We regularly get questions about giving money to charity from the company. So what’s the deal – is your company allowed to give money to charity?
Giving is OK, but not tax-deductible
In brief, a company can absolutely give to charity, but it’s normally not tax-deductible in the company’s tax return. This means that for an enskild firma or a handelsbolag there’s no point (tax-wise) in letting your company giving to charity as opposed to giving privately.
For an aktiebolag the cost is also not tax-deductible, so you can say that you’re giving away the company’s taxed profits. But if you had instead paid yourself dividends, paid tax on these and then given the money to charity, there would obviously have been less to give away. So for an aktiebolag there is actually a point in giving to charity from your company instead of privately. However, note the risks below.
Giving is sometimes taxed
It is not always crystal clear and risk-free to have your company give to charity. For a small-company owner Skatteverket could very well say that the owner gives to a charity that is dear to him/her personally, but does it from the company instead to avoid taxes. And then they would probably say that the owner should be taxed for this. Just like if the company had paid the owner’s rent (which is taxed), they can say that the company pays the owner’s gift to charity.
If an employer gives to charity in its employees’ names (e.g. as a Christmas gift), this is also taxed for by the employees. However, if the company gives to charity in its own name (e.g. instead of giving Christmas gifts), this is usually OK.
So can you know for sure when it’s OK for a company to give to charity and when it’s not? Although it’s not always easy to say, in general I’m guessing that the more the company can be seen as an “extension” of the owner (e.g. a one-person company), the greater the risk for taxation. While for a bigger company with employees that e.g. gives to charity instead of sending Christmas cards, I think the risk is quite small.
Giving dividends to charity
It’s also possible to give your dividends to charity without first paying tax on them, both dividends from listed stock and from your own company. The website Aktiegåvan.se has more information about this.
Also see Pwc’s blog Skänk din utdelning till välgörenhet – så funkar det! (in Swedish).
Tax reductions for individuals
Individuals can get tax reductions for certain gifts. You can get a tax reduction with 25% of gift amounts up to 12 000 SEK per year (until 2021 up to 6 000 SEK), with the following conditions:
- the gift has been made to charities listed by Skatteverket
- each single gift has been for at least 200 SEK
- total gifts during the year has reached at least 2 000 SEK, which can be divided among several charities
Read more about tax reductions for gifts at Skatteverket (in Swedish).
As with all tax reductions, it’s your total tax that is reduced. And all tax reductions are made in a certain order, e.g. the tax reduction for work income (“jobbskatteavdraget”), ROT/RUT etc. It’s only income tax and real estate tax that can be reduced, so not e.g. social fees for enskilda firmor. If you don’t pay enough tax to cover of all your tax reductions, they are forfeit.
Read more about tax reductions in general at Skatteverket (in Swedish).
Not as remuneration for work
So can you gift money to employees and others instead of paying salary? No, of course not. 🙂 As soon as there’s a work effort or something else given in return, we’re no longer talking about gifts.
And speaking of giving things in return, what are the rules for different kinds of sponsorships? Here they say (simply put) that if what you get in return is reasonable in relation to the amount paid, and if it furthers the company’s activities etc, the cost can be claimed in the business. So basically if it’s a reasonable cost for acquiring the business’s revenue, the same way as with all other tax-deductible business costs. If you e.g. buy an ad in a sports club’s game leaflet, the cost is tax-deductible as long as the ad, the cost etc are reasonable and of use to the business.
As usual there are a more details involved if you head down the rabbit hole, and in every case there’s a judgement call to be made, but these are the main ideas.