Prerequisites for tax-free subsistence allowances

Technically, all subsistence payments are taxable from the first crown. At the same time, workers have the right to make flat-rate deductions for increased living costs associated with business trips. And out of this “conflict of interest”, the employee's right to deductions always goes winningly. This means that employers can pay subsistence allowances tax-free.

However, in order for employers to pay tax-free subsistence allowances, the following three requirements must be met:

• The trip must include at least one overnight stay
• The trip must go to a place that is at least 50 kilometers from both the workplace and the employee's residence.
• The trip must be a business trip, which needs to be substantiated with evidence showing who travelled, to where and when the trip started and ended.

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How much do you get in subsistence?

Formally, there is no maximum amount when it comes to how large the subsistence allowance may be. However, the subsistence allowance is only tax-free up to a certain amount, which is regulated by the Tax Agency's fixed flat rate.

The tax-free maximum amount of subsistence allowances varies according to the extent of the trip:

• Full day: 240 kr in 2022, and 260 Year 2023

• Half-day: ! 120 kr in 2022, and 130 kr year 2023

• Night allowance: ! 120 kr in 2022, and 130 kr year 2023

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Should the employer choose to pay a subsistence allowance higher than the lump sum, the portion exceeding the maximum amount is considered ordinary wages and is thus taxable. For example, let's say that in 2022 you receive a subsistence allowance of SEK 300 for a business trip that lasted a full day, then SEK 240 of the amount is tax-free and the remaining SEK 60 is taxable.

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Full-day, half-day and night allowances - what's the difference?

The size of the tax-free subsistence allowance is regulated not only by the flat-rate amounts, but also by the scope of the trip. We mentioned earlier that a basic condition for tax-free subsistence allowances is that there is at least one overnight stay, but in addition to this, subsistence allowances are usually divided according to full day, half day and night subsistence allowance, which are regulated by different times.

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Full-day allowance

In order to receive a subsistence allowance for a full day, the business trip must start before 12.00 on the day of departure or end after 19.00 on the day of return.

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Half-day allowance

Based on the above logic, the business trip is counted as half a day when the departure takes place after 12.00 or when the employee arrives home before 19.00.

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Night allowance

In addition to receiving a full-time or half-day allowance, employees may also receive a so-called night allowance from their employer. But this only if the employer has no actual logic costs for the employee (usually in the form a hotel bill). Thus, for example, night allowance may become applicable when the employee spends the night with a relative or friend. Furthermore, the trip must also extend overnight between 00.00 to 06.00.

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Let's take an example.

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An employee goes on a business trip between Monday and Thursday. The employee leaves on Monday morning at 08.00 and comes home Thursday afternoon at 16.00. During his stay, the employee spends the night with his relative.

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This means that in 2022 the employee can receive three full-time allowances of SEK 240 (Mon, Tue, Wed) and one half-day allowance of SEK 120 (Thurs). In addition, the employee can receive a night allowance for his three overnight stays of SEK 120 per night. This gives us 240*3 + 120*4 = 1200 kr.

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Reduced subsistence allowances

In some cases, the tax-free maximum for subsistence allowances may be lower. The reduction is mainly due to two reasons: time and free diet.In some cases, the tax-free maximum amount of subsistence allowances may be lower. The reduction is mainly due to two reasons: timely and free diet.

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Time Reduction

If the business trip is longer and takes place at the same place of business, the tax-free maximum amount must be reduced after three months and again after two years.

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Three-month reduction

After three months of stay in the same place, the full-time allowance is reduced by 30% of the original amount according to the Swedish Tax Agency's rules. This means that in 2022, after three months of business travel in the same locality, you can receive 240* 70% = 168 SEK in tax-free subsistence allowance. For the year 2023, the reduced amount amounts to 182 SEK.

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The reason why the subsistence allowance is reduced is mainly due to the assumption that the cost of living decreases when you spend a longer period of time in the same locality. On the other hand, the tax-free maximum amount of the night allowance is not affected but remains the same regardless of the length of the service trip, provided that the requirements for the night allowance are met.

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Two-year reduction

Therefore, if the business trip has lasted more than two years at the same place of business, the tax-free maximum amount must be reduced once more. This time with 50% of the original amount. This means that, as an employee after two years on a business trip, in 2022 you can receive a tax-free full-time allowance of SEK 120, and in 2023 the same reduction amounts to SEK 130.

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Reduced subsistence allowance in the case of free diet

As an employee, having their meals paid for by their employer during a business trip is another reason that gives rise to a reduced tax-free maximum. This is because the employee at that time did not really have any increase in living expenses (because he did not pay for meals), which means that the tax-free subsistence allowance should be reduced.

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How big the reduction will be depends on how many meals the employer paid for:

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• Breakfast, lunch and dinner bring a reduction of $216 (2022) and $234 (2023)

• Lunch and dinner brings a reduction of $168 (2022) and $182 (2023)

• Breakfast offers a reduction of $48 (2022) and $52 (2023)

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Consequently, the tax-free full-time allowance of an employee who has had meals reimbursed by his employer amounts to:

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• All meals = SEK 24 (2022) and SEK 26 (2023)

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• Lunch and dinner = 72 SEK (2022) and 78 SEK (2023)

• Breakfast only = 192 SEK (2022) and 208 SEK (2023)

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Preferential taxation of free meals

In addition to the reduction of the tax-free subsistence allowance when the employer offers meals, the employee will also be subject to preferential taxation for the meals, which is due to the fact that free meals in the service are seen in most cases as a taxable benefit. The exact benefit value is determined by the number of meals paid for by the employer:

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• Completely free diet (minimum three meals): 250 kr (2022)
• Lunch and dinner: $100 (2022)
• Breakfast: 50 kr (2022)

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To read more about preferential taxation, we recommend our article --> Benefit taxation, what is it and how does it work?

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Thus, as we note, there is a strong correlation between preferential taxation and the size of the subsistence allowance. Fortnox The following table shows how this is connected.

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The fact that both the subsistence allowance is reduced and that the employee benefits are taxed when the employer bids for a bite can at first glance almost be perceived as unfair, as if the employee is double taxed. This is also a common misconception among both employers and employees. But in the tax world, all this is in order. It won't be double.

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Because, as we mentioned at the beginning, the subsistence allowance is intended to cover increased living costs associated with a business trip. It is important to remember that employees also have living expenses at home, so-called private living expenses. After all, always have living expenses, even at home. And the subsistence allowance should not cover the actual cost of living, but only for the increase in price that often occurs when one is on the move.

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Paying the employer for the employee's meals during a business trip, this increase in cost has never occurred and therefore there is no need to cover any increased costs, since in practice there are no increased costs, which is why the subsistence allowance is reduced. In reality, the employee has really only made a saving in his usual living expenses, which he would have had regardless of whether he was at home or on a business trip, which is why the dietary allowance is imposed.

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It is not about earning a living allowance, about some kind of extra tax-free salary that you get just because you are on a business trip. Consequently, it is perfectly correct that both the subsistence allowance is reduced and that a dietary benefit is imposed on the employee when the employer pays for the meals on a business trip, although it may be perceived as somewhat contradictory.

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Do you need help with subsistence?

Managing subsistence can create some headaches for the uninitiated. At Saldo, we are experts in all types of accounting and if there is something we are passionate about more than all the things called finance, it is to help our clients run better and more successful businesses by offering the best advice in the industry. We support you both in the small and in the big. So, if you have questions about subsistence allowances, preferential taxation, or something else entirely, we are more than happy to take them up with you.

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Get in touch and we'll take it from there.

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