May is approaching and that means tax season in the US. As a US person living in Sweden you should note that new regulations called FATCA, has entered into force and that financial institutes in Sweden are obliged to inform the IRS in the US about your assets here in Sweden.
What is FATCA and why should I care?
FATCA, short for Foreign Account Tax Compliance Act, is a relatively new regulation aiming to prevent tax evasion. Each country must sign the FACTA agreement in order for it to apply in the country. Countries and financial institutions that do not sign the agreement risk to pay 30% taxes on payments from the US.
The Swedish-American FATCA Agreement was signed August 8, 2014 and entered into force on 1 April 2015. The agreement is reciprocal, which means that the IRS will have access to information about US citizens capital assets and revenue managed by or paid to the Swedish financial entities. Similarly, the Swedish Tax Agency to obtain information about the Swedish citizens assets and revenue managed by or paid to the US financial entities.
So, the FATCA might have direct impact on you if you are US person with assets in Sweden.
Does FATCA apply to me?
FATCA apply to US persons. This term mostly includes US citizens or individuals residing in the United States. However, it also applies to green card holders, who live outside of the US and to US registered companies and businesses.
What assets does FATCA apply to?
The accounts covered by FATCA are (amongst others) bank accounts, saving accounts, business accounts, investment savings accounts, holding accounts, private pension plans and mutual fund shares.
Are there any exceptions?
Examples of accounts that are exempt from the reporting are:
- Pension insurance (subscribed and paid by the employer and managed in Sweden)
- Accounts held by the estate
What is FBAR and when does it apply?
When the aggregate value of all your foreign accounts exceeds $ 10,000 at any time during the calendar year you have to report this information on a special form, this special form is commonly called FBAR.
Can a Swedish bank report my accounts whiteout my consent?
The bank will ask you to sing a form allowing them to provide information about your assets in Sweden to the IRS. Refusing to sign such a form can result in the bank freezing your account.
Questions about the FATCA can be sent to the Swedish Tax Agency under the E-mail: email@example.com.