VAT deductions on common costs for property companies with mixed business activities

The case involved a property company that lets both residential premises (exempt from VAT) and commercial premises (subject to voluntary VAT registration). The company sought an advance ruling on whether it could allocate input VAT on common costs using the turnover-based calculation method specified in the EU VAT Directive.

The Supreme Administrative Court upheld the advance ruling, and stated that the deductible input VAT on common costs may be determined using the turnover-based calculation method specified in the VAT Directive.

The court referred to a previous ruling (HFD 2023 ref. 45), which had found that Sweden's "reasonable basis" allocation rule does not meet EU's requirements on clarity, precision, and transparency needed for proper directive implementation. Consequently, the VAT Directive has direct effect, allowing individuals to rely directly on its provisions to calculate the deductible input VAT using the directive's turnover method.

This ruling provides clarity for property companies operating mixed business activities, ensuring they can benefit from EU-harmonised VAT calculation methods rather than being restricted to potentially less favourable Swedish domestic rules.