Paid congestion tax and infrastructure charges will comprise a taxable benefit

Congestion tax and infrastructure fees incurred in private journeys undertaken with company cars, and which are paid by the employer, will comprise a taxable benefit from 1 January 2018. The Tax Agency has recently issued a position paper regarding the basis and method of calculating this benefit. We present below a summary of the Agency’s position in this matter.

For employees with company cars, the change in this law will imply that congestion tax and infrastructure fees levied on company cars used during private journeys will be seen to be a taxable benefit. This benefit is to be calculated separately from the benefit value of the vehicle. The employer is to report the benefit value in its employer’s declaration and at the end of the year is, also, to include this value in the statement of earnings and tax deductions provided to the employees.

The Tax Agency states that the employer is to report on the basis of a two month delay, that is, a control point passage in private journeys made by the employee in a company car in January is to be reported in the employer’s declaration for the salary month March, and this declaration is to be presented to the Tax Agency in April. The value of the benefit is to be included in the basis of the employer’s tax deductions from the March salary.

According to the Tax Agency, the employer is to calculate the benefit value based on two different methods:

Proportioning

If the employer has received, for example, a so-called individual assessment, that is, a tax assessment for each individual vehicle in which the specific days in the month during which congestion tax has been levied are stipulated, and where the number of passages and the total amount of the levied congestion tax for the respective days are also reported, then, the calculation can take place via the proportioning method. The employer calculates the tax on the basis of the tax assessment they have received from Transportstyrelsen (Swedish Transport Agency) and proportions the amount based on the mileage log details and notations made by the employee using the vehicle.

Calculation example

• Congestion tax has been levied for five passages during one day, totaling SEK 100. Two of the passages can, based on the mileage log and the employee’s notations, be seen to be journeys which have been made in performing work duties and the remaining three journeys are for private purposes. The benefit value for the day can, then, be calculated at 3/5*100=SEK 60.

Detailed passage information

If the employer has detailed information for all of the passages, including for the sub-amounts incurring congestion tax, the individual sub-amounts in the respective day referring to journeys undertaken in performing work duties, and which can be evidenced on the basis of the mileage log, can be deducted from the day’s total amount. This method is recommended to also be used if the maximum amount for one day has been reached.

Calculation example

• Congestion tax has been levied for five passages for one day, totaling SEK 100. Based on the mileage log and other detailed documentation, it is seen that two passages referred to work duties and these were debited at SEK 25, respective SEK 15. The amount of SEK 40 is, then, deducted from the total amount and the remaining amount comprises a taxable benefit, that is, SEK 60.

Payment of the benefit

If the employee, himself or herself, pays the entire amount of the taxable benefit to the employer, then, of course, no benefit arises. Such payment is to take place via deduction from net salary or on a cash basis.

Comments

Currently, an employee is not charged tax if an employer pays the congestion tax for private journeys. This has been criticized on the basis of, amongst other things, environmental considerations as it has been seen to benefit company car drivers in large city regions, thereby, and encouraging extra car trips. With congestion tax and other fees excluded from the standard assessment of company car benefits, the economic incentive on behalf of both the individual incurring the benefit and the entity providing the benefit to decrease the number of private journeys is enhanced.

The new rules do not only imply additional costs in the form of increased taxes for the employee and employer when the employer pays the employee’s congestion tax with private passages, but also create increased administration for the employees and the companies, with the associated increase in costs. The Tax Agency’s position regarding the basis and method for calculating the benefit shows very clearly that the rules imply increased administration, especially for the companies. Furthermore, only certain types of information can be received electronically from Transportstyrelsen, which increases the administrative burden.

Ever since the proposal for new rules was presented, we have been of the opinion that such a change will lead to employers decreasing their offering of the benefit of free passages to employees and that the employees will, instead, request a refund of their costs for congestion tax from employers and that this will take the form of a request of refund for out-of-pocket expenses paid in conjunction with travel. This could take place both to minimize employers’ contributions and to reduce administration costs. The Tax Agency’s position strengthens our belief in our previous assumptions as regards this matter.