US-Sweden Totalization Agreement Overview for Expats

US-Swedent Totalization Agreement

The country of Sweden is known for its high level of taxation—so it’s not a place where you want to get caught with double taxes. Therefore, if you’re an expat who lives in Sweden or is considering a move to Sweden, you should get to know the US-Sweden totalization agreement. Avoiding twice the social security taxes is essential in order to maximize your financial situation while you live abroad.

Why the US-Sweden Totalization Agreement Exists

Totalization agreements were introduced to help mitigate the double taxation that occurs when people move abroad, and the US has them in place with many countries around the globe. The purpose of the US-Sweden totalization agreement is to offer guidance for ascertaining whether an expat should pay social security tax in the US or Sweden.

Which Country Will It Be—the US or Sweden?

In the vast majority of scenarios, if a US employer sends an expat to work in Sweden for five years or less, then they and their employee pay US Social Security taxes. So, the expats who are sent to work in Sweden for an excess of five years, and those who were hired in Sweden, will pay into the Swedish social security system. Bonus fact: the Swedish social security system is run by the National Agency of Social Insurance, or, in Swedish, Försäkringskassan.

Expats who are self-employed and work only in the US, or who transferred their business to Sweden for five or fewer years will pay tax to the US Social Security system. Expats who are self-employed and work only in Sweden, or have transferred their business to the US for five or fewer years will pay tax to the Swedish social security system.

What Exemptions Are Available with the Totalization Agreement?

After an expat has determined where social tax should be remitted, the next step is to acquire a certificate of coverage issued by the aforementioned country, which will be the proof of exemption from social tax on the same income from the other country.

How Do I Apply for a Certificate?

Employees who are seeking an exemption from Swedish social tax must have their employer request a certificate of coverage, or form US/SW 101, from the Social Security Administration. You can mail this in or request at the Social Security website.

Those seeking an exemption from US Social Security must have their employer request a certificate of coverage, or form SW/US 101, from the Swedish Regional Social Insurance Office for the region in which your employer is located.

You’ll want to have the following info handy before making this request:

  • Full name of the worker;
  • Date and place of birth;
  • Citizenship;
  • Country of worker’s permanent residence;
  • US Social Security Number (or Swedish Social Security Number if requesting a certificate from Sweden);
  • Name and relationship of family members accompanying the worker;
  • Address in Sweden, if known;
  • Date of hire;
  • Country of hire;
  • Name and address of the employer in the US and Sweden; and
  • Date of transfer and anticipated date of return.

Self-Employed in Sweden? Here’s How to Apply for a Certificate

Much like the process listed above, expats who are self-employed in Sweden should write to either the US Social Security Administration or the Swedish Regional Social Insurance Office in the region in which they reside to request the certificate. Again, you request this from the country where you will pay social tax—not where you want the exemption.

Remember to get the following information first:

  • Full name;
  • Date and place of birth;
  • Citizenship;
  • Country of permanent residence;
  • US and/or Swedish Social Security Number;
  • Name and relationship of family members accompanying you;
  • Address in Sweden, if known;
  • Nature of self-employment activity;
  • Dates the activity was or will be performed; and
  • Name and address of your trade or business in both countries.

When Is My Certificate Valid?

Normally, the certificate is valid when you begin work in the other country. So, yes, it can be retroactive. Greenback highly suggests requesting a certificate of coverage at your earliest convenience, but ideally before work begins in the other country, to prevent any chance of double taxation.

Final Steps to Eliminate Double Tax with the US-Sweden Totalization Agreement

For expat employees, certificates issued by Sweden will be retained in your employer’s files for use in case of an IRS audit. You and your employer are not required to file a copy of the certificate unless requested by the IRS. Expats who are self-employed must send a copy of the certificate from Sweden with their income tax return annually as proof of the US exemption from social security tax. This step is vital because self-employed expats are nearly always on the hook for roughly 15% in self-employment tax.

Certificates of coverage distributed by the US are given to the employer and the employee or self-employed person. Then, it is your (or your employer’s!) obligation to guarantee the certificate is provided to the Swedish tax authorities when necessary.

When you use the above tips to mitigate double taxation, life as an expat in Sweden is that much easier.

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