Sweden: Refunds of input VAT on acquisitions used in EU sales

Swedish tax agency position regarding refunds of input VAT on acquisitions used for sales in other EU countries

Regarding acquisitions used in EU sales

The Swedish tax agency announced its position regarding refunds of input value added tax (VAT) on acquisitions used for sales in other EU countries—in particular, with respect to branch structures.

The tax agency stated that the right to deduct input VAT on acquisitions used for sales in another EU Member State presupposes the application of the provisions of a right to a refund and this requires that the turnover be subject to VAT in the country where the turnover takes place and that it would have been subject to VAT if it had taken place in Sweden.

The right to a refund can also affect companies with establishments in different EU Member States, such as branches. The tax agency’s position describes that transactions between different establishments within the same taxable structure or group do not constitute turnover in terms of VAT. This means, among other things, that if the establishment in Sweden assists an establishment in another EU Member State with, for example, an administrative service, it is not a question of a turnover of an administrative service between the establishments. Instead, input VAT on costs for the administrative service is related to the sales that the establishment in the other EU Member State carries out. According to the Swedish tax agency, the right to a refund in Sweden then depends on the outgoing transactions that the establishment in the other EU Member State conducts.

In situations when an acquisition is used for both VAT-liable and VAT-exempt sales, a distribution of the input VAT may need to be made to determine the right to a refund. According to the Swedish tax agency, this determination primarily is made at the time of acquisition and is based on the actual use. If this determination is not possible, the distribution generally is deemed to take place on an annual sales basis (as a starting point). If the acquisition is also used by several establishments, the Swedish tax agency considers that a distribution may need to be made in steps—first, by distributing the input VAT to the various establishments and second, by determining the right to deduct and repay for each establishment. As far as the initial distribution is concerned, the Swedish tax agency considers that it can take place based on annual sales (for each establishment) but also by, for example, starting from internal invoicing between the establishments.

Read a January 2022 report (Swedish) prepared by the KPMG member firm in Sweden

 

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