A company car policy is a very common benefit employers offer their employees. Despite how common this benefit actually is, a lot of companies tend to lack control of the tax rules connected to it. And what are the rules in the other Nordic countries?
A company car benefit is a car that an employee may use freely even if it is owned by the employer. Having a company car can solve logistical challenges in the work life, such as transportation back and forth to the office and work related travelling. Common to the whole Nordic region is that this is a taxable employee benefit. So how does it actually work in Norway, Sweden, Denmark and Finland? Let’s have a look.
Company car rules in Sweden
A car benefit is a car that an employee may use freely even if it is owned by the employer. The employee is therefore taxed. When an employee uses the employer's car for private use, the car constitutes a taxable benefit - a so-called car benefit. The tax of the benefit applies regardless of whether the company owns the car or if it’s a rental car. Here are some examples of how it works in Sweden:
- The benefit value for the car is the taxable benefit of being able to use a company car privately. The amount is added to the gross salary and the tax is then deducted based on this amount. How large the benefit tax for a car will be is based on a standard of the market value of different cars.
- A rule to remember is that the benefit value for the car should correspond to the savings you make by having a benefit car compared to owning the car privately. There are several factors that determine how large the benefit value will be for a certain car, such as year model and purchase cost for extra equipment (leather upholstery, stereo packages, etc. The Swedish Tax Agency has a limited digital service for car benefit calculation.
- Avoid taxable car benefits with the help of a driving record: Anyone who wants to avoid being taxed on benefits can use the company car a maximum of ten times a year and drive a maximum of 100 km per year in total. According to the Swedish Tax Agency, this is the limit for "small scope".
Driving log, travel invoices, notes
- A driving record can be kept on paper, in a computer or the employee can use an electronic driving record which is connected to the car and registers all journeys automatically. The logbook can also be supplemented with, for example, travel invoices or diary entries that certify the information provided in the logbook.
- Service driving with 3000 mil or more: The Swedish Tax Agency calls it extensive service driving when an employee drives 3,000 mil or more in the service per year with a company car. The employer can then reduce the benefit value to 75 percent of full value. In order for the reduction in the benefit value to take place, the employee must meet the number of miles with the employer during the current income year. If the employer does not reduce the benefit value, the employee can make the reduction in their income tax return, provided that the conditions are met. Employees who have several employers during the year can sum up all service driving with the various employers during the year.
- Employed with free fuel: If the employer pays for the fuel for an employee with a company car, the employee should only be taxed for fuel used for private travel. This presupposes that there is evidence that shows how much you have driven privately and in the service, otherwise you must be taxed for all fuel.
Company car rules in Norway
In the same way as the other Nordic countries, if you use a car that is owned or leased by the employer, this is a taxable advantage also in Norway. Here is an overview of the most common tax rates that are nice to know about in the Norwegian market.
- For 2021, the deductible benefit is 30% of the car's list price as new up to NOK 325,400 and 20% of the excess, but there are some exceptions:
- If the car is older than 3 years per 1 January in the income year: Then the calculation is based on 75 percent of the car's list price as new.
- If the employee documents that the professional driving exceeds 40,000 km in the income year: Then 75 percent of the car's list price as new.
- Electric car: 60 percent of the car's list price as new.
- For a combination of a car older than 3 years per 1 January in the income year and professional driving that exceeds 40,000 km in the income year: 56.25 percent of the car's list price as new.
- When combining a car older than 3 years per 1 January in the income year and an electric car: 45 percent of the car's list price as new.
- By a combination of electric car and professional driving that exceeds 40,000 km in the income year: 45 percent of the car's list price as new.
Rate for tax-free mileage allowance:
- The employer can pay the kilometer allowance to the employee for professional driving with a private car. Parts of this allowance may be taxed.
- The rate of deduction and tax-free kilometer allowance on a car is NOK 3.50 per kilometer. If you use the state's rates of 4.03 per kilometer, 0.53 NOK will be a taxable amount for the employee.
- The rates also apply to the use of private vehicles abroad.
- The overview below include all tax-free rates for kilometer refunds:
7,50 NOK pr. km
Snowmobile and ATV
7,50 NOK pr. km
Heavy motorcycle (more than 125 ccm)
2,95 NOK pr. km
Scooter or light motorcycle (below 125 ccm) and other motorized means of transport
2,00 NOK pr. km
Company car rules in Denmark
.As of 1 July 2021, new rules have been adopted for the calculation of taxation of company cars. The new rules apply to all company car schemes – including those entered into before the legislation was passed.
The following changes have been adopted.
- The percentages of 25% and 20% for calculating the taxable value based on the car´s calculation basis of resp. below and above DKK 300.000 is changed.
- The rate of 25% will be reduced by 0,5% annually until 2025, and the rate of 20% will be increased by 0,5% annually until 2025, after which there will be only one rate of 22,5%. For 2021, the reduction to 24,5% and the increase to 20,5% have an effect per. July 1, 2021
- In isolation, this means that taxation increases for cars with a calculation basis above DKK 600.000 and falls for cars with a calculation basis below DKK 600.000.
- The percentage for calculating the environmental surcharge is currently 150%. This rate is increased year by year for all company cars until 2025. Per July 1 2021, the environmental surcharge will be increased to 250% for 2022 to 350%, for 2023 to 450%, for 2024 to 600% and for 2025 and onwards the rate will be 700%.
- For a company car, where an annual ownership tax of e.g. DKK 2.000, this means that the environmental surcharge and the taxable value of a free car increases by DKK 11.000 (from DKK 3.000 in 2020 to DKK 14.000 in 2025) In addition, there is also a continuous increase in the ownership tax itself.
Read more about the new Danish tax law here.
Company car rules in Finland
- If an employee has used a car or van provided by the employer for private purposes, she/he receives a taxable company car benefit.
- A company car benefit can be unlimited or limited. Unlimited car benefit means that the employer pays all expenses related to the car. Limited car benefit means that the employee pays at least the fuel expenses.
- The taxable value of a company car is usually a fixed monthly amount. The tax authorities decide annually on the tax values of cars. A car benefit calculator can be found here.
- A kilometer-based value can also be used, but this requires that you keep a driver’s log of the kilometers driven for private purposes.
- If an employee drives her/his own car on a temporary business trip the employer may pay her/him tax-exempt kilometer allowances. For the year 2021, the basic allowance equals 44 cents per kilometer.
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