Let's start by explaining some concepts and relationships that are important to know to understand how benefit taxation works.

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What is Benefit Taxation?

Benefit tax is the tax accrued when workers receive non-cash compensation. Thus, preferential taxation means that employees, beneficiaries, must pay tax on the benefits they receive through work, which according to the rules are taxable.

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What is a perk?

A benefit is defined by the Swedish Tax Agency as any form of remuneration, in addition to the usual salary, that the employee receives for his work and which pays for a private living expense. Some common examples of benefits include work phone, occupational health care, exercise and wellness, and company car.

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In the vast majority of cases, benefits are taxable, which means that the employee must pay tax for his benefit and the employer social contributions, but there are also tax-free benefits (more on that below).

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The taxable benefits are normally valued at their market value, which corresponds to the value that the employee had to pay for the benefit on his own in the local place. In this context, the market value is also referred to as the preferential price or preferential amount, which forms the basis for the calculation of the preferential value.

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What is preferential value?

Benefit value can be equated to the savings that the employee makes by receiving a benefit through work compared to if the employee had paid for the benefit on their own.

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How is the benefit value calculated?

Slightly simplified, the benefit value is calculated by subtracting the market value or benefit-based price of a benefit by the amount paid by the employer for the same benefit. It is also this savings or difference that can become taxable.

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In some cases, for example in the case of car and food benefits, the value of the benefit and thus the amount of the benefit tax is instead determined on the basis of the Tax Agency's predetermined templates.

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How is the benefit tax paid?

The benefit tax is paid by recording the specific benefit that the employee receives on his salary specification, thus increasing the gross salary and, in turn, the employee's tax. Thus, even if it is the employee who receives the benefit, in practice it is the employer who pays the benefit tax on behalf of the employee.

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How does a benefit become taxable?

In order for a benefit to become taxable, two requirements are usually met:

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• The beneficiary must have accepted the benefit
• The beneficiary shall have access to and use the benefit

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As with most rules, there are exceptions. Such an exception is, for example, benefits for vacation homes. The right to use holiday homes through work can be assessed by the Swedish Tax Agency as a taxable benefit, regardless of whether the holiday home is used or not. At the same time, there are also some benefits that are tax-free under certain conditions.

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What benefits are tax-free?

The majority of benefits that can be obtained as an employee are taxable, but there are certain benefits that are exempt from taxation, as long as certain requirements are met. Below we list some common examples of benefits and what requirements are imposed to be able to count them as tax-free.

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Personnel care benefit, exercise and wellness

Exercise and other wellness treatments such as massages and easier consumption of drinks and food that cannot be considered a full meal are three common examples of benefits that all fall under the umbrella of employee care benefits. In order for employee care benefits to be counted as tax-free, they need:

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• Offered to the entire workforce, regardless of employment conditions
• Item of lesser value (5000 SEK in case of health care allowance)
• Not exchangeable for cash

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When it comes to exercise and other health care, a distinction is also usually made between benefits in kind and wellness grants.

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Health Care Contributions

Health care allowance is a specified amount that the employee may dispose of and dispose of himself, as long as it is spent on something that falls within the scope of health care. The limit for tax-free wellness grants is 5000 SEK.

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Benefit in kind

Benefit in kind means that the employer determines and directly pays for activities for exercise or wellness. This is often the case when the activities are offered at the workplace or in another premises that the employer fully or partially owns. For benefits in kind, there is no maximum amount to relate to. However, they need to be of less value and of Simpler kind to be counted as tax-free. Thus, it becomes a matter of assessment where each case needs to be examined individually, but the rule of thumb when it comes to the “simpler kind” is that activities that require more expensive equipment, equipment and equipment do not count as tax-free.

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Computer, mobile phone and other electronic equipment

Electronic equipment such as computers or mobile phones fall under the work-tool benefit. In order for work tools, regardless of the type of goods or services involved, to be considered tax-free, it is necessary that the goods or services:

• is of substantial importance for the employee to perform his duties;
• is of limited value to the employee (a matter of assessment); and
• not without difficulty can be distinguished from the usefulness of employment

Therefore, in order for your computer or mobile phone that you receive through work and which you also use for private use outside the workplace to not be subject to preferential taxation, it is necessary, first of all, that your technical device is essential for you to be able to perform your job. In addition, it is required that the subscription or the cost of the device be paid for a fixed fee and that it is not possible to distinguish between private use and use in the service.

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Workwear

Work clothes and in some cases even clothing that can also be worn privately are tax-free benefits if they are:

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• Adapted for a specific job, such as protective clothing, or
• Designing for a specific service, such as a uniform

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In order for more “ordinary” clothing that can also be used for private use to be counted as a tax-free benefit, the requirements are somewhat stricter. Then the garments will need:

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• be mandatory to use in the service
• are counted as work clothes, i.e. they are provided pre to be used at work
• be suitable for the service, i.e. they should be uniform for certain personnel or have some other specific characteristic;
• hold the employer's logo or name in a way that is significantly different from ordinary garments.

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Service car

The car benefit is probably the benefit that people have the most questions about, and in the vast majority of cases it is a benefit taxed on the basis of the Tax Agency's predetermined flat rate. However, the car benefit can also be tax-free, and in order to avoid paying preferential tax on one's service car, it is required that it be used to a small extent, which is defined by the Swedish Tax Agency as:

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• The car can be driven privately to the max 100 miles per year at
• Max 10 Occasions per year.

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This is why it is important to keep clear and detailed driving records, as the driving record is the basis used to distinguish between private driving and service driving. Worth noting is that trips to and from work are considered as private trips.

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Gifts

The main rule is that gifts are taxable, but the exception that confirms the rule are Christmas gifts, anniversary gifts and commemorative gifts. These gifts are considered tax-free benefits as long as they are addressed to all employees or to a larger group of employees, and do not exceed the following amount limits:

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Christmas gifts: 500 kr incl. VAT Administration and transportation are not included in the amount.

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Anniversary Gifts: 1500 kr incl. VAT Anniversary gifts may first be given when the company celebrates 25 years, and every 25 years thereafter.

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Commemorative gifts: 15000 kr tax incl. Commemorative gifts may be made to permanent employees when they reach the age of 50 or more, to staff employed for more than 20 years and to employees who quit. In addition, commemorative gifts may only be given once, except when the employment ends.

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Diet

In the case of internal representation, free board, which is otherwise preferentially taxed, is a tax-free benefit. Common examples of internal representation are staff parties or conferences, but in its proper sense, internal representation is defined as:

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• Temporary and
• Short-term gatherings, which do not last longer than a week

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Training and conference trips

Education always counts as a tax-free benefit as long as it involves such training that is relevant to the employee's work.

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Benefits associated with a conference trip are also tax-free as long as the elements of pleasure and recreation are not given a more prominent role. An important rule of thumb here is that conference time should be at least 6 hours per day.

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Staff discounts

Staff discounts on goods or services from the company in which one is employed or from another company belonging to the same group shall count as a tax-free benefit if:

• the discount is aimed at the entire workforce
• the product or service is included in the regular supply
• the goods or services cannot be exchanged for cash compensation
• the goods or services are not direct compensation for the work performed
• the discount is not greater than the usual employee discount in the industry
• the discount does not exceed the largest discount a consumer can receive on a business basis.

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Advice, support or help?

Remember that the rules of preferential taxation are always updated. Therefore, the information above should first of all be interpreted as a hint of finger more than anything else. To ensure you have the latest information, you should always consult your accounting firm or read at The Tax Agency.

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We at Saldo are passionate about business advice and love all matters related to finances, big and small. Do you have questions about or want to discuss how to think about preferential taxation, or something completely different related to your business? Don't hesitate, ask!

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Please also read our other articles. There is a lot of useful information on everything related to business administration.

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