Foreign direct investment (FDI) in Sweden

FDI in Figures

According to UNCTAD's World Investment Report 2024, FDI inflows to Sweden totalled USD 29.4 billion in 2023, against the record-breaking USD 44.7 billion registered the previous year. Despite the decrease, the country was the fourth most attractive market in Europe for FDI and reached thirteenth place globally. At the end of the same period, the stock of FDI stood at USD 413.1 billion. Sweden is also a big investor, with an outward FDI stock of USD 527.1 billion. In terms of FDI stocks, the UK, Luxembourg, the Netherlands, Germany, the U.S., and Norway are the main investing countries in Sweden. European companies hold 86% of foreign-owned assets in Sweden, with many investments channelled through holding companies in Luxembourg and the Netherlands. The services sector represents 72% of FDI stock, driven by finance, business services, and real estate. Manufacturing accounts for 28%, with chemicals and pharmaceuticals leading, followed by wood, paper, metal, and machinery (data Business Sweden). According to the latest figures from the OECD, in the first semester of 2024, FDI inflows to Sweden reached USD 10.7 billion, compared with USD 14.6 billion recorded in the same period one year earlier.

Despite the unfavourable international situation, the country maintains a high level of appeal to foreign investors, because of its multilingual and qualified workforce, very high per capita purchasing power, an economy at the forefront of new technologies and innovation, as well as its advantageous tax regime. The Swedish government has undertaken measures to develop support for investment, focusing on key sectors (biotechnologies and food processing), as well as rapidly growing markets (Baltic countries, India, Brazil, etc.). On the other hand, investing in Sweden may be risky due to its small domestic market reliant on exports, high labour costs with strict regulations, steep taxes, and infrastructure plus housing challenges. On September 13, 2023, the Swedish Parliament approved the FDI Act, creating a national screening system for foreign direct investments. This legislation, effective December 1, 2023, empowers the Inspectorate of Strategic Products (ISP) to assess FDIs that may impact Sweden's national security, public order or public safety. All foreign investments closing on or after December 1, 2023, must comply with mandatory notification and approval procedures under the FDI Act, regardless of when the investment agreement was initiated. As evidence of the quality of the Swedish business climate, the country ranks high on most international investment lists, including the AT Kearney's 2024 Foreign Direct Investment Confidence Index (15th worldwide), the Global Innovation Index 2024 (2nd worldwide, the country has been in the top 3 for over a decade), and the latest Index of Economic Freedom (9th).

What to consider if you invest in Sweden

Strong Points

Advantages for FDI in Sweden:

• The political and economic situation is very favourable and creates a good quality business environment. 
• According to the World Bank, Sweden is the 10th country in terms of ease of doing business (Doing Business 2020).
• Corporates taxes are among the lowest in Europe: The country applies participation exemption, authorises a total tax deduction for interest and has no strict capitalisation rules. 
• The economy is open, diversified (specialised in high-potential sectors such as high-tech products and sustainable economy) and extremely competitive. 
• Demographics are becoming increasingly dynamic and are fuelling a highly qualified workforce adapted to export trades. 
• The judicial system is balanced and allows for safe, transparent and reliable decisions. 
• The quality of management and advisory services is very high, and the business procedures are simple to undertake. 
• The potential of the domestic market is often underestimated, as Swedish consumers have one of the highest levels of purchasing power in Europe and a growing propensity to consume. 

For more information, visit the Business Sweden website.

Weak Points

Disadvantages for FDI include:

• High labour costs
• Rigid labour legislation giving priority to worker protection
• High household debt (201% of net disposable income)
• Tensions in the housing market

Government Measures to Motivate or Restrict FDI

Since entering the European Union, the Swedish government has put in place a number of reforms to improve the legal business environment. This allowed the country to attract foreign investors and increase its competitiveness.
There are a number of incentives available to both Swedish and foreign owned companies, including:

• Financial incentives (such as loans and grants).
• Favourable tax regimes (such as tax relief for foreign experts and key personnel).

The Swedish government offers certain incentives to set up a business in targeted depressed areas. A range of regional support programs, including location and employment grants, low rent industrial parks, and economic free zones are available.

Sweden does not have a national security screening mechanism for inbound foreign investment.  However, the government is considering how to implement the EU Commission’s investment screening framework.

Business Sweden is the investment promotion agency tasked with facilitating business.

Bilateral investment conventions signed by Sweden

Sweden has signed over 70 bilateral agreements. To see the list of conventions and countries, click here.