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The Swedish Tax Agency (Skatteverket) has issued a statement regarding the reporting of VAT on wage deductions that may affect the handling of certain deductions within your company. This can be considered a clarification of existing rules, as they have previously been subject to various interpretations. In this article, we summarize what this means for you as an employer.
VAT for Employers on Employee Wage Deductions
When an employer offers benefits and deducts the cost of these benefits from an employee's gross or net salary, the Swedish Tax Agency states that the employer should report VAT on these wage deductions. This applies to taxable benefits offered regularly, such as cleaning, parking, or bicycles. However, this does not apply to car and pension benefits, which are subject to different rules.
VAT on a benefit should be reported when the employee has paid some form of compensation for it, whether through wage deductions or other separate payment methods. If the employer does not receive compensation for the benefit, VAT should not be reported.
Exceptions from Reporting VAT
- Employers whose total taxable sales amount to less than 80,000 SEK are not required to register for or report VAT on compensation from their employees. If the amount is not exceeded, the employer can choose not to report VAT on employee wage deductions.
- In some cases, even occasional benefits may become subject to VAT. This happens when the offer is a normal part of the company's activities for its customers. For example, if a cleaning company occasionally offers cleaning services to its employees, these services may be subject to VAT. However, if a grocery store offers cleaning services to its staff, the benefit may be considered exempt from VAT.
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Basis for VAT, Market Value, and Employer Costs
The basic rule is that VAT should be calculated based on a price that corresponds to the market value. According to the Swedish Tax Agency, the market value is normally the price that external customers pay for the same services or goods, provided such sales exist. If an employer offers standard discounts to its employees, this discounted price can be considered the market value. In the absence of comparable sales of the same product or service, the employer's costs for providing the product or service to the employee can be used by the employer to calculate the output VAT.
Summary
The Swedish Tax Agency's position may affect how you, as an employer, should handle VAT on certain wage deductions. It can also impact how wage deductions should be reported in your company's ongoing accounting. If you wish to receive advisory on this topic, you are welcome to contact us at Azets.
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