Sweden's VAT Guidelines for Taxable Transactions to Employees: Market Value and Assessment Criteria

Following the Supreme Administrative Court ruling, the Swedish Tax Agency published guidelines on whether transactions between an employer and employee should be included in economic activity and whether the tax base should be revalued.

The guidelines also include an assessment criterion for determining the applicable VAT rules on taxable transactions between employers and employees.

Assessment Criteria and Their Implications on Taxable Persons

The Tax Agency underlined that when a taxable transaction between employer and employee differs from those typically included in the employer's economic activity as a taxable person, an assessment must be conducted. 

The assessment of taxable transactions between the employer and the employee must answer whether the additional transactions occur with such continuity and frequency that they could constitute an economic activity if no other economic activity is carried out.

If affirmative, those transactions must be included in the economic activity. However, if the answer is negative, the second question must be answered. The second question is whether those transactions are related to economic activity and whether they should be included in it.

Generally, if the employer provides goods or services to employees at prices lower than the market value, the tax base is calculated on the market value. However, if the employer can prove that the price is fair and reflects the market value, they can avoid applying this rule.

The term market value describes the amount the employee would need to pay to an independent or third-party seller or service provider in the country for the same goods or services in a comparable transaction. In rare situations, where there are no comparable transactions, the employer's cost of providing the goods or services is the market value.

Conclusion

The guidelines and assessment criteria published by the Swedish Tax Authority provide taxable persons with valuable information on how to assess and treat taxable transactions between them and employees, helping them avoid disputes with the Tax Authority.

The market value rule ensures that taxable persons correctly calculate the taxable amount when providing goods or services to their employees. Moreover, setting these rules should prevent underreporting, thus contributing to more revenue from VAT.

Source: Swedish Tax Agency