Victor Elovsson
Senior Associate
Stockholm
Newsletter
The right to calculate deductible VAT
by Victor Elovsson and Ebba Perman Borg
Published:
On 9 July 2024, the Swedish Supreme Administrative Court (“HFD”) ruled, in case HFD 2024 not. 41, that a taxable person cannot be denied the option to calculate deductible VAT based on the turnover-based method for joint costs in a so-called mixed business.
The rules regarding calculation of deductible VAT in a mixed business, i.e., a business in which there are both taxable and non-taxable business, state that an allocation must be made to decide what portion of costs – which cannot be entirely assigned to either the taxable or non-taxable business – should be deductible for VAT purposes.
Under the VAT Directive (Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax), the main rule is to calculate the deductible input VAT in accordance with the turnover-based method. HFD stated that since the VAT Directive has direct effect, the company in question may calculate the deductible proportion of input VAT by applying the turnover-based method.
The ruling is in line with HFD’s prior ruling in case HFD 2023 ref. 45, which was based on the old VAT Act (1994:200). As of 1 July 2023, the new VAT Act entered into force and did not provide for any material changes in the rules on calculation of deductible VAT. Schjødt reported on that case in our previous newsletter on 9 January 2024. See that article here.
