Taxation of companies in the new sharing economy

Sharing is currently a big trend. Sharing is deemed to be sustainable, resource-efficient and sound. Using your own resources and assets in a variety of ways and in a number of contexts can contribute to your own economy and serve as a means into the labour market or business world. Recently the communication agency, Prime, hosted a lunch seminar addressing a variety of questions regarding the sharing economy. That new technology creates new business opportunities was something everyone agreed upon, as was the premise that the taxation of these types of operations is critical for the growth of these companies in the “new” economy.

The seminar was introduced by the entrepreneurs, Olof Stenhammar, founder of OMX, and Dan Olofsson, founder of the listed company, Sigma. Robin Teigland, Professor at the Stockholm School of Economics, who has described the Swedish sharing economy in a report, Stefan Fölster, Director of the Reform Institute, and Uber’s General Manager in Sweden, Alok Ahlström, contributed with their views; thereafter, the undersigned presented his reflections on the Swedish tax situation in relation to the sharing economy.

The Swedish Tax Agency maps the sharing economy

In December 2015, the Tax Agency received a government directive with the assignment of mapping and analysing the manner in which the sharing economy impacts the tax system. The directive stipulates, “The Tax Agency is to describe the sharing economy and its impact on the tax system, and tax revenues over time.” The legal relationships between the various players are also to be described. An overall report will be presented on 15 March 2016, while the experience specifically gained from control measures is to be reported to the Ministry of Finance on 31 October 2016. This implies that the Tax Agency will execute, during this period, an increased number of audits of sharing economy companies.

The following describes the rules right now, briefly and as an overview.

Uber. When it comes to private vehicles used for personal transport in exchange for payment, the Tax Agency announced, in information provided during the autumn of 2015 that the driver is to report this revenue as income from services. Deduction is allowed in an amount of SEK 18.50 per 10 kilometers for the driver’s own car and in a lower amount if it is a question of a company car being used for the transport. The principal is to pay preliminary income tax. If the principal is foreign, the driver is, himself or herself, required to pay this tax.

Airbnb. When it comes to private housing, there are more clearly defined rules. Currently, a maximum amount of SEK 40,000 of the profit from renting out an apartment or home is tax exempt, after deduction of certain costs. Any excess profit over this amount is taxed as capital.

Crowdfunding. Crowdfunding companies offer or mediate various forms of financial products. This can be comprised of investments in shares or loans or variations of these. There are general tax rules for these products.

For private individuals wishing to offer services, there is the possibility of applying for a so-called F-tax card (Swedish sole proprietorship) and, then, undertaking business operations on this basis. This requires the usual accounting and the tax rules applying are relatively complex. Another possibility is to operate through another person’s company and pay compensation for this. Here the applicable rules are not entirely clear.

In all situations, both VAT and social security contributions apply.

Comments

All in all, the conclusion is that, generally speaking, there currently are theoretical tax rules for a number of different operations within the sharing economy. However, difficulties arise when these are to be applied and when the revenues are to be reported; this is when these types of operations can appear to be just too difficult to handle correctly, which in turn may limit the growth of these businesses.

In order to support and develop these types of business operations, and in order to avoid tax errors, it is most likely the basic premise in taxation should be simplicity, simplicity and more simplicity, just as one says that it is the location, location and location which matters when you buy a house or apartment.