Advance tax ruling regarding vat and independent groups

Supply of services is generally subject to value added tax (“VAT”), even when supplied intragroup. However, certain intragroup supplies may be exempt. The exemption covers the supply of services by independent groups of persons, who are carrying on an activity which is exempt from VAT or in relation to which they are not taxable persons, where those groups merely claim from their members exact reimbursement of their share of the joint expenses, provided that such exemption is not likely to cause distortion of competition. The services must further be considered necessary for the relevant activity.

In the advance ruling, the question was whether the supply of accounting, salary, human resources, and IT services within an independent group, with an activity that is of public benefit, would be exempt from VAT under the aforementioned exemption and, in particular, whether the services could be considered directly necessary for the exercise of the activity and whether they could cause distortion of competition. The Council for Advance Tax Rulings decided that the exemption was not applicable in this case. This assessment was based on the fact that the services were not considered to be directly necessary for the exercise of the activity as well as the provided services being too general in scope, which therefore could risk a distortion of competition. However, there were two dissenters in the decision who considered that the exemption was applicable. The dissenters argued that, considering the aim of the exemption and EU legislation, the exemption should have a wider scope than it currently does in Sweden. 

The advanced ruling has been appealed to the Supreme Administrative Court of Sweden, which will have the final say in the matter.