitate to contact us.