Retroactive Swedish Tax Claims Hit Latvian Workers Hard

Arkiv

Not only did the Latvian workers slave away for a measly SEK 15 per hour, they now also face severe retroactive tax claims for the income earned while in Sweden. Working for the staffing company Sia Connected has basically destroyed their lives.

Over 730,000 Swedish kronor (SEK), that is the sum the 18 Latvian workers jointly must submit to Skatteverket, the Swedish Tax Agency. If payments are not submitted before 12 February 2015, the claims will be handed over to Kronofogdemyndigheten, the Swedish Enforcement Administration which will then request the help of the Latvian authorities to collect the money. This is how it works within the EU. If you are found liable of taxation in any country, the money will be collected in your country of residence. And now the Latvian workers, who worked under grotesque working conditions, mostly in the county of Värmland, will learn the effects of this system the hard way. Yes, Sia Connected had written a contingency agreement with the concerned trade union, Byggnads Örebro Värmland, but they only paid the workers SEK 15 per hour in wages. In addition to the wages, the workers also got a tax-free allowance established by the Latvian state amounting to approximately SEK 346 per day. (Please also read the article by Stoppafusket SEK 15 per hour – the reality behind the agreement.)

Payroll Tax
The Swedish Tax Agency has now delivered its ruling regarding Sia Connected’s activities in Sweden. The audit covered 2012 and 2013 and concludes that Sia Connected had all its activities in Sweden. The owner, a Latvian woman, was also living in Sweden. Collectively, these facts supported the Swedish Tax Agency in its belief that Sia Connected had its so called “permanent establishment” in Sweden. Hence, the company had become “Swedicized” and should comply to the same rules as any other Swedish company. This means, for example, that they should submit their annual report in Sweden, pay tax here, and more. It also means that the Latvian workers should pay their taxes here and, since Swedish, not Latvian rules apply, subsistence allowances are considered as wage.

Employee Responsibility To Submit Tax
If an employer does not pay the taxes for their employees, the employees have to submit the taxes themselves. That is the way the Swedish tax system works. Sia Connected has not paid any payroll tax in Sweden and since they went bankrupt in September 15, 2014, the workers are now forced to pay the piper and settle the tax claims themselves. The largest amount owed for an individual worker is SEK 96,000! This man had worked extensively in Sweden both in 2012 and 2013. Several other workers will receive tax claims close to SEK 70,000. Other claims are “smaller”, ranging from SEK 12,500 to SEK 60,000, depending on time period spent in Sweden.

Deceived
A number of workers have written to the Swedish Tax Agency explaining that they have been deceived by the owner of Sia Connected who had informed them that the matter of taxes was under control. This is, however, something that the tax agency cannot take into account. The agency writes: “That you were deceived by your employer is nothing that Skatteverket can or should consider since it may be seen as a civil law matter between yourselves and Sia Connected. According to both national law and the tax treaty with Latvia, Sweden is in its right to tax your income for the work performed in Sweden.”

Subsistence
Some workers have pointed out that large amounts of the compensation received should not be taxed, since it could be considered to be “expenses for working abroad”. However, since Sia Connected has had a permanent establishment in Sweden, Swedish rules with a special tax income for non-residents, a so called SINK (särskild inkomstskatt för utomlands bosatta) tax, apply. The tax liability is lower, in this case 25 percent, but it also means that you cannot make deductions for expenses.

The Owner
In this case, the process of establishing the company’s “permanent” location or establishment was linked to the fact that the company’s owner lived in Sweden. (Click here to read more about the Swedish Tax Agency’s definition of a permanent establishment.) The owner, a Latvian woman, had been registered and living in Sweden since January 2007. She could have registered a company anywhere, but she lived in Sweden and if company related operations and activities are conducted here, the concept and rules of the so called permanent establishment apply. This also means that the woman herself was liable for unlimited taxation in Sweden of all her incomes, regardless of origin. The owner’s personal tax debt due for payment amounts to more than SEK 88,000.

Management
It seems however that the woman was not solely responsible for managing the company. In 2012, the owner lived in a house in Värmland, which belonged to a Swedish man. This man was in turn registered in Latvia from August 2010 to June 2013. The Swedish Tax Agency believes that this man, together with the woman “was the effective management of Sia Connected”.
The Tax Agency has reviewed the man’s bank statements for 2012 and notes that he has, in fact been living in Sweden, not in Latvia, and hence he is also liable of unlimited taxation in Sweden.

Incorrect information
The man has also received compensation from Sia Connected, a fact that which he did not mention in his tax return. And because the man has made a incorrect statement to the tax agency on income earned, he is also fined a tax surcharge of 40 percent. His outstanding tax debt with the Swedish Tax Agency amounts to just over SEK 68,000.

Change of Location
As of January 5th this year, the man has again registered residency in Latvia. The address is the same as before, a house in a rather dilapidated area of Riga. The woman has emigrated to Germany, but has not indicated any new residential address.

Anna-Lena Norberg
Translation: C-line Production

Sia Connected has paid payroll tax in Latvia for the workers. They can reclaim this tax since they should not be taxed twice. However, the refundable money from Latvian tax authorities doesn’t go very far since the taxes were calculated on the very low hourly pay of SEK 15. The tax rate in Latvia is 24 percent.

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