Car benefit calculation - guide for entrepreneurs and employees

A car allowance is a common employee benefit that requires an understanding of its tax implications. Like most benefits received by employees, the car benefit is taxable. A car benefit means that an employee gets access to a company-owned or leased car for both work and private use. Here you can read more about the rules and factors affecting the calculation of the car benefit, the exceptions available and how the benefit value is calculated in practice.

How car benefit calculation works

Determining the tax for a company car involves calculating the benefit value. The Swedish Tax Agency has established that if the company car is used to a limited extent, there is no tax liability, but if it is used more than the established number of times and number of miles, the benefit is taxable and must be declared in the tax return. To know how much tax you should pay for a company car, the benefit value must be calculated. The tax you then pay is called benefit tax, which is a tax on non-cash assets.

Several factors determine the benefit value. These include the age of the car, vehicle tax and any extra equipment. If you want to make a car benefit calculation, the registration number is a good source to find out the vehicle tax for the car.

Exceptions and derogations

Not all additional equipment increases the value of the car and affects the preferential value. For example, it does not include a hands-free mobile phone, an electronic logbook or an electric car charger. Nor is an alcolock a taxable benefit.

For cars older than five years and where a standard new car price is less than four price base amounts, a new car price may not be used. For example, for 2023, the lowest new car price is SEK 210,000. If the new car price is less than this amount, you must use SEK 210,000 for the calculation of the benefit value.

Use mileage logs to avoid car allowance

The benefit value is normally added to an employee's gross salary and taxed together with other income. If you do not want to be taxed on the benefit value of the car, the Swedish Tax Agency has stipulated that the car may only be used to a reasonable extent. Which, according to the Tax Agency, is a maximum of ten times per year and the mileage may not exceed 100 miles per year.

It is not arbitrary but you must be able to verify the data. The best way to verify the data is to keep a driving record, either electronic, digital or on paper.

How to calculate the benefit value

The car benefit calculation is based on a flat rate where the private mileage is set at 1,600 miles per year and where all costs are included, except for fuel, for example. A standard car benefit calculation is based on four factors: Price base amount for the tax year, interest-related amount, price-related amount and vehicle tax according to the Road Tax Act. In addition, there are rules governing the calculation and affecting the benefit value, including minimum levels of government borrowing rate and different price base amount percentages depending on cars before or after 1 July 2018.

1. Government borrowing rates must never fall below a minimum level of 0.50%.
2. The price-related amount is calculated at 9% of the new car price if it is no more than 7.5 price base amounts. If the new price is above 7.5 price base amounts, an amount corresponding to 20% of the excess is added.
3. The percentage for price base amounts is different for cars before and after July 1, 2018. Before the specified date, the percentage is 0.375 and after it is 0.29.
4. The employer should reduce the total benefit value by 25% if the car is driven 3,000 miles or more on business.

New rules and factors affecting car benefit calculations

As of July 1, 2021, new rules apply that classify cars according to when they were first used and between which years:

• In use before 1 July 2018
• Taxable from July 1, 2018 - June 30, 2021
• In service from 1 July 2021

This leads to variations in the calculation of the benefit value for older and newer cars, which is important to keep in mind.

‍

Example of calculation of benefit value

The calculation of the benefit value follows a formula that includes the price base amount, government borrowing rate, new car price, vehicle tax, etc. An example of the calculation is shown below with new car price, extra equipment and vehicle tax to obtain the benefit value, which is then distributed on an annual basis and added to the gross salary.

When calculating the benefit value, the following formula is used:

0.29 price base amount + (70% x government loan rate + 1 percentage point x new car price) + (13% x new car price up to 7.5 price base amounts) + vehicle tax = benefit value

Let us assume that the car has a new car price of SEK 250 000 and extra equipment worth SEK 15 000. The calculation is then based on SEK 265 000. The vehicle tax is SEK 4 070. The price base amount for 2022 is SEK 48 300.

1. 29% x price base amount SEK 48 300= SEK 14 007
2. 1.35% of the new car price of SEK 265 000 = SEK 3 577
3. 13% of the new car price of SEK 265 000 = SEK 34 450
4. Vehicle tax 4 070 SEK

This gives a benefit value of SEK 56 104. This is then spread over a year and the monthly amount added to the gross salary is just over SEK 4 675.

The Swedish Tax Agency offers an electronic service where it is easy to calculate the benefit value. The website also contains lists of new car prices where it is also possible to calculate by car make or model code.

Reduced preferential value for green cars

It is not only the rules for fossil fuel cars that have been changed. In 2021, the preferential value for cars that are environmentally friendly was reduced. These include electric cars, plug-in hybrids, and cars powered by hydrogen or gas. A flat rate is used here, based on the environmental technology used in the car.

Please note that the reduction may not exceed 50% of the new car price. Moreover, it only applies to cars that became taxable for the first time on 1 July 2022. Cars that were taxable before that date will follow the old rules.

When calculating the value of the car benefit, the new car price must first be reduced by:

1. Electric car - 350 000 SEK
2. Hydrogen car - 350 000 SEK
3. Plug-in hybrid - 140 000 SEK
4. Gas car - 100 000 SEK

Benefit car or private car

In most cases, a company car is an advantage. Moreover, the benefit is higher if the car is more expensive and you drive a lot privately. With a company car, you also don't lose the depreciation of a new car. It is not deductible for private individuals but the company can deduct the depreciation. 

If the company provides the fuel, the best solution is for the company to pay for fuel used for business driving and for you as an employee to pay for the fuel for private driving. This reduces benefit taxation.

A disadvantage for 23/24 is the high government borrowing rate which will increase the benefit value and automatically the benefit tax. The interest-related amount is calculated at 75 percent of the government borrowing rate at the end of November the year before the tax year. This means that next year the interest-related amount will be relatively high. As the benefit value is added to the gross salary, it will then increase the tax.

Fuel benefit

Another benefit linked to a company car is whether the company pays for fuel even when the car is used privately. If so, the benefit will be valued at 120% of the market value including VAT of the fuel used for private driving. 

For example, if petrol costs SEK 18 per liter and the car consumes 0.7 liters per mile, the benefit value is SEK 15.12 per private mile (120% x 18 x 0.7).

Easier registration of travel expenses

By law, travel and other expenses must be recorded at the end of the month, but often the supporting documents are not received in time. The Mynts company card makes it easier to register travel expenses, resulting in smoother expense management. VAT is automatically calculated, and by creating appropriate categories, it is easier to calculate VAT and keep the accounts up to date.

Sources

The tax authorities

The entrepreneurs