The value of any extra equipment is added to the new car price. New car prices are determined annually by the National Tax Board.

If the car is six years or older, the new car price can never be set lower than four annual base amounts i.e. SEK 151,600 during 2002.

As an income year 2002 example, a 2002 make Volvo V70 2.4 Business (new car price SEK 275,900) gives a benefit value of SEK 46,423 – this means SEK 3,869 will be added to the salary every month.

Since Swedish income taxation is progressive, a well-paid employee may pay car benefit income tax of 56% - SEK 2,167 a month.

The benefit value of having the car is reduced to 75% if the employee benefiting from it drives at least 3,000 km annually in duty.

If the employee is paying the employer from his net salary or is paying for other running costs other than fuel, then the benefit value should be reduced.

If exceptional reasons are at hand, the benefit value may be adjusted up or downwards, for example a downward adjustment is achievable if the car is a taxi and has been driven at least 60,000 km in duty during the calendar year.

Free fuel is a benefit of itself and is taxed separately. The benefit value of free fuel is calculated as market value multiplied by 1.2.

The market value is calculated as the value of the total amount of fuel that has been used during the period of the benefit.

If the employee can prove that the private consumption is less than the total amount used then the market value of the fuel used for private consumption is reduced accordingly. If the employee pays the employer for the fuel then the benefit value is reduced accordingly.

VAT on passenger cars
Swedish standard VAT rules does not apply to the import, purchase and hire of passenger cars and motorcycles.

However, vehicles that according to the Swedish VAT Act are considered to be lorries, trucks or buses are treated as any other goods for VAT purposes.

Under the Swedish VAT Act, in addition to ordinary passenger cars, light commercial vehicles and buses with a total weight not exceeding 3,500 kg are also treated as cars.

However, commercial vehicles with a cab as a separate body unit are not treated as cars. The cab is a 'separate body unit' when there is an air gap between the cab and the van and the vehicle functions as a truck, even if the van body is removed.

A VAT taxable business, other than commercial passenger transport under the Commercial Transport Act, sale or leasing of passenger cars, hearse or driving instructors, is not entitled to deduct VAT paid on the purchase of a passenger car.

A right to deduct input VAT exist, though limited to 50% of the VAT paid, on the leasing of a passenger car that is used more than negligible in a business. I.e. the passenger car must be used more than 3,000 km annually for business purposes for the business to obtain the right to the 50% input VAT deduction. In the case of short-term rentals the use of the car must be compared to the lease period.

VAT paid on running costs for a passenger car are, however, fully deductible if the car is a business asset or has been leased for use in the business. No breakdown of costs between business and private use is necessary. Running costs include costs for service, repairs and testing, for example.

The purchase of extra equipment does not qualify as running costs. However, there may still be a right to deduct input VAT if the extra equipment is actually used in a VAT taxable business.

The right to deduct VAT in those cases has to be individually evaluated. Such equipment includes car telephones, communication radios, winter tyres, towing hooks, extra lights, engine heaters and car stereo.

Since the general rules are applicable a breakdown may be necessary if it is a mixed business or if the equipment has been purchased partly for private use.