Leaving America can be hard on many levels. Adapting to a new culture, a different language can often be challenging. On top of that, many Americans in Sweden experience difficulties with filing the Swedish tax return. This is not surprising, as the combination of Swedish and American tax legislation is complex and often highly incomprehensible.
Update 2025-01-24: The Swedish tax return filing of 2025 starts within a couple of weeks, in February of 2025. Please reach out to us if you need assistance with tax return preparation for this year.
Swedish tax return – what are the basics?
Sweden applies the calendar year also as the tax year, just like America. The deadline for filing the tax return is usually on 2nd of May of the year following the tax year. Most Swedish residents choose to file the tax return online, but one can also choose to file it on paper forms. The tax return will be processed by the Swedish Tax Agency (‘Skatteverket’), and a tax assessment decision will be issued during between May and December.
As an American living in Sweden, you are tax liable for your global income. This includes any US-sourced income, such as dividends from American corporations, salary payments from an American employer, pension payments from America, and similar income. Swedish-sourced income is already reported to the Swedish Tax Agency, which means that it is already filled in the tax return form.
Since this is not the case for American-sourced income, one has to manually include it in the tax return forms, after having converted it (for currency purposes) and having classified it in relation to Swedish tax law. This can be very difficult (more inforrmation on this below).
The Swedish tax return is not available in English. Hence, receiving help from someone that understands Swedish is crucial.
Risk for double taxation of Americans in Sweden
Since Sweden will also tax the American sourced income of Americans in Sweden, it is likely that the income will be subject both to US and Swedish tax, due to the American citizen based taxation system. In order to avoid this, one has to demand that the Swedish-American tax treaty is applied. This sort of demand/claim should be made in the annual Swedish tax return. There is no form available to do this. Most Americans that want to claim the benefits of the tax treaty will hire a professional tax lawyer to draft and file the Swedish tax return.
In order to apply the tax treaty’s provisions, one has to assess in what country (Sweden or USA), the individual has his/her treaty residency. The assessment affects whether it is America or Sweden that is obligated to mitigate any double taxation This residency assessment should be done by a tax lawyer, as it is a complex legal assessment.
How to declare US-sourced income in the Swedish tax return
Another problem that is prevalent for Americans living in Sweden, is that one has to properly classify US-sourced income for Swedish tax purposes. For example, there is no such thing in Sweden as long/short-term capital gains, or non-qualifying dividends. Furthermore, IRA:s, 401(k):s and other pension accounts can cause a lot of tax problems for an American living in Sweden, since Sweden treats these very different compared to America. Also, Sweden applies special tax rules to owners of companies with less than five shareholders, that can lead to considerable tax risks. The rules also apply on ownership in American corporations.
Another cause of trouble, is ownership in American companies that are taxed as "pass-through" entities, such as a C-corps, LLC's and S-corps. Same applies to business income of sole traders.
Lastly, receiving income from an American trust is a considerable risk, since Sweden does not recognize trusts as legal entities. Instead, an American living in Sweden risk having employment tax levels applied to distributions from a trust. Also, in accordance with Swedish case law, a trust’s settlor, trustee or beneficiary can be seen as the taxable owner of the trust’s capital and income. If this is the case, the person must include the trust’s income in the Swedish tax return. Always consult a tax lawyer if you are living in Sweden and receive income from an American trust, or if you are settlor, trustee or beneficiary of a trust.
There have been cases of Americans being subject to heavy tax penalties, for not having declared their American income in a proper way in their Swedish tax return. In rare cases, this can lead to a Criminal Process, which can even lead to imprisonment.
Please reach out to us, if you need help with your Swedish tax return, or with any other tax or legal question in regard of your tax situation in Sweden.
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