Car Benefits – Tax on an Employer-Provided Vehicle

If an employer provides an employee with a vehicle for their use or disposal, the value of that benefit is treated as taxable employment income.

The same rules apply whether the vehicle is owned, leased or borrowed by the employer or business.

The value of the car benefit is determined in accordance with the valuation rules published annually in the Tax Assessment Guidelines (Skattmat).

Different rules apply depending on whether the employee has full and unrestricted use of the vehicle, or restricted use of the vehicle.

Full and Unrestricted Use

If an employer provides an employee with a vehicle for full and unrestricted use, the taxable value of the car benefit is calculated based on the age and value of the vehicle, rather than on the employee's actual private use.

Company owners, managing directors, individuals in comparable positions, and members of a company's board of directors are always regarded as having full and unrestricted use of any passenger vehicle made available to them for private use.

Restricted Use

An employee is regarded as having restricted use of an employer-provided vehicle if the vehicle is otherwise used in the employer's day-to-day operations and the employee is only permitted to use it outside working hours:

• for travel between home and the workplace, and

• for occasional private use.

Where the employee has restricted use of the vehicle, the taxable benefit is calculated based on the number of kilometers driven.

If the employee pays the employer for the use of a vehicle made available to them, those payments reduce the taxable value of the benefit.

See the Car Benefit Calculator on Skatturinn's website.