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As an American expat in Sweden, you’ll probably have to file both a US and Swedish tax return. Here’s what you need to know to meet all of your expat tax obligations.
Sweden offers its citizens some of the finest social programs that exist: universal health insurance, unlimited sick days, subsidized childcare, and free university tuition.
These luxuries do not come without a cost, however, and Sweden’s tax rates are among the highest in the world. In addition to Swedish taxes, Americans living abroad cannot forget their US expatriate income tax return obligation or other reporting requirements, like FBAR. If you are considering a move to Sweden, you will want to examine what effect it could have on your expat income tax return, as well as the Swedish tax rates and deadlines.
Sweden is renowned for its comprehensive social programs. However, to support those social programs, Sweden also has some of the highest tax rates in the world. Swedish tax law is also known for its complexity, often making it difficult for expats to keep track of their obligations.
To help clear things up, here’s an overview of how Sweden’s tax law applies to US expats.
Expat residents of Sweden with an income of at least 18,900 Swedish kroner (SEK) in a single tax year are required to file an annual tax return to report their worldwide income. This applies to both full-year and part-year residents.
Non-residents, on the other hand, are only taxed on their Sweden-sourced income. Plus, non-residents are generally not required to file a tax return if they only have employment income to report without any capital gains, pensions, or other non-wage forms of income.
Sweden’s taxes for US expats will depend on your residency status. So how do you know if you’re a resident or non-resident of Sweden?
Residency is determined by whether or not someone is “permanently or regularly” living in Sweden. This typically includes:
Swedish citizens and foreign residents who have lived in the country for more than a decade are considered tax residents until the resident can prove all ties have been broken. After that, the rules are flipped. Five years after a resident has left, it is up to the tax authority to prove that the person who had been living in Sweden still has important ties to the country.
You are taxed on your worldwide income if you are considered a resident in Sweden. Non-residents are only taxed on income sourced within Sweden, including capital gains and pensions. The Swedish tax rate on employment income for non-residents is a flat 25%.
Not all countries impose the same types of taxes on residents and non-residents. For example, unlike the US, Sweden has no gift tax, estate tax, or inheritance tax. So what taxes might an American living abroad in Sweden be subject to?
Here are the most common.
Sweden taxes income at two levels: local and national. Local taxes range across different municipalities, while national rates are more consistent. The table below shows both rates for Swedish residents, with an average estimate for local taxes. (All income amounts are given in SEK.)
While Swedish residents are required to report their worldwide income, the US-Sweden tax treaty helps US expats living in Sweden avoid double taxation.
As mentioned above, the Swedish tax rate on employment income for non-residents is a flat 25%.
Self-employed expats living in Sweden will receive a notice from the skatteverket (the Swedish equivalent of the IRS) informing them of their tax filing obligations.
Capital gains and investment income are taxed at a flat rate of 30%. This tax applies regardless of whether or not the gain was related to business activities.
The good news is that capital losses can be used to offset taxes on capital gains, and depending on what type of gain or loss occurred, these may even be prorated. However, while losses can be carried forward, they cannot be carried back.
Sweden imposes a property tax—also known as a property fee—on certain houses. The rate for this tax depends on the use and value of the house but generally ranges from 0.75%–3% of the tax assessed value of the home.
Employers who are established in Sweden are required to pay a wage tax on pension costs involving tax-qualified company pension plans. The rate for this tax is 24.26%.
Because Sweden is part of the EU, most services and sales are subject to a value-added tax (VAT). The standard rate for value-added tax is 25%, but certain items such as food and books have a 12% VAT. Transportation is taxed at 6%.
Pro Tip: Expats can typically deduct the VAT charged on inputs from VAT that is payable on related output.
As with individuals, Sweden taxes resident corporations on their worldwide income and nonresident corporations on only their Sweden-sourced income. (Though once again, the US-Sweden tax treaty typically protects resident corporations from double taxation.)
The corporate tax in Sweden is a flat rate of 20.6% on all taxable income.
Sweden boasts a comprehensive social security system supported by contributions from employers and employees. The US-Sweden totalization agreement defines terms for whether Americans working in Sweden are obligated to contribute to US Social Security or Swedish social security.
The tax rates for Swedish social security contributions are:
Yes, the US has a formal tax treaty with Sweden. This treaty helps US expats living in Sweden avoid double taxation. The US and Sweden also have a totalization agreement to help determine which country’s social security system expats must contribute to.
The primary tax form in Sweden is the inkomstdeklaration (“income declaration”). There are multiple versions of the inkomstdeklaration:
In most cases, US expats living in Sweden will use inkomstdeklaration 1.
Every year, Sweden’s skatteverket sends copies of this form to residents and nonresidents who are required to file. However, even if you don’t receive a tax form, you may still be required to file your Swedish taxes. In that case, you can request a copy from the skatteverket.
Either way, unlike with most US tax forms, your inkomstdeklaration will probably come already completed, and all you have to do is approve it with your signature. Alternatively, you can approve it online, over the phone, or even through text message.
If you think any of the information on your completed form is incorrect, you can change it online through the skatteverket website. To do this, you’ll need a Swedish personal identity number and Swedish e-identification (such as a BankID).
Your Swedish annual tax return is due on May 2nd, or the following Monday if May 2nd falls on a Saturday or Sunday.
Form 1040 is the standard US individual income tax return. Every US citizen is required to file this form regardless of where they live in the world.
Normally, the due date for Form 1040 would be April 15th, but expats get an automatic filing extension until June 15th.
Pro Tip: If necessary, you can request a further extension to October 15th for filing your Form 1040.
As an expat, if you own non-US financial assets above certain thresholds, you must file a FATCA report. The specific threshold for your finances will depend on your filing status and whether you qualify as a bona fide resident of Sweden.
If you are required to file a FATCA report, attach it to your Form 1040 once you’ve completed it and file them together.
If you have a total of at least $10,000 in a non-US bank account, you’ll have to report it by filing FinCEN Form 114, better known as FBAR. (This applies whether the money is in a single account or spread out over multiple.)
You should file the FBAR electronically using the FinCEN BSA E-Filing System. The standard due date for the FBAR is April 15, but if you miss that deadline, there’s an automatic extension until October 15.
Because of the US-Sweden tax treaty, most Americans living abroad in Sweden won’t have to worry about double taxation. However, the IRS also provides several potential tax credits and deductions for expats, such as:
Using these tax credits, most expats are able to erase their US taxpaying obligations entirely. (Though you are still required to file a US Federal Tax Return even if you don’t owe anything.)
Hopefully, this guide has given you a better understanding of how Sweden’s tax policies impact US expats. If you’d like to learn more, though, our team of expat tax experts are ready to help.
At Greenback Expat Tax Services, we’ve spent years helping expats optimize their financial strategies and file their taxes accurately and on time. Just contact us, and we’ll be happy to answer any questions you have.
Click here to get started on your expat taxes today.