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Tax effects of working from home during the coronavirus pandemic

The continuing coronavirus pandemic has led the Public Health Agency of Sweden (Folkhälsomyndigheten) to urge people to work from home. This places many demands on the employer relating to their employees’ working environment. Depending on the solutions offered by the employer, there may be tax effects. In this article we address what happens in terms of tax if the employer bears the costs of a home office.

Some things for the employee can be offered tax-free, while others are taxable and then contribute to increased costs in the form of employer contributions. Questions may also arise as to whether VAT can really be deducted and when the regulations prevent it. These issues are often overlooked in eagerness to attempt to make things as pleasant and stimulating as possible for employees.

Aside from temporary changes in the rules for the year 2020 on taxing gifts to employees and parking at the workplace, the government has not introduced any special rules on taxing benefits or equipment linked to the coronavirus pandemic. This means that the tax rules are otherwise the same now as before the pandemic. 

The employer pays for equipment for the home office

Borrowing existing work equipment can be tax-free provided that the employee needs the equipment for their work. It is, however, important to keep in mind that the specific equipment must be justified for the tax exemption to apply. As an employer, it is important to be able to argue that you are not covering the employee’s private costs, and it is equally important that the equipment remain the property of the employer. The same conditions apply if the employer purchases new equipment for the employee to use in their home office.  

There are, however, additional aspects to consider, one of these being VAT. It may be questionable, for example, whether an employer is entitled to deduct VAT if it purchases a desk adapted for the home office or adapts lighting in the home office. Purchases of this kind could in fact be affected by the ban on deductions for normal places of residence.

Private purchases of equipment

If an employer covers an employee’s private costs, this is deemed a taxable benefit. This also applies if the employer covers only a percentage of the cost of the product or service. For example, paying for an employee’s broadband for working from home is a taxable benefit, and if the employer instead gives the employee monetary compensation for the cost, this is deemed taxable salary.

Another potentially relevant example is the purchase of a new headset requested by the employee in addition to what is actually required for their work duties, or the purchase of a new office chair for the home office. When the employee is taxed for the benefit, ownership transfers to the employee. For a limited period this year, until the end of December, however, the employer could use the opportunity to give the employee a tax-free gift to circumvent this. For this to work, the total value of the gifts to the individual employee must not exceed the SEK 1,000 permitted by the temporary regulations.

Employee welfare benefits, coffee breaks and fitness

The basic rule for something to be classed as a tax-free employee welfare benefit is that the benefit be low value, aimed at the entire workforce and offered in the workplace. One common employee welfare benefit is basic refreshments for a coffee break, such as coffee and fruit, and it is clear that it must be offered in the workplace for the tax exemption to apply.

In the current situation, however, it is open to discussion as to what should actually be regarded as the workplace as many people consider their home to be their primary office, albeit for a limited period. If an employer pays for basic refreshments for a coffee break in the home, this would usually be a taxable benefit. It could be argued today that basic refreshments can be offered tax-free in connection with, for example, digital meetings held from today’s temporary home offices. 

When it comes to fitness benefits, which admittedly are exempt from the requirement that they be used in the workplace, the Swedish Tax Agency has disclosed that the benefit can also be extended to digital versions such as exercise apps and online diet advisors, which is a welcome decision for many people who are avoiding crowds.

With the new circumstances and rapid changes, it is easy for the questions to build up and, as an employer, it is important to keep track of both existing legislation and the temporary changes announced by the government. It can be difficult to navigate through all of this, ensure regulatory compliance and take advantage of the opportunities available. 

Have you thought about any of the new rules that have been introduced in response to the coronavirus pandemic? Would you like advice or practical help? Feel free to contact us at Azets!