Offering employees different types of benefits other than their fixed salary is a common practice in most businesses. Benefits in kind come in different shapes, such as mobile phone, transportation, housing, company cars, food, discounts and gifts. When the value of these benefits exceeds a certain amount, they are taxable. It can be very difficult to keep track of all the rules and tax rates, and when the business is located in multiple countries, the headache really begins. In this article, we will give you the overview of the most common employee benefits and the rules of thumb in Sweden, Norway, Denmark and Finland.
In Norway, the rules regarding gift giving in the workplace changed in 2021. While gifts given and received at the workplace are mostly tax free, there are some exceptions. Employees can receive tax-free gifts for up to KR 5000 per year, which is an increased amount of KR 3000 from 2021. One of the requirements for this rule is that the gift must benefit in kind, and not contain cash or gift cards that can be exchanged for cash. However, it is still open for the reimbursement of employees' purchases of gifts for themselves to be tax-free if a receipt for the purchase is provided.
Tax liability arises for the part that exceeds NOK 5,000. This could be, for example:
- Broadband and mobile phone (EKOM)
- Private content services that exceed NOK 1,000 (EKOM)
- Taxable gifts from third parties (employer's business relations)
- Taxable discounts from third parties
- Staff discounts beyond the free amount of NOK 8,000, see below
- Training fee
Some of the most common benefits that may be reportable include travel expenses, bonuses, director's fees, work wear, free board and lodging, housing, travel home/work, toll booth subscription, insurances, union dues, free vehicle, discounted loans, newspaper, IT, gifts, free daycare, stipends, free gym, paid pension, pension scheme, free lunch, discounts from employers, discounts from third parties, and tip.
The following list shows the limitations relevant for different occasions.
- Other gifts throughout the year of no special occasion: kr 5.000
- In case of service in the company for at least 20 years and then every ten years: kr 8.000
- When the company has existed for 25 years or the number of years divisible by 25: kr 4.000
- When the employee gets married: kr 4.000
- When the employee passes 50 years of age, and then every ten years: kr 4.000
- If the employee moves on from the position, or retires, after a minimum of 10 years in the company: kr 4.000
The previous rule that all gifts to employees must not involve any discrimination (almost equal and at the same type of event) was removed in 2021 for all gift occasions mentioned in the table above. The employer can give gifts tax-free without all employees having to receive for the same occasion.
If you want to read more about employee benefits in Norway, this Norwegian article has further information: Nye gaveregler gir enklere hverdag
In Denmark, some benefits have to be taxed if the total amount is higher than DK 6.600 per year, and only if the benefit is in direct context with the work. Some of the more common benefits are free boarding and lodging, car, phone, and health insurance. The whole amount will be taxed if it exceeds DK 6.600.
Examples of these benefits are:
- Free food and drink during overtime
- Free news to use for work
- Free card for public transport, which is granted for reasons of business transport, and which can be used for private transport other than between home and work
- Credit Card Schemes
- Driving licence paid for by the employer, which must be used as part of work
If the benefit Is not in direct context with the work the limit is DK 1.200, so if the amount is higher than DK 1.200, it needs to be taxed.
Examples of these benefits are:
- Free car
- Free phone
- Free housing
- Free radio and media licence
- Free board and lodging according to the Tax Ministry’s rates
- Board and lodging that are not included in your salary
Benefits to all employees
Benefits provided to all employees (and retired employees) that are seen as usual and of reasonable value are not calculated as income, and some are taxed after a limit has been reached.
Those benefits include:
- Healthcare provided by the employer
- Personnel discount of the company’s products or services
- An anniversary gift or other small gifts received in a form other than money
- Recreational or hobby activities organised by the employer
- Shared transportation organised by the employer for trips between the apartment and the workplace
- A free or discount ticket entitling to travel provided by a carrier to its employees
- Care of a sick child temporarily arranged by the employer during the period in which the employee would be entitled to care leave with full benefits.
- Private use of the communication connection arranged for the employee's work use
Employer-subsidised commuter tickets are tax free up to €3,400.
Bicycles are tax-free up to €1,200 of taxable value per year. When the bicycle’s value is no higher than €1,200 per year, it is regarded as being part of the total combined tax-free value – €3,400 – of an employer-provided commuter ticket and bicycle.
Sports and culture benefits
Employers can provide their employees with tax-exempt sports and culture benefits payable by vouchers or other means of payment for up to €400 a year. The culture benefit can also be used in virtual events.
Benefits to a limited number of employees
Fringe benefits provided to a limited number of employees such as company car, accommodation, mobile phone, garage, meals etc. are taxed as wage income. The Tax Administration issues an official decision each year on the valuation of different fringe benefits. If there is no confirmed taxable value for a benefit, the benefit is taxed at its fair market value.
It counts as a benefit when an employee is allowed to use the employer's car privately. Examples of private trips are trips to and from work. It must be taxed in the current month for the employee.
Benefits that must be taxed one month in arrears for the employee:
- Fuel benefit. If the employer pays the fuel(includes electricity and other environmental fuels) for an employee’s private trips(includes to and from work), whether the car is privately owned or a benefit car.
- Parking benefit. If the employer pays for parking(applies to both private cars and benefit cars).
- Dietary benefit. When an employer provides an employee with free or subsidised meals(applies whether the employee receives this benefit every day or just now and then).
Congestion tax Benefit
When an employer pays congestion tax for private journeys that an employee makes with their benefit car. The employee must be taxed for the benefit and the employer must pay employer contributions and make tax deductions.
It can be taxed up to 3 months in arrears for the employee, depending on when the invoice is received from the Swedish Transport Administration.
Important information regarding correction of benefits
According to the Swedish Tax Agency's rules, all corrections and corrections of benefits must be corrected in the month the benefit has been handled and reported to the Swedish Tax Agency, because since 2019, Sweden has been reporting AGI on an individual level to the Swedish Tax Agency.
This means that if several months of benefits are to be corrected, extra payroll runs are required per covered month.
If you need assistance with keeping track of the Nordic rules and tax rates on employee benefits, you are welcome to contact us. Azets has payroll expertise in all Nordic contries, and differensiate with our Nordic collaborative aproach. Let us make your cross-country payroll processes seamless and efficient with our local knowledge.