Statutory rate without a valid treaty claim: 30%.
What sets the U.S.-Sweden treaty apart
The U.S.-Sweden treaty exempts interest and royalties at source, and since the 2005 protocol has a 0% dividend rate for qualifying parents and Swedish pension funds. A few of its rules are tighter than the usual pattern: the performer threshold is only $6,000, measured over any 12 months; U.S. contingent interest is reclassified as a dividend rather than left as exempt interest; and pension funds lose the 0% rate on shares they sell within two months.
Common payments at a glance
| Payment | What the U.S. payer does | Article |
|---|---|---|
| Interest to a Swedish lender or affiliate | No withholding. U.S. contingent interest that is not portfolio interest is a dividend: 15% or 5% | 11(1), 10(5) |
| Royalties, including film and broadcast rights | No withholding | 12(1) |
| Rent for equipment | Business profits: no withholding without a U.S. permanent establishment | 7(7) |
| Dividend to a Swedish company owning 10% or more of the voting power | 5%; 0% if 80% held for 12 months and an Art. 10(3)(a) route is met | 10(2)(a), 10(3)(a) |
| Dividend to a Swedish pension fund | 0%, if not from a business and the shares are not sold within 2 months | 10(3)(b) |
| Dividend to anyone else | 15% | 10(2)(b) |
| Swedish contractor working in the U.S. | Exempt unless a fixed base is regularly available in the U.S. | 14 |
| Employee seconded to the U.S. | Exempt only if 183 days or fewer in any consecutive 12 months, paid by a non-U.S. employer and not borne by a U.S. PE | 15(2) |
| Performer or athlete | Taxable if gross receipts in any 12-month period, including reimbursed expenses, exceed $6,000 | 18(1) |
| U.S. Social Security benefits | Taxable in the U.S.: withheld on | 19(2) |
| Lottery winnings and other income | Exempt from U.S. tax: taxable only in Sweden | 22(1) |
Assumes the payee is the beneficial owner, is resident under the treaty, meets its limitation-on-benefits article and gives a valid W-8BEN, W-8BEN-E or Form 8233. Article references are to the treaty as amended.
Rates on investment and other income
Treaty in effect generally from Jan. 1, 1996. Protocols in effect from: Jan. 1, 2007. IRS country code SW.
| Income | 1042-S code | Treaty rate | Article |
|---|---|---|---|
| Interest paid by U.S. obligors, general | 01 | 0% (exempt)gjj | 11(1) |
| Dividends paid by U.S. corporations, general | 06 | 15%ddmm | 10(2) / PIV |
| Dividends qualifying for the direct dividend rate | 07 | 5%ddmmoo | 10(2) / PIV |
| Royalties: industrial, commercial or scientific equipment | 10 | n/au | 12(1) |
| Royalties: know-how and other industrial royalties | 10 | 0% (exempt) | 12(1) |
| Royalties: patents | 10 | 0% (exempt) | 12(1) |
| Royalties: motion picture and television copyrights | 11 | 0% (exempt) | 12(1) |
| Royalties: copyrights (including software, unless the treaty says otherwise) | 12 | 0% (exempt) | 12(1) |
| Pensions and annuities | 15 | 0% (exempt) | 19(1) |
| U.S. Social Security benefits (applies to 85% of the payment) | 15 | 30% | 19(2) |
"n/a" means the payment type is not covered by the royalty article: equipment leasing is business profits (no withholding without a permanent establishment) or other income. Superscript letters are the IRS's own conditions, listed at the end of this page.
Pay for personal services performed in the United States
Each row is an exemption the treaty gives, with the limits the IRS lists. All conditions in a row must be met; if any is not, the pay is withheld on at 30% (contractors) or under the wage rules (employees). Services performed entirely outside the United States are foreign-source and need no treaty claim.
| Code | Purpose | Maximum presence in U.S. | Required employer or payer | Maximum amount | Article |
|---|---|---|---|---|---|
| 17 | Independent personal services7 | No limit | Any contractor | No limit | 14 |
| 18 | Dependent personal services121757 | 183 days | Any foreign resident | No limit | 15 |
| 42 | Public entertainment25 | No limit | Any U.S. or foreign resident | $6,000 | 18 |
| 20 | Remittances or allowances11 | No limit | Any foreign resident | No limit | 21 |
Reading the U.S.-Sweden treaty as a payer
Documents and dates
The convention was signed in Stockholm on September 1, 1994, replacing the 1939 treaty; the IRS tables give January 1, 1996 as the general effective date. A protocol signed on September 30, 2005 replaced the dividend and limitation-on-benefits articles, added a transparent-entity rule and updated the saving clause; the IRS tables list it as effective January 1, 2007, with withholding changes applying from the first day of the second month after it entered into force. The original treaty text is not posted by the IRS; the 1994 technical explanation describes it article by article.
Residence and transparent entities
Exempt organizations and pension plans are residents (Art. 4(1)(c)). U.S. citizens and green card holders are U.S. residents only with a substantial presence, permanent home or habitual abode in the U.S. A company resident in both countries is resident where it was created. Income derived through an entity transparent under either country's law counts as a Swedish resident's only to the extent Swedish law treats it as that resident's income (Art. 1(6)). The 2005 technical explanation's example: a U.S. entity that Sweden treats as a corporation, owned by a Swede, does not pass U.S. income through to the Swedish shareholder, even if the U.S. treats it as transparent.
Limitation on benefits
The 2005 Article 17 qualifies individuals, governments, listed companies whose shares are regularly traded and either trade primarily in their home region (the EU, EEA or Switzerland for a Swedish company) or are managed there, subsidiaries at least 50% owned by five or fewer listed companies, exempt organizations and pension funds meeting beneficiary or sponsor tests, and companies passing an ownership and base erosion test. Swedish group contributions paid to a Swedish resident are not counted as base-eroding payments. Derivative benefits need 95% ownership by seven or fewer EU, EEA, NAFTA or Swiss equivalent beneficiaries. Income connected with an active business in Sweden qualifies. A triangular rule lets the U.S. tax interest and royalties at up to 15% where they run through a third-country branch taxed at less than 60% of the Swedish rate.
Dividends
The 5% rate needs a company owning at least 10% of the voting power, tested on the record date. The 0% rate needs a Swedish company that has owned, directly or through residents of either country, at least 80% of the voting power for the 12 months ending on the date entitlement is fixed, and that either: is listed or a listed company's subsidiary; passes both the ownership and base erosion test and the active business test; qualifies under derivative benefits; or has a competent-authority grant (Art. 10(3)(a)).
A Swedish pension fund (organized under Swedish law, mainly to provide pensions, and exempt on that activity) gets 0% if the dividends are not from a trade or business and it does not sell, or contract to sell, the shares within two months of acquiring them (Art. 10(3)(b), 10(11)). RIC dividends get 15% (0% for pension funds); REIT dividends get those rates only for an individual or pension fund holding 10% or less, a holder of 5% or less of a listed class, or a holder of 10% or less of a diversified REIT (Art. 10(4)). Article 10(8) also keeps a Nobel-type exemption: Swedish charities supported substantially by non-U.S. persons are exempt from U.S. private foundation excise taxes.
Interest and royalties
Interest is taxable only in Sweden (Art. 11(1)). The 2005 protocol added U.S. contingent interest that would not qualify as portfolio interest to the definition of dividends (Art. 10(5)), so it is withheld on at the dividend rate rather than exempted. REMIC excess inclusions are taxable at the statutory rate. Branch-level excess interest of a Swedish company's U.S. branch is treated as exempt interest. Royalties are taxable only in Sweden (Art. 12(1)); the definition includes payments for films and works for radio or television. Equipment rent is business profits (Art. 7(7)).
Services
A Swedish individual's independent services are taxable in the U.S. only through a fixed base regularly available here (Art. 14). Construction projects become a permanent establishment after 12 months. Employees are exempt only if present 183 days or fewer in any consecutive 12-month period, paid by a non-U.S. employer and not borne by a U.S. permanent establishment or fixed base (Art. 15(2)). Directors' fees may be taxed by the company's country, except the part for services performed in the director's home country (Art. 16). Performers and athletes are taxable once gross receipts in any 12-month period, including reimbursed expenses, exceed $6,000, and then on the whole amount (Art. 18).
Pensions and Social Security
Private pensions and annuities are taxable only in the country of residence (Art. 19(1)). Social Security, including tier 1 Railroad Retirement and Swedish allmän tilläggspension, is taxable only in the paying country (Art. 19(2)), so U.S. Social Security paid to a Swedish resident is withheld on.
Students and other income
Students and trainees in full-time education or training are exempt only on amounts received from abroad (Art. 21); grants from U.S. sources and pay for services are not covered. There is no teacher or researcher article. Other income, including lottery winnings, is taxable only in Sweden (Art. 22). Gains other than on U.S. real property or permanent establishment assets are taxable only in the residence country.
Where payers get it wrong
- Exempting U.S. contingent interest. Since 2005 it is a dividend, at 15% or 5%.
- Granting 0% on an 80% holding alone. The 12-month holding and one of the four limitation-on-benefits routes are required.
- Giving a Swedish pension fund 0% on a short-term holding. Shares sold within two months do not qualify.
- Using a $10,000 or $20,000 performer threshold. Sweden's is $6,000 in any 12-month period, and above it all receipts are taxable.
- Counting 183 days by calendar year. The employee test runs over any consecutive 12 months.
Read from the treaty documents: Treasury Technical Explanation of the Convention of Sept. 1, 1994; Protocol of Sept. 30, 2005 and its Technical Explanation. Texts and technical explanations: United States income tax treaties, A to Z.
How the payee claims these rates
- Individuals claim a reduced rate on interest, dividends, royalties or pensions in Part II of Form W-8BEN: treaty country, article, rate and any conditions. Most claims need a U.S. TIN or a foreign TIN on the form.
- Entities claim in Part III of Form W-8BEN-E, which also asks which limitation-on-benefits test the entity meets (the Sweden treaty's LOB provision is Article 17).
- Pay for services performed in the United States by an individual is exempted on Form 8233, not the W-8BEN, one form per tax year and per payer.
- The payer reports the payment on Form 1042-S with the income code shown above and chapter 3 exemption code 04 (exempt or reduced withholding under a tax treaty). From 2026 an exemption code is required whenever less than 30% is withheld.
The rate in a table is the most the United States may withhold under the treaty, not an entitlement. The payee has to be a resident of Sweden under the treaty, the beneficial owner of the income, and (for entities) meet the limitation-on-benefits article, and the payer has to hold a valid certificate before the payment. The IRS tables are a summary: check the article itself when the amount is material.
Questions payers ask
What is the U.S. withholding rate on dividends paid to a resident of Sweden?
15% on dividends generally and 5% on dividends qualifying for the direct dividend rate, under Article 10(2) / PIV, if the shareholder documents the claim on a W-8BEN or W-8BEN-E. Without a valid claim the rate is 30%.
What is the U.S. withholding rate on royalties paid to a resident of Sweden?
0% on copyright and software royalties (income code 12), 0% on patent royalties and 0% on film and television royalties, under Article 12(1).
What is the U.S. withholding rate on interest paid to a resident of Sweden?
0% under Article 11(1), before considering the Code's own exemptions for portfolio interest and bank deposit interest.
Is a contractor from Sweden working in the United States exempt from U.S. withholding?
Under Article 14, pay for independent personal services is exempt if the contractor is present in the United States for no more than no limit, subject to the conditions in the article. An individual claims the exemption on Form 8233; without it, withhold 30%.
Do we withhold on a contractor from Sweden who works only outside the United States?
No. Pay for services performed entirely outside the United States is foreign-source income: no withholding and no Form 1042-S. Keep the contractor's W-8BEN or W-8BEN-E on file.
Does a Swedish pension fund pay U.S. tax on dividends?
Not if it qualifies as a pension fund under Article 10(11), the dividends are not from a trade or business, and it does not sell the shares within two months of acquiring them. It must also meet Article 17.
When is a Swedish performer taxable in the U.S.?
When gross receipts from U.S. performances in any 12-month period, including reimbursed expenses, exceed $6,000. Then the full amount is taxable.
Is interest paid to a Swedish company withheld on?
Generally no. Interest is taxable only in Sweden. U.S. contingent interest that is not portfolio interest is treated as a dividend, and REMIC excess inclusions are taxed at the statutory rate.
The IRS notes behind the figures
Notes to the rates (IRS Table 1)
- g Exemption or reduced rate does not apply to an excess inclusion for a residual interest in a real estate mortgage investment conduit (REMIC).
- u If enterprise earns income from leasing of equipment in the conduct of a trade or business, covered by Business Profits article (net tax). If passive income from the leasing of equipment, and not in Royalty article, covered by the Other Income article, if any. In Pakistan payment for TV broadcasting rights are covered by the Royalty article but not rental income from motion picture films.
- dd Amounts paid to certain pension funds that are not derived from the carrying on of a business, directly or indirectly, by the fund are exempt. This includes dividends paid by a REIT only if the conditions in footnote mm are met. For Sweden, to be entitled to the exemption, the pension fund must not sell or make a contract to sell the holding from which the dividend is derived within 2 months of the date the pension fund acquired the holding. The United States has competent authority arrangements (MAP) with some treaty jurisdictions (e.g. Netherlands and Switzerland) that describe which pension funds are eligible for the exemption. See the Competent Authority Arrangements page on irs.gov.
- jj The rate is 15% (10% for Bulgaria and Spain; 30% for Austria, Germany, and Switzerland) for contingent interest that does not qualify as portfolio interest. In general, contingent interest is interest that is determined with reference to (a) receipts, sales, income, profits or other cash flow of the debtor or a related person, (b) any change in the value of any property of the debtor or a related person, or (c) any dividend, partnership distribution, or similar payment made by the debtor or related person. For Sweden and Germany, contingent interest is covered by the dividends article of the treaty.
- mm The rate in column 6 applies to dividends paid by a regulated investment company (RIC) or real estate investment trust (REIT). However, that rate applies to dividends paid by a REIT only if the beneficial owner of the dividends is (a) an individual (or pension fund, in some cases) holding not more than a 10% interest in the REIT, (b) a person holding not more than 5% of any class of the REIT's stock and the dividends are paid on stock that is publicly traded, or (c) a person holding not more than a 10% interest in the REIT and the REIT is diversified.
- oo Dividends received from an 80% owned corporate subsidiary are exempt if certain ownership period and limitation on benefits conditions are met by the recipient. For Japan, greater than 50% ownership is necessary. See specific treaty article to determine other conditions.
Notes to the services table (IRS Table 2)
- 7 Exemption does not apply to the extent income is attributable to the recipient's fixed U.S. base. For residents of Korea and Norway, the fixed base must be maintained for more than 182 days (for Norway, 30 days in the case of the exploration or exploitation of the seabed and sub-soil and their natural resources); for residents of Morocco, the fixed base must be maintained for more than 89 days.
- 11 Applies only to full-time student or trainee.
- 12 Fees paid to a resident of the treaty country for services performed in the United States as a director of a U.S. corporation are subject to U.S. tax.
- 17 The exemption does not apply if the employee's compensation is borne by a permanent establishment (or in some cases a fixed base) that the employer has in the United States.
- 25 Exemption does not apply if gross receipts (including reimbursements) exceed this amount.
- 57 Remuneration for employment exercised aboard a ship or aircraft operated in international traffic by a resident of a contracting State may be taxed in that State. Canada may tax the income from employment if the income is derived by a resident of Canada and the ship or aircraft is operated by a resident of Canada. If operated by a Luxembourg resident and Luxembourg fails to tax the income, such income shall be taxed in the State of which the employee is a resident. The income may be taxed in Tunisia only if the ship or aircraft is operated by an enterprise that is managed and controlled in Tunisia.
Transcribed from the IRS Tax Treaty Tables. Treaty texts and technical explanations: United States income tax treaties, A to Z.
Other treaty countries
Australia · Austria · Bangladesh · Barbados · Belgium · Bulgaria · Canada · Chile · China · Commonwealth of Independent States · Cyprus · Czech Republic · Denmark · Egypt · Estonia · Finland · France · Germany · Greece · Iceland · India · Indonesia · Ireland · Israel · Italy · Jamaica · Japan · Kazakhstan · Latvia · Lithuania · Luxembourg · Malta · Mexico · Morocco · Netherlands · New Zealand · Norway · Pakistan · Philippines · Poland · Portugal · Romania · Slovak Republic · Slovenia · South Africa · South Korea · Spain · Sri Lanka · Switzerland · Thailand · Trinidad and Tobago · Tunisia · Turkey · Ukraine · United Kingdom · Venezuela