Car benefits – Definition, rules, taxes
Update May 7, 2024
The Swedish Tax Agency has updated their provision of original prices of cars for cars produced in 2024 when valuing car benefits, valid from June 1, 2024.
Update November 20, 2023
The Swedish Tax Agency has changed its provision on the original price of cars for cars produced in 2023.
Car benefits are calculated according to a certain flat rate
After July 1, 2021, there are three different calculation models for valuation. The valuation depends on when the car was taken into traffic:
- Before July 1, 2018
- July 1, 2018 – June 30, 2021
- From July 2021
Update November 8, 2022
The climate bonus is abolished. This is because the cost of owning and driving a climate bonus car is getting closer to the cost of a petrol or diesel car. If you buy or order a climate bonus car after November 8, 2022, you will not obtain a climate bonus.
Charging an electric car at your workplace is a taxable benefit
If you charge your car at your workplace, it is considered a fuel benefit tax and should be taxed accordingly. How do you value the benefit of free electrical fuel? This is a task that the employer needs to find out for each car. It depends on the estimated usage of electricity per km and the market value of electricity.
The benefit rate also depends on whether there is free fuel to a benefit car or your own car. If it concerns your own car, the benefit is calculated at a rate equal to the market value. If it is a benefit car, the benefit is calculated according to a rate equal to the market value multiplied by 1,2.
Update July 2022
Benefit value for electric cars, plug-in hybrid cars and gas cars
July 2022 saw a change in rules for the reduction of the benefit value for gas cars or electric cars and plug-in hybrid cars that can be charged from the electricity grid. This change does not apply to electro-hybrid cars or ethanol-fueled cars. The rate of the reduction cannot exceed 50% of the original price of the car.
Flat rate to be used for reduction of car benefit rates:
- Electric cars and hydrogen cars: 350 000 SEK.
- Plug-in hybrid cars: 140 000 SEK.
- Gas cars: 100 000 SEK.
Car benefits, the benefit value can increase by 25%
The new car benefit rules came into force on July 1, 2021. This applies to cars registered from July 1, 2021 onwards. Cars registered before that are not affected.
The new rules regarding car benefits came into force July 1, 2021. In the new proposal for calculation, the interest-based and price-based rate changes to better reflect today’s market value. This is to ensure cost neutrality between salary and benefits, also with this flat rate. With the new rules, the majority of those with a benefit car or company car receive an increase in benefit rate. This applies to those who register their benefit car after July 1 2021. Cars registered before June 30 are not affected by this new rule.
The new car benefit rate amounts to the sum of:
- 29% of a price amount
- Interest-based amount. The original price of the car multiplied by 70% of the government borrowing rate and one (0,01) percentage
- Price-based amount. 13% of the original price of the car
- The car’s vehicle tax according to the road tax law
The extra luxury car supplement disappears. (The price-based amount is 13% of the original price of the car).
For example, for a car with an original price of 350 000 SEK, the benefit rate increases by 34% from approximately 51 500 SEK to 68 900 SEK per year. By a marginal tax rate of 52%, the driver’s tax amount increases by approximately 9000 SEK per year.
How am I and my company taxed for the benefits?
Below, we go through the basics and answer the most common questions about car benefits for employees and business owners.
What are car benefits?
Car benefits are a taxable salary benefit that applies when you as an employee or business owner use the company’s (leased or owned) car for private driving. There are exceptions for driving to a small extent, meaning at most 10 occasions and max 1000 km per year. Journeys to and from work, including driving home from another postal code during the weekend count while assessing whether car benefits apply.
Car benefits are taxable and contributing
Car benefits need to be taxed and the employer needs to calculate and pay employer's contribution. The same applies if an owner of a limited company has a company car.
Driving logbook
To avoid benefit taxation, you need to be able to prove that the car only has been used privately and to a small extent. The safest way to prove it is to keep a thorough logbook over your journeys.
There is no legal text to describe the content of a driving logbook. However, the Swedish Tax Agency recommends that the logbook contains the following information:
- Mileage at the beginning and end of the year
- Date, mileage, and address at the beginning and end of the journey
- The length of the journey in kilometers
- (By official matters) Purpose and name of visited companies, places, and people
Driving logbooks can be kept digitally or on paper.
Example of calculation for car benefits (following rules from July 1, 2021)
Gunilla earns 35 000 SEK per month and owns a Volkswagen Passat GTE DSG, an eco-friendly car from 2021 as a company car. Since Gunilla drives to work several days per week, her private driving is not to a small extent. Car benefit applies. Gunilla’s income tax rate is 30%.
We use the Swedish Tax Agency’s calculation model to conclude a benefit rate of 4570 SEK per month or 54 845 SEK per year. (NB: This excludes supplement for vehicle tax.)
- Salary 35 000 SEK
- Car benefit 4570 SEK
- Taxes for the employee (35 000 + 4570) x 0,30 = 11 871 SEK
- Net salary 35 000 – 11 871 = 23 129
The company must also pay employer's contributions
(35 000 + 4 570) x 0,3142 = 12 432
Accountor’s tax consultants will gladly help you as an entrepreneur to review the best solution for your company car.
Car benefit with net salary deduction
For those running a limited company, it may be profitable to raise the gross salary instead of putting company cars as employee benefits. By increasing the salary amount by the value of the benefit car and financing the car with taxed money, the space for payout increases to the lower tax rates according to the 3:12 rules. This is because salary benefits are excluded from salary details according to the 3:12 rules.
Another advantage of this is that your sickness benefit qualifying income (SGI) increases, which affects your reimbursement in case of parental leave or sickness. Salary benefits are not included in SGI.
The fiscal effect for both you as an individual and the company stays the same, regardless of whether you decide on car benefits or increase the gross salary and pay for the car by yourself.
Example of calculation
In the example above, we noted that the employee (or the owner) kept 23 129 SEK after tax and the company paid 11 871 SEK in payroll tax. Here, we raise the salary and finance the car by net salary instead.
- New gross salary 35 000 SEK + 4 570 SEK (the beneficial value of the car) = 39 570 SEK
- Tax 39 570 x 0,3 = 11 871 SEK
- Net salary 27 699 SEK
- Payment to the company for the car 4 570 SEK
- Left in your wallet 23 129 SEK, meaning the same as before
The company pays employer's benefits
39 570 SEK (35 000 + 4 570) x 0,3142 = 12 432 SEK, meaning the same as before
As shown, it does not matter if the car is financed through a net salary deduction or other private means. What is important is for the beneficiary to reimburse the company for the fees. Worth noting is that you still have a car benefit that needs to be included in the income statement, but the beneficial value amounts to 0 SEK.
Fuel
If the company pays for fuel for private journeys, this is also included as a benefit. Income and payroll tax should then be paid for the fuel benefit. The employee must then be able to prove how big part of the fuel that was used for official matters, for instance through a driving logbook, to avoid benefit taxes for the total fuel.
Factors that increase the benefit rate
Extra equipment not included in the original price of the car increases the benefit rate.
Decrease in case of extensive driving for work
In case driving for work exceeds 30 000 km per year, the benefit rate decreases by 25%.
Exceptions for on-call personnel
Besides the usage of a company car to a small extent, there are exceptions for on-call personnel. During time spent on call, an employee may bring a company car home max. four days per month, without it counting as a benefit. If you are on call every seventh week or less, you may bring your car home for more than four days, but only during a small number of months. In that case, driving should be carefully limited to official matters.
