Sweden's Investment Risks: What Foreigners Should Know

Sweden is considered a favourable investment destination due to its stable investment climate, innovation, economic robustness, and political steadiness. However, there are certain risks that investors should be aware of before putting their money into the country. While Sweden offers a robust modern economy that has survived several economic downturns since the 1990s, it has a highly unionised workforce, extensive welfare benefits, and a history of economic crises.

High taxes and cost of living

Sweden is known for its high quality of life, excellent public services, and stunning natural landscapes. However, these benefits come at a price. The country is considered the 14th most expensive country to live in Europe, with high taxes and a high cost of living. Here is a breakdown of the expenses you can expect:

Housing

Housing is one of the most significant expenses in Sweden. Whether you choose to rent or buy, prices can vary significantly based on location. In major cities like Stockholm, Gothenburg, and Malmö, expect to pay more. The average rent for a one-bedroom apartment in the city center ranges from $1,150 to $1,730 per month, while outside the city center, it ranges from $690 to $1,035. In Stockholm, the price per square meter can be as high as $10,350, whereas in smaller towns or rural areas, prices can be as low as $2,875 per square meter.

Utilities

Utility costs in Sweden include electricity, heating, cooling, water, and garbage services. The monthly utility bill for an 85 m² apartment is approximately $170. Internet services typically cost around $35 to $58 per month.

Food

Grocery prices in Sweden are higher than in many other countries. A typical monthly grocery bill for a single person might be around $290 to $345. Eating out is also expensive, with a meal at an inexpensive restaurant costing around $11.50 to $17.25, and a three-course meal for two at a mid-range restaurant costing around $80 to $138.

Transportation

Public transportation in Sweden is efficient and widely used, but it is surprisingly expensive. In Stockholm, a monthly pass costs about $110. For intercity travel, Sweden has an extensive and reliable train network, but tickets can be pricey without a discount.

Healthcare and Insurance

Sweden's healthcare system is publicly funded and offers excellent care. Residents pay a nominal fee for services, with a typical doctor's visit costing about $23. Dental care is subsidized, but adults pay for some services out-of-pocket. The good thing about high taxes in Sweden is that the government subsidizes much of one's healthcare needs. A large percentage of the cost of prescription medication and medical procedures are covered.

Leisure and Entertainment

Sweden offers a variety of leisure activities, but they can be costly. A movie ticket costs around $14, and monthly gym memberships are approximately $35 to $70. Alcoholic beverages are also expensive, with stringent regulations and high taxes.

Education

Education in Sweden is generally free for residents and EU citizens up to the university level. However, for international students, tuition fees vary depending on the program and institution. The cost of international schools can be rather steep, with high annual fees and extra costs such as textbooks, uniforms, extracurricular activities, and school excursions.

High labour costs

Sweden has the highest hourly labour costs in the EU, with an average hourly labour cost of just over €40 per hour. This is significantly higher than the EU28 average of €23.70.

The high cost of labour in Sweden can be attributed to a few factors. Firstly, Sweden has a well-educated labour force, which demands higher wages. Secondly, Swedish labour laws and regulations are rigid, which can drive up the cost of labour. For example, employers must pay social security fees of about 31.5%, which include statutory contributions for pensions, health insurance, and other social benefits. Additionally, Sweden has a high unionisation rate, with approximately 68% of the labour force being union members. Unions have been successful in negotiating higher wages and better benefits for their members.

The high labour costs in Sweden can impact businesses and investors in a few ways. For businesses, it can increase operational costs, making it more expensive to do business in Sweden compared to other countries. This can affect their profitability and competitiveness, especially if they are operating in a highly competitive industry or are exporting their products or services internationally.

For investors, high labour costs can affect the return on investment. If a business's operational costs are high due to labour expenses, it may have less money to reinvest in its growth and development. This could slow down the business's expansion and reduce its profitability over time. Additionally, high labour costs can make it difficult for businesses to hire a large number of employees, which could limit their ability to scale their operations and meet demand.

It is important to note that while labour costs in Sweden are high, the country also offers other benefits that can attract investors. Sweden has a competitive, open economy, providing access to new products, technologies, skills, and innovations. The country also has outstanding communication infrastructure, a stable political environment, and a favourable tax regime, including low corporate tax rates and the absence of withholding tax on dividends.

Overall, while high labour costs can be a challenge for businesses and investors in Sweden, the country offers other advantages that can offset these costs and make it an attractive destination for investment.

Rigid labour laws and regulations

Sweden's rigid labour laws and regulations can be a challenge for new firms entering the country. Around 65% of Sweden's workforce is unionised, and the country has a Co-determination at Work Act, which requires companies to include labour representation on their boards of directors once they reach 25 employees. This act also obliges management to negotiate with unions before implementing major changes to company activities and to furnish information on many aspects of the company's economic status to labour representatives.

Sweden's labour laws are not waived to attract or retain investment, and there is no government policy that requires the hiring of nationals. The cost of labour in Sweden is high, and overall salary costs are comparable to most OECD countries, although they have become increasingly competitive due to relatively modest wage increases over the last decade and a favourable exchange rate.

Employers must pay social security fees of about 31.5%, which includes statutory contributions for pensions, health insurance, and other social benefits. There is no fixed minimum wage; instead, wages are set by collective bargaining by sector. Swedish unskilled employees are relatively well-paid, while well-educated employees are relatively less well-paid compared to those in competitor countries.

Housing shortages

Sweden has suffered from a housing shortage since 1905. This shortage has had several consequences for the country, including:

• Young people are unable to accept placements at universities unless they can find housing and are forced to live at home for longer than is comfortable.
• Foreign talent faces a major hurdle when moving to Sweden for work.
• The rental housing market is difficult to access for lower-income households.
• The housing shortage has contributed to the country's recession, with households cutting spending as mortgage costs rise.
• The housing shortage has also led to a dysfunctional housing market, characterised by under-supply, low rates, and generous tax benefits.

Sweden's home ownership rate is relatively low at 64.5% compared to other European Union countries. The country's system aims to offer affordable quality housing for all, with the responsibility for ensuring housing falling to the 290 municipalities, 255 of which report a housing shortage.

The shortage has led to long waiting lists for public housing, with no prioritisation of applicants based on their housing needs. As a result, financially secure classes can take advantage of the system, occupying affordable and well-located apartments, while vulnerable groups are pushed to the outskirts of cities. The average queuing time in the capital, Stockholm, ranges from nine to sixteen years.

The private sector, which makes up half of the rental housing market, works to achieve affordability in urban areas through the 'bruksvärdessystem' or utility value system. This system prevents private landlords from making excessive profits by estimating the value of a dwelling based on its characteristics and utilities, rather than market forces. However, this has also contributed to the lengthy housing queues, leading some to resort to black market housing.

To address the housing shortage, Stockholm would need to build approximately 25,000-30,000 homes annually to meet demand.

Low corporate tax

Sweden has a low corporate tax rate of 20.6% as of 2025, down from 28% in 2009. This is a competitive rate internationally and is one of the reasons why Sweden is considered a highly favourable investment destination. The country also has no withholding tax on dividends and a favourable holding company regime.

Sweden's taxation structure is straightforward, and companies have the option of making deductible annual appropriations to a tax allocation reserve of up to 25% of their pre-tax profit for the year. They can also make pre-tax allocations to untaxed reserves, which are only subject to tax when utilised.

In addition, Sweden has an extensive double tax treaty network, and there is no exit taxation. Dividends paid by foreign subsidiaries in Sweden to their parent company are not subject to Swedish taxation. Due to these tax exemptions on capital gains and dividends, as well as other competitive tax rules, Sweden is one of Europe's most favourable jurisdictions for holding companies.

Unlisted shares are always tax-exempt, and there is no qualification time or minimum holding of votes or capital. Listed shares are exempt if the holding represents at least 10% of the voting rights (or is contingent on the holder's business) and the shares are held for at least one year.

Sweden's corporate tax system, combined with its well-educated labour force, outstanding communication infrastructure, and stable political environment, makes it a top destination for foreign investment.

Frequently asked questions