Swedish Taxation of American LLC Owners

Moving to Sweden as an American can lead to challenges with regard to taxes. The main reason is the US so-called Citizen Based Taxation (CBT), which implies that an American in Sweden would be fully liable to taxes in both America and Sweden. In particular, difficulties can arise for individuals that hold stocks in an American LLC, that are taxed as a so-called S-corp.

What is an American LLC?

An American LLC is a company form that offers limited liability to its owners while allowing business income and losses to pass through directly to the owners personal tax returns. Unlike traditional corporations, LLCs that elect to be taxed as S corporations do not pay US federal income tax at the entity level. Instead, the shareholders report their respective shares of income or losses on their individual tax returns.

Despite the fact that the owners are taxed on the LLCs profits, such profits may also be distributed to the owners. In addition, compensation can be paid out in the form of salary.

How is an American LLC treated for Swedish tax purposes

Swedish similarities to a US LLC

In Sweden, there are company forms that share certain similarities with an LLC taxed as an S corporation. These are known as a Handelsbolag or a Kommanditbolag. In English, the closest counterpart would typically be a partnership. As with an LLC, it is the owner rather than the entity that is liable to tax on profits generated by a Handelsbolag or Kommanditbolag.

Swedish tax claim on LLC owners

According to the Swedish Income Tax Act, Swedish tax residents are liable to Swedish income tax on holdings in foreign non Swedish companies that are taxed at the ownership level under the domestic legislation of the jurisdiction in which the company is formed.

Since this is the case for American LLCs taxed as S corporations, all shareholders of such LLCs who are also tax resident in Sweden are, as a starting point, subject to Swedish taxation on their share of the companys profits. This means that you, as an owner of a US LLC, may be required to pay Swedish tax on the LLCs profits regardless of whether those profits are actually distributed to you. However, there are certain exceptions to this general rule.

Will an American LLC owner living in Sweden potentially become double taxed?

Both Sweden and the United States want to tax

Due to the United States system of citizen based taxation, an individual who is tax resident in Sweden and owns shares in an American LLC may be subject to tax on the LLCs profits in both Sweden and the United States.

This is problematic, as it creates a clear risk of double taxation.

Applying the Swedish-American tax treaty

To mitigate or eliminate double taxation, it is generally possible to apply the Swedish American tax treaty. However, the application of the treaty varies depending on the specific circumstances of the individual case. Relevant factors include, among other things, where the shareholder is considered tax resident for treaty purposes and whether the LLC has a permanent establishment in Sweden.

It should also be noted that the Swedish American tax treaty does not apply to US state taxes. As a result, it is often necessary to rely on Swedens foreign tax credit rules in order to offset US state taxes paid.

If the tax treaty is to be applied, this should normally be done by a lawyer through a formal appendix to the Swedish income tax return, supported by well founded legal arguments.

How would an owner of an American LLC be taxed in Sweden?

As a main rule, Swedish domestic tax provisions apply when determining the taxation of an LLC owner who is tax resident in Sweden. This means that the individuals share of the LLCs annual result is subject to Swedish taxation regardless of whether any profits have been distributed.

The applicable Swedish income tax rate typically ranges between 30 percent and 55 percent, depending on the level of income and other factors. In addition, Swedish social security contributions, generally amounting to 24.26 percent, are levied on the LLCs annual result. This can result in a very high overall tax burden for an LLC owner who is tax resident in Sweden.

Applicable Swedish tax rates for 2026

LLC's Total Profits (after deductions)	Applicable Swedish Municipal Tax Rate	Applicable Swedish State Tax Rate	Total Tax Rate	Swedish Social Security Contribution rate
SEK 0 - 643 000	29-35%	0%	29-35%	24,26%
SEK >643 000	29-35%	20%	49-55%	24,26%

It should be noted that there are certain tax rules that apply in addition to the stated rates, which may reduce the effective tax burden, particularly where the annual income is lower. Furthermore, Swedish social security contributions are deductible for Swedish income tax purposes.

Impact of social security agreements

In addition, the Swedish American social security agreement may affect the obligation to pay Swedish social security contributions.

Final remarks

Are you the owner of an American LLC and living in Sweden? Would you like guidance on how this situation should be handled from a tax perspective? Please do not hesitate to contact us.