Charitable organisations in Sweden: overview
A Q&A guide to charity law and practice in Sweden.
The country-specific Q&A guide provides a structured overview of the key practical issues concerning charity law in this jurisdiction, including the legal framework and legal definition of a charity; principal sources of law; forms of organisation used for charitable purposes, and the qualification requirements/formalities to set these up; main regulatory authorities; management; accounting/financial reporting requirements; tax; overseas charities; and reform.
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This Q&A is part of the Charity Law Global Guide. For a full list of jurisdictional Q&As visit www.practicallaw.com/charity-guide.
Overview and main trends
Charitable work and the idea of helping less privileged people have a long history in Sweden. The church fostered the idea of helping people in need as early as the Middle Ages. This type of work intensified during the 18th century, as associations were created to help provide for people in certain guilds. This included financial support to families that lost a family member. As the number of poor people increased in Sweden during the early 19th century many organisations were established to focus on private charitable work.
The view on charitable work changed in the early 20th century. One reason for that was that it was seen as degrading to receive aid in the general view of the public, as it entailed an obligation for the receiver to be grateful. The view of charities changed further as social-political issues appeared on the political agenda. One idea was that social policy ought to be publicly funded, as well as rights-based and equal to everyone, so that the need for charity would be limited. After the Second World War the debate between two sides, about whether social works should be provided by private parties or the public, grew stronger.
This debate and the level of charitable work in Sweden have been affected by the dominance of the social democratic party over the last century. According to the social democratic philosophy, everyone is to be treated equally. Everyone should have access to publicly available healthcare, schools and, if needed, social allowance. The long period of social democratic governance in Sweden has resulted in vast welfare reforms. The need for charity has been somewhat limited compared to other countries. This could explain why there are fewer organisations in Sweden focusing exclusively on charitable work than elsewhere.
In recent years private charity initiatives have become more important, due to an increased focus on the need for aid in Sweden and abroad as a result of the current global situation. Recent developments indicate that the importance of activities by Swedish charity organisations in Sweden and abroad may increase.
It is difficult to estimate the number of organisations performing charitable work in Sweden. This work is typically, but not exclusively, performed by non-profit organisations that are not necessarily registered, hence the uncertainty in numbers. The number of non-profit organisations has been estimated at 200,000. In April 2016, roughly 416 non-profit associations, foundations and religious communities have fulfilled the requirements for and received 90-accounts from the Swedish Fundraising Control (Svensk Insamlingskontroll, SFI). Out of these, 145 have qualified to and are members of the Swedish Fundraising Council (Frivilligorganisationernas Insamlingsråd, SFC) (see Question 6).
The total amount donated to charitable organisations has steadily increased over the years. In 2014, the total revenue of all non-profit organisations with 90-accounts was roughly SEK17,778 million, an increase of 6% compared to 2013. Out of the total revenue, 35% were donations by the general public. Donations from the general public increased by 6% compared to 2013. To qualify as one of the ten most successful non-profit organisations as to donations from the general public, an organisation would have to raise at least SEK163 million.
Overall, by the 2000s, turnover in the non-profit sector has reached about SEK140 billion. The non-profit sector also employs roughly 150,000 people.
It is difficult to make an exhaustive list of the activities carried out by charitable organisations in Sweden, as they vary widely. However, the Income Tax Act (Inkomstskattelag SFS: 1999:1229) can be used for guidance. Under the Income Tax Act, foundations, non-profit associations and religious communities can receive favourable treatment if they work to pursue certain public utility purposes. Foundations, non-profit associations and religious communities promoting one or more of the following philanthropic purposes, but not excluding others, can qualify:
Care of children.
Charitable work to those in need.
To strengthen Swedish defence in connection with military or other authorities.
Other equivalent activities.
A non-profit association can carry out these types of activities in a variety of ways. Further, the above list is not exhaustive for non-profit associations. Such associations can carry out another type of work, but can then be subject to less favourable treatment under the Income Tax Act.
Definition of charity
There is no legal definition of a charity and no specific body of law governing charity work in Sweden. Charitable work has evolved over time and different types of legal entities have provided charitable work. The most common legal entities for charitable work are non-profit associations (Ideella föreningar) and foundations (Stiftelser) (see Questions 4 and 5).
Principal sources of law
Sweden has no charity act and no specific legal body monitoring charitable activities, so a number of laws and regulations apply. To a large extent, the legal structure of the organisation or legal entity decides which law applies. The most common form of association for charities and other non-profit organisations in Sweden are non-profit associations.
Under Swedish law there is no separate act or statute for non-profit associations. This type of organisation is to a large extent governed by principles in case law and the analogous use of legal rules covering other forms of associations. The Economic Associations Act (Lag om ekonomiska föreningar SFS 1987:667) is of special interest. It directly applies to economic associations (ekonomiska föreningar), that is, associations with an intention to make profit, and is often analogously applied to various types of associations that are not formally regulated.
Another form for conducting a charity is a foundation. A foundation is not a form of association, but is constituted by the separation of property. The Foundation Act (Stiftelselag SFS: 1994:1220) introduced basic legal rules for foundations.
Different rules apply to a charitable organisation, depending on its activities. For example, if a non-profit association or foundation engages in commercial activity, has large assets or is the parent to a subsidiary body, it must keep books in accordance with the Accounting Act (Bokföringslag SFS: 1999:1078).
Charitable work is also subject to control under general laws, for example tax regulations, and by certain regulatory organisations (see Question 6).
Non-profit associations in Sweden can generally be categorised into three different types of associations:
Those who do not engage in commercial activity but by other means aim to promote a non-profit objective.
Those who have a clear intent to generate funds for its members, but do not engage in commercial activity to do this (for example, trade unions).
Those who despite conducting commercial activity, have a non-profit objective, that is, funds received are not distributed to its members, but are used for other means.
A non-profit association has legal personality and can acquire rights and assume liability. It can also be a party in judicial proceedings. A non-profit association is often organised in a similar way to economic associations. There is usually a members' meeting and an administrative body, usually a board, to make decisions.
Advantages. The lack of a separate statute for non-profit associations provides a lot of freedom for such associations to organise themselves to suit their purpose and activities.
Disadvantages. There are no obvious disadvantages of being a non-profit association, given the freedom it has in the absence of specific legislation.
Foundations are not associations and consequently have no members. The Foundation Act sets out four different categories of foundations:
Collective agreement (kollektivavtals) foundations.
Pension or personnel foundations.
The aim of a foundation is to promote the objective and/or persons chosen by the founder, on a long-term basis. For example, to support education or scientific research, or to provide financial aid to certain groups.
A foundation is founded when its property has been separated from the founder and transferred to an administrator obliged to administer the property, in accordance with the foundation's objective. A foundation can meet its objective by using the yield of the separated property to give cash donations to certain individuals or groups, or by becoming involved in business activity, for instance in the healthcare, educational or housing sectors.
An important feature of the foundation as a legal structure is its duration. The separated property must, at the outset, be valuable enough to keep the foundation functioning for at least five to six years. An undertaking to inject funds into a foundation is not taken into account when calculating the value of the separated property.
Similarly to non-profit associations, foundations are legal persons and can sign agreements and have rights and obligations in their own right. The Foundation Act stipulates that the liability of a foundation is limited to its assets. The representatives of the foundation are generally not personally liable for the actions of the foundation. However, board members, appointed auditors and other representatives can be liable to pay damages to the foundation itself, if economic loss has been caused due to the representatives' negligence.
A foundation is not dissolved until it has no assets left after paying its debts (which are limited to its assets). If a foundation is completely financed with the yield of its separated property, that is, the property itself is not used and does not decrease in value, the foundation is of a permanent nature. A business conducting foundation, on the other hand, can be subject to voluntary or compulsory wind-up, much like a non-profit association.
Advantages. The aim of a foundation is to promote the objective and/or persons chosen by the founder on a long-term basis. This is an advantage for a founder wishing to establish a long-term charity for a specific purpose.
Disadvantages. The statutory registration and supervision by the authorities can be a disadvantage to foundations in comparison with non-profit associations. However compared with other legal persons, foundations have a high degree of self-governance.
The steps to form a non-profit association have been identified in Swedish case law:
An agreement of co-operation must be made by two or more legal or natural persons.
The agreement must be formalised by adoption of a charter, which must include information on the name and objective of the association.
A board must be appointed.
Once these steps have been taken, the non-profit association is considered to exist with legal personality.
Generally, there is no requirement to register a non-profit association with the authorities. However, the association can be registered with the Companies Registration Office (Bolagsverket) if it will conduct commercial business and wishes to protect its trade name. It can also apply to the Tax Agency (Skatteverket) for an organisation number. Large non-profit associations (defined as associations exceeding certain thresholds in terms of number of employees, balance sheet total and net turnover) that operate commercial business must register with the Companies Registration Office.
A foundation is formed when the founder signs a formation document, specifying the intent to create a foundation and to separate certain property which must be used for a specified purpose. The specification of intent must include the foundation's aim and intended activities, and the group of potential beneficiaries.
The separation of property is finalised when the property has been separated from the founder's other assets, by way of transfer to a party other than the founder, who is obliged to administer the property (which is then out of reach from the founder's creditors).
Although not a requirement for the formation, a foundation must be registered within six months from formation with one of the county administration boards (Länsstyrelser) appointed by the government, in or near the county where the foundation has its seat of administration.
Ongoing regulatory requirements
Charity organisations are not subject to public regulation in Sweden as such, given the lack of charity legislation. There is no governmental body that regulates non-profit associations or inspects their activities. Foundations are registered and supervised by county administration boards (see box, The regulatory authorities).
If the relevant county administration board suspects that the foundation is not administered in accordance with the Foundation Act or its charter, for example it has not filed an annual report, lacks an appointed auditor or is reported by the public, it has a right and duty to intervene. For this purpose, the foundation must let the county administration board inspect its cash and bank balances, and its accounting documents and protocols.
If faults are revealed, the county administration board has power to order board members or external administrators to take certain measures, or even to dismiss them. It can also bring an action for damages on the foundation's behalf against board members, administrators, and auditors, if they wilfully or negligently cause financial damage to the foundation, for example by deviating from the foundation document.
Supervision by private organisations
Due to the lack of public regulatory control, private initiatives also monitor and inspect non-profit organisations. The most important is the Swedish Fundraising Control (Svensk Insamlingskontroll, or SFI).
A non-profit association, foundation or religious community that wants to receive acknowledgment for its charitable work can apply for a "90-account" from the SFI. A 90-account is a seven-figure bank account starting with the number 90. It is an accreditation of the work carried out by the account holder. The general view among the public is that organisations approved by SFI are sincere and worth donating money to.
The basic aim is to control how fundraising organisations use donations from the public. This includes the methods and costs of fundraising procedures, promoting proper advertising and ensuring that donations reach their destination.
If approved by SFI, the organisation can use a 90-account for donors to deposit their donations. This is a confirmation for potential donors that donations are managed responsibly, and that the money is used for the specified purpose without unnecessary costs.
To be approved by SFI and get a 90-account, a charity organisation must comply with the SFI regulations. In particular:
The organisation must raise funds for humanitarian, charitable, cultural or other public utility purposes, and the objective of the fundraising must be specific enough to enable SFI to regulate its fulfilment. A 90-account is not assigned to an organisation with political objectives, nor if the objective of the organisation does not comply with law, regulations and good practice.
The organisation must be a legal person with its headquarters in Sweden. An approved organisation is usually a non-profit association, foundation, or religious community.
The persons in charge must be suitable for the assignment and appropriately experienced.
The organisation must be governed by a board of directors with at least three board members and three deputy board members. At least half of the board members and deputy board members must reside in the European Economic Area (EEA). All members must be solvent and of full age and legal capacity.
The board must regularly review the finances of the organisation and ensure that raised funds are used for the stated purpose, without unnecessary costs. The bookkeeping must be controlled by an authorised auditor.
All fundraising activities must be supervised by persons with the appropriate knowledge and experience. Advertising must be ethical and not unnecessarily expensive. The raised funds must be used for the stated purpose.
SFI can examine the finances and administration of the organisation at any time. The organisation must provide SFI with all relevant information and documentation to enable this. The organisation must keep books in accordance with the Accounting Act, and prepare annual financial statements in accordance with the Annual Statements of Accounts Act.
If the costs of the fundraising activities and administration of the organisation exceed 25% of the organisation's total income three years in a row, the organisation will be disqualified as a 90-account user. Failure to comply with the SFI regulations will also lead to disqualification.
A 90-account holder can also apply for membership of the Swedish Fundraising Council (Frivilligorganisationernas Insamlingsråd, SFC). The SFC is a joint industry body for charity organisations, which promotes ethical and professional fundraising. It has developed a code of standards applicable to its members. Besides the reputational benefit, members are also invited to events where they share experiences and are trained by the SFC. The SFC also influences public opinion on ethical and professional fundraising. The key words for the SFC's ethical fundraising are respect, openness, trust and quality.
Another organisation that monitors charity work in Sweden is Charity Rating, which is a non-profit association focusing on the interests of donors. Charity Rating analyses how non-profit organisations use donations and carry out their work. Charity Rating collects information about a large number of non-profit organisations and rates them. Among other things, Charity Rating provides information about an organisation's transparency, management and ability to deliver. Rated and analysed organisations are selected by Charity Rating through dialogue with industry bodies, such as the SFC, and other non-profit organisations. Rated and analysed organisations only include non-profit organisations and foundations performing charity at a regional level, excluding local charity work.
In addition, the donor might also take a monitoring role. For example, the donor might stipulate certain requirements for the recipient to fulfil, in order to receive and use the donation.
A non-profit association is often organised in a similar way to an economic association. A non-profit association usually has a members' meeting and an administrative body, usually a board, to make decisions.
Due to the significant organisational freedom, the tasks of the different bodies in non-profit associations vary. The basic tasks of the members' meeting are to decide on amendments to the charter of the association and to appoint the board. The normal function of the board is to manage the association's activities in an acceptable way, and represent the association in its external relations. Legal capacity, being solvent and of full age (that is, 18 years old) are not prerequisites for being appointed as a board member. Nor is there a required number of board members, which means that the board can consist of only one person.
A foundation can have its own internal administration, where its activities are managed by a board consisting of one or several natural persons.
Alternatively, a foundation can be managed by an external legal person, for example a bank, government agency or association, with the executive body of this legal person responsible for the foundation's affairs.
There are no differences in terms of duties, powers or liabilities between these two ways of administrating a foundation. An internal administration is solely appointed to administer the foundation and can be organised in a variety of ways. A related administration means lower costs relating to the board, and the possibility to co-ordinate the administrative functions of the foundation with those of the external legal person.
There are a number of administrative provisions in the Foundation Act. For example in a foundation with its own administration:
The board represents the foundation and has authority to sign for it.
The board cannot consist solely of the founder or founders.
All board members must be solvent and of full age and capacity.
For foundations with external administrations, the legal person acting as administrator represents the foundation and has signing authority. The external administrator must be solvent and cannot be the same as the founder.
A non-profit association must keep books if the value of its assets exceeds SEK1.5 million, or if the association operates a commercial business or is the parent entity of a group of entities.
Non-profit associations that are required to keep books must prepare an annual report or annual accounts. An annual report is required if the association for the last two financial years has exceeded at least two of the following thresholds:
More than 50 employees.
Balance sheet total exceeding SEK40 million.
Net turnover exceeding SEK80 million.
The same applies if the association is the parent entity in a group of entities and the group exceeds the above thresholds.
Non-profit associations that are required to keep books but do not exceed the thresholds above must prepare annual accounts instead of an annual report.
Non-profit associations that are not required to keep books have no legal obligation to prepare an income statement or balance sheet, but such requirements or similar can be set out in the association's statues.
Non-profit associations that are required to prepare an annual report are generally also required to have an auditor.
The main rule is that a foundation must keep books if the value of its assets exceeds SEK1.5 million. However, certain foundations, such as fundraising foundations, collective agreement foundations and foundations that operate commercial business, must keep books even if the value of its assets does not exceed SEK1.5 million. Foundations that are required to keep books are generally required to submit an annual report to the relevant county administration board.
All foundations must have an auditor. Foundations that are required to submit an annual report must have an authorised or approved public accountant, while other foundations can have a general auditor.
Tax on income and capital gains
The tax rules applicable to legal persons in the Income Tax Act generally apply to both non-profit associations and foundations, so they are subject to tax on income and capital gains in the same way as other legal entities. However, if the association or foundation has a public utility purpose, it can qualify for a partial tax exemption and only pay tax on income derived from real property or commercial business.
Although the assessment by the Tax Agency is made on a case-by-case basis, according to case law it is possible to sell merchandise to raise money without the operations being defined as commercial business. Circumstances implying that operations are not commercial businesses include:
An obvious discrepancy between the price and the market value for the merchandise (preferably, that the merchandise lacks value for the recipients).
The sale is not made in a competing market.
The clear objective for the sale is charity.
Purposes considered to be of public utility (see Question 2) include supporting education, scientific research or providing help for people in need. In respect to non-profit associations, promotion of, for example, culture, religion or politics, are also considered as activities conducted for a public utility purpose.
In addition, to qualify for the partial tax exemption:
The organisation's activities must exclusively or nearly exclusively be attributable to the qualifying purpose, and the organisation must spend a substantial part of its annual revenue on the qualifying activities (about at least 90% to 95%).
A non-profit association must also be open to the public, that is, nobody can be refused membership unless there is a specific reason relating to the nature of the association, for example that members must be of a certain age, live in a certain area, or practise a certain sport or activity. This requirement does not affect foundations, as they do not have any members.
Tax on property used by the organisation
If the organisation owns real property, the organisation is subject to property tax, just as with other legal entities. The tax exemption on income (see above, Tax on income and capital gains) does not affect the taxation of property held by the organisation.
Value added tax (VAT)
Only non-profit associations that operate commercial business can be subject to VAT and have the right to deduct incoming VAT. If the non-profit association is only partially subject to income tax (see above, Tax on income and capital gains), its operations are generally not considered as commercial business.
Since there is no specific legal regime applicable to organisations conducting charity nor any legal definition of charitable status, there are no real general disadvantages of being a charitable organisation. The supervision that comes with being exempted from certain taxes and qualifying for a 90-account (see Question 6) is a possible disadvantage. However, it is not mandatory for a charity organisation to apply for a tax exemption or a 90-account.
There is no separate regulation for oversea charities. Only organisations seated in Sweden can apply for a 90-account (see Question 6). However, this is not usually a problem, since many international charity organisations operate in Sweden through local branches with Swedish headquarters. The branch is set up as a local office with an independent management. The person appointed as manager must register the branch with the Companies Registration Office (Bolagsverket). Branch letters, invoices, order forms and websites must contain information about the foreign charity's:
Legal form and registered office.
Company number in the register.
Branch name and registration.
Description. Official website of the Swedish Parliament. All legislation referred to in in the article is available in Swedish on this website.
Swedish Tax Agency
T +46 8 564 851 60
Description. The Swedish Tax Agency is the governmental authority responsible for taxation of charitable organisations.
Swedish County Administration Boards
T +46 10 22 30 303
Description. The county administration boards are the representative authorities of the government in the 21 counties of Sweden, responsible for among other things the supervision of foundations.
Michael Karlsson, Partner
Mannheimer Swartling Advokatbyrå
Professional qualifications. Sweden, lawyer, 1980
Areas of practice. Mergers and acquisitions; dispute resolution
Non- professional qualifications. LLM, Lund University, 1980
Languages. Swedish, English, French, Danish
Professional associations/memberships. Swedish Bar Association, 1986
- Corporate Social Responsibility - The Corporate Governance of the 21st Century, chapter 17: Business and Human Rights: The Recent Initiatives of the UN.
- Global Business and Human Rights, first edition 2011: Local Human Rights Environment.
- Thomson Reuters Charity Law, First edition, 2012.
Gustav Engvall, Associate
Mannheimer Swartling Advokatbyrå
Professional qualifications. Sweden, lawyer, 2014
Areas of practice. Public M&A and equity capital markets; corporate sustainability and risk management
Non-professional qualifications. LLM, Lund University, 2014
Languages. Swedish, English