Proposal regarding changed rules on VAT and mixed business

The Swedish Supreme Administrative Court has stated that a taxable person cannot be denied using turnover for the purposes of calculating the proportion of input VAT deductible in a mixed business. The court referred to the EU VAT directive, where a turnover based method is the main rule (HFD 2023 ref. 45). 

Following this ruling, the Ministry of Finance proposed amendments to the Swedish VAT Act regarding the calculation of input VAT deductible in mixed business. The proposal's main purpose is to introduce a new main rule, where a turnover based method in line with the VAT Directive shall be used. However, the proposal allows an allocation key other than based on turnover, if the method used guarantees a more precise determination of the deductible proportion.

For certain financial activities, an exception to the main rule is proposed, whereby the turnover from certain taxable transactions should be wholly or partly excluded when calculating the turnover for allocation of the deduction. For input VAT related to buildings, it is proposed that the allocation key shall be based on the area used for VAT liable and VAT exempt transaction, respectively. This is in line with EU case law. 

The new rules are proposed to enter into force on 1 January 2027. We are monitoring developments closely. If you have any questions, please feel free to contact Schjødt’s tax lawyers.