Challenges in an international context on the handling of board fees

Invoicing of board fees from own company has for a long time been possible until the Supreme Administrative Court (SAC) made it almost impossible in a renowned verdict from 2017.

In the verdict mentioned above, SAC expressed that board positions are of particular personal nature, which by the Swedish Companies Act stipulate that board positions can only be held by a physical person and thereby only be taxed as employment income. However, if the board position is temporary and specially defined to a one-time point effort by a so-called board professional, there is a possibility to tax the board fees as business income. SAC’s conclusion has been confirmed in later verdicts by the same instance, most recently in February 2021, when a new verdict from SAC confirmed that the rule also applies to sole proprietorships. Hence, it is no longer possible to from a tax perspective, treat board fees as business income other than within the exception for temporary and specially defined assignments.  

A consequence of the legal situation is that the board member is taxed at employment income tax rates and the company is liable to pay for social security contributions (provided that the board member belongs to the Swedish social security system) on the distributed compensation.


Challenges on an international basis

Since some countries like Sweden (Finland amongst them) do not allow invoicing of board fees while others do, the Swedish changes induce challenges for international board members and their assignments. The diverse look on board fees implies a risk for double taxation. Some countries apply social fees while some do not. In addition, taken into consideration the changes to the legislation on tax withholdings introduced in January 2021, international companies have a high administrative obligation in Sweden.  


Non-tax residents’ board fees from Swedish companies

A non-tax resident is liable for tax on board fees from Swedish companies regardless of where the actual work takes place (according to most tax treaties Sweden has the right to tax). According to the Special income tax on non-residents (“SINK”) the general rule is that board fees are taxed with 25 %.

Compared to other employment income, board fees from Swedish companies are treated differently since Sweden taxes the fees regardless of where the work is performed. The general rule concerning employment income is otherwise that Sweden only taxes non-tax residents on work that has been performed in Sweden.

As mentioned prior, it should be noted that the legislation on tax withholding changed on January 1, 2021. The new legislation clarifies that compensation from work abroad within the payer’s business activities in Sweden is also subject for taxation. The said activities can include work from the Swedish payer’s office abroad, foreign business trips and work from home in a different country.

To summarize, after the legislation changes in 2021 there is a considerable risk that Swedish companies must report preliminary tax on board fees, even for non-tax residents who have worked partly abroad, unless there is a tax treaty between the two countries which prohibits this.  


Tax residents’ board fees from non-Swedish companies

As a general rule, tax residents are liable for tax on all their global income in Sweden, regardless of source. Put into context, this means that tax residents are tax liable on fees from Swedish as well as foreign companies, irrespective of where the work has been performed.   

As explained, it is common that the source state, i.e. the country in which the corporation is registered, also claims the taxation right even if the work in question has been performed outside the country. Consequently, there is a risk for double taxation. Again, the legislation changes from 1 January 2021 are brought to the fore. Previously, withholdings of preliminary tax on employment income from international companies without a permanent establishment in Sweden was paid directly by the taxpayer to the Tax Agency. Since January 2021, foreign companies paying remuneration are obliged to make tax withholding for the part of the income that relates to work performed in Sweden. This means that foreign companies must make a preliminary tax withholding (usually 30 %) and report this monthly for each individual to the Tax Agency, which also means that the business must register as an employer with the Tax Agency.

The changes imply that international companies paying board fees for work performed in Sweden must register as an employer and make monthly deductions for preliminary tax on an individual basis.


About social security fees

Within EU, EEA and Switzerland social security fees on employment income shall only be paid in one country. When paying out compensation one must assess which country’s social security system the person in question belongs to. To prove which country the fees should be paid in, -one can apply for an A1-certificate.  

Not all countries take obtained board fees into consideration when assessing which country’s social security system the person belongs to. In some cases, it can therefore prove difficult to forecast which system a person belongs to. Neither do all countries add social fees to board fees which means that even though there is an A1-certificate, it is not assured that fees should be paid in the country where the individual is comprised.


Double taxation of board fees

It is common that double tax claims arise when a board member with tax residence in one country receives board fees from a company registered in another country. To avoid double taxation, tax treaties are applied to the extent these have been concluded. As a result of the difference in how to treat board fees between countries, either as income from employment or as business activity, there might be a risk of failing in alleviating double taxation by a applying a tax agreement.



In summary, it is evident that the legislation on taxation of board fees within an international context is complex. The fact that the legal tax classification of board fees differ between countries makes it difficult to apply tax treaties in some cases, which further induces risk for double taxation. Furthermore, the same discrepancy between countries leads to a challenge in determining which social security system a person receiving board fees belongs to and if social fees should even be paid.

At Skeppsbron Skatt we have qualified expertise and experience of the tax and the social security aspects of board fees. We are a part of TAXAND, a global network of tax advisors, and can therefore help you with a complete review of the reporting of board fees. Please do not hesitate to contact us for further information on how we can tailor our analysis for your company.

Pernilla van der Capellen
Partner, Global Mobility Services, Private Client Services
Anders Lagerholm
Partner, Global Mobility Services