The new VAT act

On 1 July 2023, a new VAT Act (2023:200) (the “New Act”) entered into force in Sweden. The New Act constitutes a revision of the old VAT Act (the “Old Act”) with the purpose of making the VAT rules easier to interpret and apply. The New Act is adapted to follow the EU VAT Directive (Council Directive 2006/112/EC of 28 November 2006) (the “VAT Directive”) with respect to structure, terms and systematics. The aim of the structural changes has been highlighted in Schjødt's previous Tax Newsletter published on 4 April 2023 which can be read here.

The New Act focuses mainly on a formal revision, presenting a new structure and defined terms which are more aligned with the VAT Directive, avoiding material changes as far as possible. This has meant that provisions from the Old Act, which have been found to be incompatible with the VAT Directive, have been transferred to the New Act, such as, the rules on adjustment of input VAT on investment goods. Schjødt has previously published an article about the rules on adjustment of input VAT on direct transfer of real estate, please see Schjødt's Tax Newsletter from 4 April 2023 which can be read here.

As the New Act has entered into force, we have summarised the most important material changes below. It has further been noted that some of the changes in the New Act, which were intended to be pure formal adjustments to the VAT Directive, have been interpreted as material changes by the Swedish Tax Agency.

Special provision on chargeable event for cash of delivery
According to the Old Act, the chargeable event for cash of delivery (Sw. postförskott) occurred at the time of dispatch of the goods. As there is no corresponding article in the VAT Directive, this rule was abolished. Under the New Act, the chargeable event for cash of delivery occurs when the goods or the services are supplied, in accordance with the main rule under the VAT Directive. 

New provision on taxable amount when transferring goods to another Member State
Under the VAT Directive, the taxable amount when transferring goods to another EU Member State shall be the purchase price of the goods or, in the absence of a purchase price, the cost price. As there was no corresponding provision in the Old Act, this has been implemented in the New Act.

Provisions on conversion between currencies
In situations where the taxable amount is expressed in a currency other than that of the EU Member State in which assessment takes place, the VAT Directive provides that the exchange rate applicable is connected to the time when the VAT becomes chargeable. However, the Old Act connected the exchange rate to the occurrence of “tax liability”, i.e., a term not used in the VAT Directive. The New Act has been adjusted to the VAT Directive meaning that the conversion should be made when the VAT becomes chargeable. In accordance with the preparatory works, this means a smaller material change.

Exemption for intra-community acquisitions of products subject to excise duty
The exemption from VAT regarding intra-community acquisitions of products subject to excise duty shall only apply to duty-suspension arrangements under the New Act. The new requirement of duty-suspension arrangements has been introduced in accordance with the VAT Directive and means a material change compared to the Old Act.

Exemption for supply of services by an independent group of persons
Supply of services by an independent group of persons that is carrying out activities exempt from VAT, for the purpose of providing services directly necessary for the exercise of such activities to the group members, are exempt from VAT under the VAT Directive provided that such exemption is not likely to cause distortion of competition. The competition requisite in the Old Act had a different wording. In order to avoid that the Swedish rules are applied narrower than the VAT Directive, the competition requisite has been adjusted to the VAT Directive. According to the preparatory works, this change may mean a material change in some cases.

Abolished invoice requirement for payments made before a supply of goods
Under the VAT Directive, an invoice shall be issued on payments made before a supply of goods within the EU is carried out. However, there is no requirement to issue an invoice for payments made in advance if the supply is exempt from VAT. The Old Act did not provide for such exemption from the invoicing requirement, which now has been introduced in the New Act. 

Revised calculation of annual turnover
Taxable persons whose annual turnover is no higher than EUR 5,000 may be exempt from VAT under the VAT Directive. The annual turnover was in the Old Act calculated based on the taxable amount on taxable transactions. However, based on a ruling from the Court of Justice of the European Union, the annual turnover shall be the value of such transactions (excl. VAT). Based on this ruling, the annual turnover shall be calculated based on the value of the taxable transaction under the New Act.

As there are situations where the taxable amount does not correspond to the value of the taxable transaction, such as in respect of the supply of second-hand goods when the margin scheme (Sw: "vinstmarginalbeskattning") is applied, the wording in the New Act provides for a material change in these situations.

Exemption from VAT for supply of certain assets
The language and structure of the exemption from VAT for supply of certain assets have been revised to comply with the VAT Directive, with no intention of any material change. However, the Swedish Tax Agency has published a public statement where it is stated that, due to the revised language in the exemption, it can no longer be applied to services.

Exemption for export
Under the Old Act, export was considered to be a supply in the other country and was therefore not taxed in Sweden. This was revised in the New Act, according to which, export is exempt from VAT (in accordance with the VAT Directive). It was noted in the preparatory work that as the result remains unchanged from a tax perspective, but with a different legal solution, no material change was intended. However, the Swedish Tax Agency has published a public statement where it is stated that, due to the New Act, the exemption for export cannot be applied to certain processed goods.

Proportional deduction
The provision in the Old Act regarding deduction of input VAT for transactions that are partly deductible has been adapted to the (new) defined terms in the New Act. It may be noted that no material change was intended, however, some of the consultation bodies, to which the proposal was referred for consideration in the preparatory work, considered the change to be material with regards to deduction relating to non-economic activities. 

New requirements on import documents proving the right to deduct VAT
A new provision has been added in the New Act regarding import documents proving the right to deduct input VAT on importation. The import document should support the calculation of VAT paid or payable.

Limitations on the right to deduct VAT for fund management
The limitation of the right to deduct VAT for fund management has been extended to also cover “similar activities” in the New Act. The added wording is intended to be a clarification of current law but was criticised by several of the consultation bodies in the preparatory work as too broad and/ or unclear.