New ruling on voluntary VAT in self-storage businesses

The advanced ruling was sought following a shift by the Swedish Tax Agency, which in December 2023 published a public statement revising its previous view and application of voluntary VAT for buildings divided in separate various lockable spaces. It follows from the Tax Agency's amended statement that voluntary VAT shall be applied based on the business activities carried out in each separate lockable space. The Tax Agency has since then applied this view to multiple self-storage operators, arguing that self-storage rental does not qualify for voluntary VAT as the lease is not sufficiently permanent (i.e. less than 12 months). The Tax Agency has applied the same view to all lease agreements, including self-storages used in customers' taxable business. 

Based on this new view, the Tax Agency has further rejected VAT reclaims for property-owning companies renting out an entire building to a self-storage operator, arguing that the lease does not qualify for voluntary VAT. The Tax Agency has in such cases disregarded the fact that the property was permanently let out for use in a self-storage business, where some transactions were entitled to VAT deductions. 

In the advanced ruling, a property-owning company (the PropCo) asked whether voluntary VAT could be applied when leasing the property to a storage letting company (the Operator), that uses the building for its self-storage business. The self-storage business had some customers where transactions were eligible for VAT deductions, while others were not. The PropCo argued that since the Operator permanently uses the property for its self-storage business, the Tax Agency's view lacked legal grounds and was not in line with Swedish case law.

The Board ruled in favour of the PropCo, confirming that under the Swedish VAT Act, voluntary VAT can be applied when the property is leased on a permanent basis to the Operator, and the Operator permanently uses the building in its self-storage business. The Boards's assessment was not affected by the fact that some transactions in the Operator's business were not entitled to VAT deductions.

While the Swedish Tax Agency may appeal the ruling, the decision is unequivocal: voluntary VAT can be applied when leasing a property to a self-storage business. Notably, the ruling makes no reference to the end customers or their activities. 

For any questions regarding the Board's ruling or questions relating to voluntary VAT, please feel free to contact any of the Schjødt tax lawyers.