• Sweden edition
 

Sweden a tax haven for investors

Published: 26 Mar 2010 15:32 GMT+01:00
Updated: 26 Mar 2010 15:32 GMT+01:00

Kapitalförsäkring started as a vehicle to stimulate investment. And many Swedes have taken advantage of this rare opportunity. Capital injections into kapitalförsäkring policies by private investors have grown at annual rates of 25 to 30 percent, pouring tens of billions of Swedish kronor into the stock market each year.

And it is not only Swedes that are allowed to sign up. Any foreign citizen with a Swedish visa or EU passport living in Sweden can open an account.

Quentin Helgren, an American citizen who moved to Stockholm two years ago, opened a kapitalförsäkring policy in 2009.

“I found out about kapitalförsäkring through a friend working for a Swedish bank. And to be honest, when I signed up, I kept asking my agent what the catch was. It really seemed too good to be true, especially in Sweden of all places.”

You might think that the mere thought of not paying taxes or even provoking the Swedish Tax Agency (Skatteverket) is enough to make most Swedes shake in their snow boots, but the investment vehicle has been steadily gaining in popularity.

“At first I was afraid to tell people that I was involved with kapitalförsäkring,” Helgren says.

“I didn’t want to be known as a greedy American. But the more people I spoke with, the more I realized how many people actually use this system.”

Perhaps it is not widely used by ex-pats because of the process for creating an account. Instead of opening a normal stock market trading account, investors must sign up for a life insurance policy with a licensed insurance company and trade through them. Also, most advertisements for the insurance companies are in Swedish. So if an ex-pat doesn’t read Swedish publications it is unlikely that they will ever know about the system.

There are several disadvantages for investors using kapitalförsäkring policies. In addition to various administrative costs for opening accounts, investors forfeit all company voting rights to the insurance policy brokerage (although unless you plan on a hostile takeover of a publically traded company, this drawback shouldn’t deter you). Also, trading losses cannot be deducted from income and dividends are fully taxed.

And there is a major loophole that the taxman is looking to close. Tax assessments are made on January 1st on the total value of the insurance policy – not the value of capital gains (the tax rate is a derivative of the government’s borrowing rate and presently hovers around 1 percent). Many investors have been exiting all investment positions, emptying their accounts before January 1st, before reinvesting their funds after the tax assessment.

Legislation to close the zero taxation "loophole" is currently being considered. According to Hans Svensson of the insurance and investment company Skandia AB, which provides kapitalförsäkring services, a new bill is being drafted in the Swedish parliament that will change when the tax assessment is made. Instead of a one-time assessment on January 1st.

“It could be done monthly or weekly. We just don’t know yet.”

Svensson also believes the new bill will allow consumers to trade with kapitalförsäkring policies by using a modified brokerage account provided by any company with standard investment services. By eliminating the need to open a life insurance policy, this change could make the kapitalförsäkring process much easier for consumers.

However, Swedish law states that in a national election year, no new legislation can be passed after March 23rd until the new government is formed. As such, it is highly unlikely that any changes will be enacted until 2011.

When the new government is formed, this bill will likely go through a series of debates and modifications. But investors needn’t worry. This is not likely to be a top priority for a new government and a vote would be delayed through 2011, which means any changes to kapitalförsäkring would be enacted in 2012.

“In the States this type of thing would be totally exploited. Not in Sweden. I think it has to do with the Swede’s introverted nature or even a sense of guilt,” says Quentin Helgren.

Joel Molin

Paul Rapacioli (paul.rapacioli@thelocal.com)

Don't miss...X
Left Right

Your comments about this article

18:01 March 26, 2010 by biffweezer
Mr. Helgren might want to consult with a US tax attorney - if he hasn't already done so - and stop publicizing the fact that he has a kaptialförsäkring, in the meantime.

The IRS would be very interested in that fact and very most likely will not give the same the tax treatment as Skatteverket. In fact, they might apply punitive-like tax rates that wipe out the benefits, and then some.

It is a shame, as a kaptialförsäkring is a brilliant investment vehicle if you believe in a market upswing. Best to consider having a Swedish spouse/sambo open the account.
18:36 March 26, 2010 by Larry Cotter
To think that people would try to abuse a good system just to save 1%.....

Ridiculous.
13:50 March 27, 2010 by StockholmSam
1% on a million dollars is a lot of cash, Mr. Cotter.
14:10 March 27, 2010 by VicTaulic
I'll pass. I never invest in something I can't pronounce.
15:50 March 29, 2010 by calebian22
Biffweezer,

As long as Mr. Helgren has a tax home in Sweden and not the US, the IRS can suck it. The only thing he has to keep in mind is that if he has more than 10,000 dollars in any one foreign account this has to be declared, but not taxed, every year on a TDF-90 form like all American expats. The penalties if discovered are 100,000 dollars or 10% of the account, whichever is larger. More and more Americans are getting hit with this little known rule and unfortunately, ignorance is not a defense.
19:50 March 29, 2010 by biffweezer
Calebian22, feel free to file the 1040 Suck It, however it may only be a matter of time before all US expats are getting the UBS treatment. The US taxes worldwide income, and a kapitalförsäkring produces just that. The IRS is not obligated to follow Skatteverket's practices, and therefore seeking professional advice for a definitive view is advisable.

You give a good reminder about the Dept of Treasury form. Note that the 10k USD is an aggregrate figure for all foreign accounts, not per account.
21:04 March 29, 2010 by calebian22
Biffweezer,

As long as you don't maintain a tax home in the US with residency, as an expat, you will not be double taxed. You are right, that the US does have the capability to tax it's citizens but if you pay taxes in Sweden, you are not on the hook for US taxes as well. Well, as it stands now that is.

Any idea where the Schedule 1040 EZsuckit is located on the IRS.gov site?
14:59 March 30, 2010 by judoflares
Is it not always the same that the rich never want to give back to society?

Taxes are there to help balance society against the injusteses imposed by the rich on the poor for generations.

Sweden has been a glowing light for equality of life. Sadly with these types of loopholes in tax, greedy selfish Americans and a capatalist government soon the working classes of Sweden will resemble the underclass that exists in Britain and many other countries in the world.

tyvär
15:59 March 30, 2010 by swedishninja
Judoflares, this system was built for the SWEDES, not Americans. The tax advantages are not advantageous for Americans (re: previous comments). Please direct your complaints accordingly.
12:46 March 31, 2010 by Swedesmith
Meanwhile the great majority of the people struggle day to day just to make the rent and put food on the table. Strange world we live in.
19:13 March 31, 2010 by krrodman
@Judoflares

Taxes do not exist to "help balance society against the injustices of the rich."

Complete nonsense.

Ask yourself why the Swedish government set up the kaptialförsäkring. Certainly, it was not to enrich the rich. It was done out of necessity. The Swedish tax structure has been punitive for generations. And, like it or not, citizens get to choose what they do with their hard-earned money. The government needed to incentivize citizens to invest in Sweden. Think of it this way: Would you rather invest in the Swedish economy or the Chinese economy? The question was answered this week when Volvo was purchased by a Chinese company. The Chinese economy is much more vibrant than the Swedish economy. The kaptialförsäkring is a simple way to get citizens to invest in Sweden.
15:48 April 1, 2010 by MichaelZWilliamson
Judoflares: The rich give to society by spending money, hiring staff, building homes, hiring employees. This improves the economy and GDP.

What do poor people give to society? Generally not a thing. Poor people should be taxed for their failure to contribute.

(hey, it makes as much sense as the idiotic whine you offered)
23:27 April 12, 2010 by wxman
Good one, Williamson!
20:56 July 31, 2010 by Michael Whitfield
To Michael Z Williamson- Touche! You are correct sir. You must be a right winged conservative with good sense. Something the left could never comprehend. The left is usually emotion based on their ideas, and the right is bulls eye on common sense and practicality. The left have always been generous with other peoples' money.
04:50 January 15, 2011 by poopooman
I know this guy, he's a huge tool.
Today's headlines
Most Swiss want Sweden to be next door
Flag photo: Shutterstock

Most Swiss want Sweden to be next door

Who said there were hard feelings between the oft-confused Swiss and Swedes? A new survey shows that Swiss people would rather have the land of Abba as their neighbour over anyone else in the EU. READ  

What's On in Sweden
Photo: TT

What's On in Sweden

Plenty of events around Sweden to get your teeth into this weekend, with Sunday capped off with a free visual-music concert in central Stockholm. READ  

Elections 2014
Red-greens stay way ahead of Alliance in polls
The Allliance party leaders. Photo: Mats Andersson/TT

Red-greens stay way ahead of Alliance in polls

While the gap between the red-greens and the Alliance is decreasing, the opposition is still far ahead, scoring 48.8 percent of support in a fresh poll. The Alliance came in at 37.7 percent. READ  

Malmö end 14-year Champions League wait
Striker Magnus Eriksson sprints onto the pitch at the end of Malmö's 3-0 win over Salzburg in a Champions League qualifier. Photo: Björn Lindgren/TT

Malmö end 14-year Champions League wait

Malmö overpowered Salzburg on Wednesday night to become the first Swedish team to reach the Champions League since 2000. READ  

Swedish royals boycott Chuck Berry's ceremony
Queen Silvia. Photo: Henrik Montgomery/TT

Swedish royals boycott Chuck Berry's ceremony

Members of Sweden's royal family have revealed that they boycotted the Polar Music Prize ceremony on Tuesday, due to Chuck Berry's past conviction for human trafficking. READ  

Swedish Tetra Pak factory to shut down
Photo: TT

Swedish Tetra Pak factory to shut down

A Tetra Pak factory in southern Sweden is set to shut down due to a decrease in demand, meaning 250 Swedes risk losing their jobs. READ  

The Local List
Ten false friends in the Swedish language
Photo: The Uppsala Koala

Ten false friends in the Swedish language

Never, ever take the Swedish language at face value. This is a language where "puss" means "kiss" and "kiss" means "pee". And that's just the beginning... READ  

Sami museum hit in suspected tear gas attack
Permanent exhibition on the life of Sami nomads. Photo: Bengt Oberger/Wikipedia

Sami museum hit in suspected tear gas attack

The Sami museum in northern Sweden had to be evacuated after two attackers sprayed an unknown substance which left several people violently ill. READ  

Roma advocate scoops Wallenberg prize
Emir Selimi: The winner of the 2014 Raoul Wallenberg Prize. Photo: Charles L. Sjölander

Roma advocate scoops Wallenberg prize

A Roma man has been hailed as "inspirational" after scooping this year's Raoul Wallenberg Prize for setting up an organization to help stamp out racism against the community. READ  

Government keen on Nato forces in Sweden

Government keen on Nato forces in Sweden

Nato will soon be able to deploy forces to Sweden, with the government likely to sign an agreement with the military alliance this week, but an expert told The Local that full membership remains unlikely. READ  

RECEIVE OUR NEWSLETTER AND ALERTS
Society
Meet the man who made a Swedish store recall its high heels for kids
Business & Money
'How I came to run my own business in Sweden'
Politics
Expert explains why Sweden's election oozes uncertainty
National
City plays Schindler's List theme at Nazi rally
Society
For Stockholm Fashion Week, here's the A-Z of Swedish fashion
Blog updates

25 August

Hit och dit, här och där (The Swedish Teacher) »

" Hej igen! A common challenge for Swedish language students are the location adverbs hit/här, dit/där, hem/hemma etc. Some of the location adverbs come in two versions. We should use one type of location adverb when we use a verb describes where we are, and we should use the other type of location adverb when we the verb..." READ »

 

25 August

The Dollar Store (Blogweiser) »

"A dollar store in Sweden. Blog post: http://t.co/tNuuvcP1q0 #USD #greenbacks #sweden #sverige pic.twitter.com/RHFAYf7U1k — Joel Sherwood (@joeldsherwood) August 23, 2014 There’s a chain here in Sweden called The DollarStore. This name always stood out to me in a country where they don’t use dollars. I went there for the first time this weekend. They actually accepted greenbacks..." READ »

 
 
 
National
'Amnesiac' man avoids deportation for ten years
Gallery
Princess Estelle through the years
Business & Money
Swedish city all set for six-hour workday trial
Business & Money
Five golden rules for the Swedish job hunt
Sponsored Article
Graduates: Insure your income in Sweden with AEA
Gallery
People-watching August 22-24
National
Armed royal guards caught (very) drunk on the job
National
Sweden orders textbook on Roma discrimination
Gallery
Violent anti-Nazi demonstrations in Malmö
Society
A closer look at Sweden's five official minority languages
Gallery
See the destruction from the southern Sweden floods
Politics
'Sweden Democrats hold the key to elections'
Society
Swedes celebrate first day of smelly fish season
Politics
Sweden elections: How do they work?
Finest.se
Gallery
People-watching August 20th
Society
Did you know the Bronx in NYC was named after a Swede?
Society
Swedes slam Danes for 'racist' art
National
Majority of Swedes favour more or just as many refugees
Sponsored Article
Find out what gives this Swedish school executive appeal
Society
This gold coin may be the key to solving a Swedish massacre
Skatteverket
Sponsored Article
Introducing... ID cards and permits in Stockholm
Sponsored Article
Introducing...Your finances in Stockholm
Sponsored Article
Introducing...Housing in Stockholm
Latest news from The Local in Austria

More news from Austria at thelocal.at

Latest news from The Local in Switzerland

More news from Switzerland at thelocal.ch

Latest news from The Local in Germany

More news from Germany at thelocal.de

Latest news from The Local in Denmark

More news from Denmark at thelocal.dk

Latest news from The Local in Spain

More news from Spain at thelocal.es

Latest news from The Local in France

More news from France at thelocal.fr

Latest news from The Local in Italy

More news from Italy at thelocal.it

Latest news from The Local in Norway

More news from Norway at thelocal.no

738
jobs available
Swedish Down Town Consulting & Productions
Swedish Down Town Consulting & Productions is an innovative business company which provides valuable assistance with the Swedish Authorities, Swedish language practice and general communications. Call 073-100 47 81 or visit:
www.swedishdowntown.com
PSD Media
PSD Media is marketing company that offers innovative solutions for online retailers. We provide modern solutions that help increase traffic and raise conversion. Visit our site at:
http://psdmedia.se