TN 16 (11-96)

RS 02001.425 Self-Employment Rule - U.S. Swedish Agreement

The agreement also includes a rule that eliminates dual coverage of self-employment income by assigning coverage to the country in which the worker is a resident. Under this rule, a self-employed U.S. resident whose earnings would otherwise be compulsorily covered under both U.S. and Swedish law is covered only by the United States. Similarly, a dually covered Swedish resident is covered only by Sweden. (See GN 01702.230 concerning determinations of residence.)

In accordance with this rule, a self-employed U.S. citizen who is a resident of Sweden is covered only under Swedish law. Although the person is exempt from paying U.S. SECA tax in this situation, he/she is still required to file a U.S. income tax return. In preparing the Schedule SE, the individual should indicate that his/her earnings are exempt from SECA tax under the agreement and attach a copy of the certificate of coverage issued by Sweden (see RS 02001.435) as proof of the exemption.