Benefits
As an employer, you can provide your employees with compensation other than money. This kind of compensation is referred to as a benefit. If you give an employee a taxable benefit, you must pay employer contributions and deduct tax on the value of the benefit.
Basic rules on benefits
As an employer, you can choose to provide your employees with benefits.
Assessing the value of benefits
You must assess taxable benefits at their market value: i.e., the amount that an employee would have to pay for a corresponding good or service. Please note that certain benefits (such as car and meal benefits) must be valued at a standard rate, and other benefits (such as wellness benefit) are tax-exempt. The value of a benefit can vary from year to year. It is therefore important to reassess its value for each new calendar year.
Employer contributions and deducted tax
If you provide an employee with a taxable benefit, you must pay employer contributions and deduct tax from the value of the benefit. Keep in mind that you can only deduct preliminary tax from compensation if you make a cash compensation payment at the same time.
Payment for benefits
A payment to an employer only counts if an actual payment has been made, or if the amount in question has been deducted from the employee’s net salary.
Your employee does not need to pay you, their employer, directly. If, for example, an employee who receives car benefit pays a service station to repair the vehicle, this also counts as payment for the benefit.
Net salary deductions
A net salary deduction is when your employee pays for a taxable benefit with their net salary: i.e., their salary after deducted tax. If your employee pays for a benefit by a deduction from their net salary, you must deduct the payment amount from the value of the benefit.
As a partner in a business, can I make a retroactive payment for a benefit?
A partner employed by a limited company who has received a taxable benefit (car benefit, for example) during a particular year can make a retroactive payment for the benefit at the end of the year. The partner then withdraws an extra salary payment from the business, and then pays for that year’s benefit via a net salary deduction.
A retroactive payment reduces the value of a benefit if the following requirements are met:
- The payment must be made before the end of the year.
- The payment must be made using the employee’s net salary. Gross salary deductions do not count as payment.
- The employer must deduct preliminary tax from the extra salary payment – unless the Swedish Tax Agency has granted an adjustment to the employee’s preliminary tax. If an employee receives a cash salary in conjunction with a benefit, preliminary tax is normally deducted on the benefit’s value on an ongoing basis throughout the year.
- The employer must correct any details provided in their previous PAYE returns as necessary, and enter SEK 0 in box 013 in the individual statement form, to indicate that the employee received the benefit throughout the year but has already paid for it.
Example: Retroactive payment for a benefit
Petra is a partner and employee of P Ltd. She receives a car benefit of SEK 48,000 for a particular year. P Ltd. has deducted preliminary tax and paid employer contributions on Petra’s car benefit on an ongoing basis during the year. In December, Petra wishes to withdraw an extra salary payment of SEK 48,000 from the business to pay for the benefit. She applies for a tax adjustment via our e-service “Jämkning” (“Tax adjustment”), and receives a decision notice stating that preliminary tax should not be deducted from the extra salary payment amount. She gives the decision notice to her employer, P Ltd.
P Ltd. makes an extra salary payment of SEK 48,000 in December, and the same amount is booked as payment for the car benefit. P Ltd. declares employer contributions on the basis of this amount, and corrects the details provided in all of its PAYE returns for the year, entering SEK 0 in box 013.
Conversion of earnings: gross salary deductions
If you do not wish to cover the cost of a benefit as an employer, you can enter into an agreement under which your employee has to pay all or part of the cost through a gross salary deduction. A gross salary deduction means that your employee exchanges part of their gross cash earnings for a one-off or continuous benefit. You can only make gross salary deductions on future compensation payments to your employees. This means that you cannot renegotiate compensation that you have already paid.
The reduced gross salary amount can affect the basis for employer contributions and deducted tax, and your employee’s pensionable income and qualifying income for sickness benefit (income on which sickness benefit is based).
If you provide your employee with a taxable benefit, a gross salary deduction does not reduce the value of the taxable benefit. A gross salary deduction is not a benefit payment. It is an agreement regarding a new lower salary.
You cannot make gross salary deductions for staff welfare benefits such as free coffee and wellness benefit, since tax-exempt benefits cannot be exchanged for cash salary compensation.