Staying compliant with expat taxes is difficult when you only have one deadline to keep track of – but managing two deadlines can be even more complicated. For American expats in Sweden, the deadline for taxes was on May 2nd. Did you miss it? If so, we have all the information you need on how to get caught up on your Swedish and American taxes.
Tax Basics for American Expats in Sweden
Sweden is known for levying some of the highest taxes in the world, so you’ll need to use all the tools in your toolbox to make sure you don’t accidentally overpay. Fun fact: the Swedish Tax Agency is called Skatteverket, which is a lot more fun to say than IRS. But let’s dive into the technical side.
Taxation is based on residency, so check out our article on expat taxes in Sweden for the full briefing. Essentially, you will be on the hook for municipal (around 32%) as well as national income taxes (20-25%), capital gains – if applicable – at a rate of 30%, and a value-added tax of 25% with some exceptions. Fortunately, the US and Sweden have reached a tax treaty, which can help determine to which country certain taxes are due and avoid any double-taxation situations. Another silver lining: no gift tax, inheritance, or estate taxes are collected in Sweden.
New Tax Issues in Sweden
The Swedish Tax Agency recommended changing their current taxation approach (which is like a formal employer) to an economic employer approach. This would affect expat entrepreneurs living in Sweden who use the 183-day rule (the Special Income Tax for Non-Residents) to prevent tax assessment of their workforce in Sweden, starting January 1, 2019. So, if you work in Sweden on a business contract and stay longer than 183 days, you will likely be subject to more taxes on your Sweden-sourced income.
Getting Caught Up
If you’re late on your Swedish taxes, hopefully you requested an extension in advance to help you avoid penalties. If not, the penalty for hidden income is 40%, and the penalty for a timing issue or taxes that were incorrectly filed by mistake is 10%. These penalties can truly hurt your net income when you live in a country that already takes well over half of your pay in taxes off the top.
And if you missed the American deadline of April 15th (as a reminder, expats receive an automatic extension to June 15th to file – but not to pay any taxes owed), the IRS offers amnesty programs that can help alleviate the financial burden of becoming compliant.
For instance, if you’re several years behind, you can use the Streamlined Filing Procedures to become compliant on your American taxes penalty free! This program only applies to expats who were late because they had no prior awareness of their tax-filing requirements. In order to use this program, you’ll need to file the past three years of delinquent Federal Tax Returns and the past six years of FBARs (Foreign Bank Account Reports).
We Can Help American Expats in Sweden Become Tax Compliant
Get started with Greenback today, and our experts will leverage every deduction and credit available to ensure your taxes are correct and that you don’t overpay.