Deductions and expenses on your invoice
Below you can read about how to calculate expense costs on your invoice. Follow our example of how gross salary, net salary and expenses are broken down when calculating your salary.
What are expenses?
You may need to make purchases, pay for travel or rent equipment in connection with an assignment. This is an expense that you incur for the customer. When you invoice your customer for the assignment, you should also invoice them for any expenses associated with the assignment. However, we recommend that you check future expenses with your customer in advance, so that no misunderstandings arise when the invoice comes to be paid.
Wellness claim
When you are self-employed via Cool Company you can claim wellness benefits. In technical terms, a deduction is made for the claim you have submitted. Once your wellness benefit has been approved, it will be applied to your next salary.
You can claim wellness benefits up to 3 600 SEK per year. All you need is a valid receipt. You can use your wellness benefit towards things like exercise activities, massage treatments or gym memberships. Read more about the wellness benefit at the Swedish Tax Agency www.skatteverket.se
Deductions for expenses in connection with assignments
How you handle expense costs differs slightly if you have previous experience from running your own company. It probably differs quite a lot if you have previously only worked as an employee.
- One difference to having your own company is that you cannot deduct VAT as an independent contractor. Instead Cool Company is responsible for that.
- As a former employee, the difference is that you will have no income or expenses other than those you create yourself.
- The cost of an expense results in a tax-free deduction from your business. As you are responsible for paying the cost of the expense with your own personal money, the tax has already been deducted once (when you first earned the money).
Use our example calculation below to understand how best to manage expenses, and how to get back the full amount you spent. Let’s start with an example where you do not have any expenses at all. This is to make it easier to follow the process through to the end.
In our example, you are a self-employed floor fitter. You have been commissioned to lay a floor for a customer.
- You have offered to do the work for SEK 10,000 excluding VAT.
- The floor to be laid costs SEK 5,000 excluding VAT, i.e. SEK 6,250 including VAT.
Example calculation 1: Invoice without expenses
We will start with an invoice without expenses, where the customer pays for the floor themselves. As you do not need to pay any expenses for the floor, the calculation looks like this.
Labour cost: SEK 10,000 excl. VAT
Invoice value: SEK 10,000 excl. VAT
Gross salary, incl. holiday pay (taxable): SEK 7,154
Net salary, incl. holiday pay: SEK 5,008
Example calculation 2: Invoice with expenses
Now it’s time to look at what the procedure is when you pay the expenses for the floor yourself.
Step 1. Create an expense to account for your cost: 50% of the expense back
Before you create your invoice, or at least when you create it, you should create an expense report for the cost you incurred for the purchase of the floor. In the expense report, you should fill in what you actually paid for the floor as a private individual, i.e. SEK 6,250 including VAT.
For an expense, no tax or employer’s contributions are deducted. So when you have an expense, this means that your gross salary (your salary before tax) is allocated so that the part from which tax is to be deducted is reduced and the “tax-free” part relating to your expense increases.
Therefore the calculation is as follows:
Invoice value: SEK 10,000 excl. VAT
Expenses for floor: SEK 6,250 incl. VAT (SEK 5,000 excl. VAT)
Gross salary: SEK 3,349 (SEK 10,000 minus expenses and fees)
Net salary: SEK 2,344
Total remuneration paid, incl. expenses: SEK 8,595
Note: The difference between what you received in this first step and the example without expenses is SEK 3,587 (SEK 8,595 minus SEK 5,008).
So, to compensate for your reduced salary, you need to invoice for the cost of the floor. Clearly your customer should pay – after all, it was the customer who ordered both the job and the floor. This leads us to step 2.
Step 2. Record the entire cost of the expense on the invoice: 50% of the expense
You simply include the cost of your expense, i.e. the floor you purchased, as a line on the invoice you intend to send to your customer. On the invoice, include the cost excluding VAT.
That provides the following complete summary:
Invoice value: SEK 15,000, of which
… Labour costs: SEK 10,000 excl. VAT
… Purchase of floor: SEK 5,000 excl. VAT
Expenses for floor: SEK 6,250 incl. VAT (SEK 5,000 excl. VAT)
Gross salary: SEK 6,927 (SEK 15,000 minus expenses and fees)
Net salary: SEK 4,849
Total remuneration paid, incl. expenses: SEK 11,099.
Done. The difference between this process in two steps and the example without expenses is
SEK 11,099 minus SEK 5,008 = SEK 6,091. The missing SEK 159 is because Cool Company’s fee will be slightly lower in the first example.
In our example calculation, we rounded off slightly and assumed that you pay 30% tax and that VAT is 25%. We also assumed that your expenses are approved and that you submit the receipt in digital or physical form to Cool Company.
If you have further questions about how to deal with expenses or have any other questions associated with the options for being an independent contractor, please contact our customer support. You will find our contact details in the page footer of the site or you can click on the Customer Support button to chat with us during office hours.