Tax Guide for Americans Living Abroad in Sweden
- Living as an Expat in Sweden
- Sweden at a Glance
- What Are Sweden’s Taxes like for US Expats?
- Who Has to File Taxes in Sweden?
- Who Qualifies as a Tax Resident in Sweden?
- Is Foreign (Non-Swedish) Income Taxed in Sweden?
- Taxes in Sweden
- What Tax Forms Do Americans Living in Sweden Have to File?
- US Tax Forms for Expats in Sweden
- What Tax Deductions Are Available for Americans Living in Sweden?
- Does the US Have a Tax Treaty with Sweden?
- Does the US Have a Totalization Agreement with Sweden?
- Navigating Tax Compliance for US Expats in Sweden
Living as an Expat in Sweden
Sweden offers its citizens some of the finest social programs: universal health insurance, unlimited sick days, subsidized childcare, and free university tuition.
However, these luxuries do not come without a cost, 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.
When contemplating relocating to Sweden, it’s essential to consider the impact it may have on your income tax return as a US expat, in addition to understanding the Swedish tax rates and deadlines. In other words, familiarizing yourself with the Swedish taxes for US expats is crucial before deciding to move.
Sweden at a Glance
- Primary Tax Form for Residents: Swedish Tax Return (inkomstdeklaration)
- Tax Year: January 1st to December 31st.
- Tax Deadline: May 2nd (for online filing) or August 2nd (for paper filing)
- Currency: Swedish krona (SEK)
- Population: Approximately 10.4 million
- Number of US Expats: Approximately 18,000
- Capital City: Stockholm
- Primary Language: Swedish
- Tax Treaty: Yes
- Totalization Agreement: Yes
What Are Sweden’s Taxes like for US Expats?
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.
Who Has to File Taxes in Sweden?
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.
Who Qualifies as a Tax Resident in Sweden?
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:
- Foreigners who are permanently domiciled in Sweden
- Foreigners who stay in Sweden for at least six months uninterrupted
- Foreigners who were previously Swedish residents and have an “essential connection” to Sweden, such as a permanent home or immediate family in the country
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.
Dreading the last minute scramble pulling together your tax documents? Despair no more! This simple checklist lists the documents you need to have on hand when preparing to file.
Is Foreign (Non-Swedish) Income Taxed in Sweden?
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%.
Taxes in Sweden
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.
Swedish Income Tax Rates
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.)
Resident Income Tax Rates in Sweden:
- For income under 20,200, the national tax rate is 0%, and the local tax rate is 0%
- For income of 20,200–537,200, the national tax rate is 0%, and the local tax rate is ~32%
- For income over 537,200, the national tax rate is 20%, and the local tax rate is ~52%
While Swedish residents are required to report their worldwide income, the US-Sweden tax treaty helps US expats living in Sweden avoid double taxation.
Non-Resident Income Tax Rates in Sweden:
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 Tax
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.
Special Wage Tax on Pension Premiums
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%.
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.
- If an expat works for a US company in Sweden for less than five years, they typically pay into US Social Security.
- If an expat works for a US company in Sweden for over five years, they will likely pay into Swedish social security.
- If an expat works for a non-US employer in Sweden, they will pay into the Swedish social security.
The tax rates for Swedish social security contributions are:
- 31.42% for employers
- 7% for employees
- 28.97% for the self-employed
What Tax Forms Do Americans Living in Sweden Have to File?
Swedish Tax Forms for Expats
The primary tax form in Sweden is the inkomstdeklaration (“income declaration”). There are multiple versions of the inkomstdeklaration:
- Inkomstdeklaration 1 is used to report the income of private individuals, sole traders, and partners in a limited company or trading company
- Inkomstdeklaration 2 is used to report the income of limited companies and economic associations
- Inkomstdeklaration 3 is used to report the income of nonprofit associations and foundations
- Inkomstdeklaration 4 is used to report the income of trading companies and limited partnerships
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 must 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 via text.
If you think any information on your completed form is incorrect, you can change it online through the skatteverket website. You’ll need a Swedish personal identity number and Swedish e-identification (such as a BankID) to do this.
Your Swedish annual tax return is due on May 2nd or the following Monday if May 2nd falls on a Saturday or Sunday.
US Tax Forms for Expats in Sweden
IRS Form 1040: Individual Income Tax Return
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.
Typically, taxpayers must file Form 1040 by April 15th (April 18th, 2023). However, the IRS automatically extends expats’ due date to June 15th, 2023. Taxpayers can also request a further extension to October 16th, 2023.
IRS Form 8938: Statement of Specified Foreign Financial Assets (FATCA)
As an expat, if you own non-US financial assets above certain thresholds, you must file a FATCA report. The specific financial threshold 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.
FinCEN Form 114: Report of Foreign Bank and Financial Accounts (FBAR)
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 over multiple.)
You should file the FBAR electronically using the FinCEN BSA E-Filing System. The standard due date for the FBAR is April 15th, but if you miss that deadline, there’s an automatic extension until October 15th.
What Tax Deductions Are Available for Americans Living in Sweden?
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:
- Foreign Earned Income Exclusion
- Foreign Tax Credit
- Foreign Housing Exclusion (or Deduction)
Using these tax credits, most expats are able to erase their US taxpaying obligations. (Though you are still required to file a US Federal Tax Return even if you don’t owe anything.)
Does the US Have a Tax Treaty with Sweden?
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.
Does the US Have a Totalization Agreement with Sweden?
The US and Sweden have a Totalization Agreement that helps clarify which country’s social security system you may be required to contribute to. The agreement ensures that individuals who work in both countries are only required to pay into one country’s social security system.
Under the Totalization Agreement, US expats working in Sweden are exempt from contributing to the Swedish social security system for a limited period, provided they have paid into the US system. The same rule applies to Swedish expats working in the US, who can be exempted from contributing to the US social security system for a specific time frame, provided they have paid into the Swedish system.
By eliminating the possibility of double social security taxation, the Totalization Agreement helps facilitate workers’ movement across borders. It supports the promotion of trade and investment between the US and Sweden.
Navigating Tax Compliance for US Expats in Sweden
Navigating tax compliance as a US expat living in Sweden can be a complex process. However, with the right resources and guidance, fulfilling your tax obligations and avoiding any potential penalties or legal issues is possible.
One of the most important things to remember is that the US and Sweden have a tax treaty that helps prevent double taxation. It is essential to familiarize yourself with the provisions of this treaty and how they may affect your tax situation.
Contact us, and one of our customer champions will gladly help. If you need concrete advice on your specific tax situation, you can also click below to get a consultation with one of our expat tax experts.