Proposal for elimination of deduction of representation costs

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PwC-skatteradgivning-board-governanceThe Ministry of Finance has proposed the introduction of the elimination of the right of deduction of representation costs referring to lunches, dinners, buffets or similar refreshments, except for simpler types of food and drink of a limited value. This change is proposed to come into effect on 1 January 2017.

The Ministry of Finance proposes elimination of the right of deduction of representation costs referring to lunches, dinners, buffets or other types of refreshments, except for simpler types of food and drink of a limited value. In the context of representation, the VAT deduction referring to meals or similar refreshments is limited to a maximum of SEK 300 per person and occasion. These changes are proposed to come into effect on January 2017.

The regulations of the Act on VAT regarding deduction of VAT on representation are linked to the rules for income tax-related deduction of representation costs. Previously, this has implied that the deduction of input VAT has been limited to the equivalent of SEK 90 per person. However, it has been determined that such a limitation on right of deduction of VAT is not allowed according to EU law. Consequently, deduction of input VAT can now be granted for a greater amount, that is, SEK 300 per person, excluding VAT, with external representation. With internal representation, deduction is granted in an amount of SEK 200 per person. If the meal includes, for example, wine, then the VAT deduction is based upon SEK 180 per person, compared with strong beer served together with food where the limit is SEK 300 per person.

In this adjustment of the VAT limit, the situation arises whereby companies need to comply with the various deduction limits applying to one and the same cost. This makes the practical handling of these amounts more difficult and the rules will be difficult to apply, both for the companies and for the Tax Agency. Consequently, a uniform limit for VAT deduction for representation costs is proposed, and for income tax deduction, it is proposed that the right of deduction be eliminated in its entirety.


The Government has received wide-spread, hard criticism for their proposal to eliminate the right of deduction for representation. At the same time, it is probably true that companies find it difficult to keep track of the current rules where varying limits apply to representation meals. For example, the current limits vary depending on if it is a question of external or internal representation, or if it wine or beer that is served with the food. Even if the proposal for eliminating the right of deduction for representation meals implies higher corporate tax, this is compensated, partially, by the proposal for a somewhat higher right of deduction of VAT for those companies undertaking VAT liable operations, and by the reduced administration when the representation receipts no longer need to have the amounts allocated into deductible, respective, non-deductible, items in conjunction with representation meals.

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Christina Aronson

Christina Aronson

Christina Aronson arbetar på PwC:s kontor i Jönköping med skattefrågor rörande bolagsbeskattning, internationell beskattning och ägarbeskattning.
010-212 52 08
Christina Aronson works at PwC’s office in Jönköping with tax issues relating to corporate taxation, international taxation and owner taxation.
+46 10 212 52 08

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