Voluntary VAT on premises occupied by several tenants

by Ebba Perman Borg, Victor Elovsson and Maria Ström


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On 5 May 2023, the Swedish Supreme Administrative Court (“HFD”) established in a ruling (HFD 5329-22) that the prerequisite regarding “continuous use” (Sw. stadigvarande användning) of premises, to be able to apply voluntary VAT, can be fulfilled even in cases where the premises are occupied by several tenants without any of them having an exclusive right to a particular area.

In the case at hand, the property owner rented out the entire property to the primary tenant, who in turn entered into rental agreements with two secondary tenants. The property was then used jointly by all tenants without any tenant having exclusive rights to a particular area. The owner of the property deducted input VAT based on the rules on voluntary VAT. The deductions were denied by the Swedish Tax Agency on the grounds that the premises were not subject to “continuous use”.

HFD noted that the applicability of continuous use had been assessed in a previous case, where HFD concluded that the prerequisite may be applicable also where the property owner intends to continuously provide premises for use in VAT-able business during several short-term rental periods. HDF has also stated in a previous case that it is not possible to apply voluntary VAT for a certain percentage of one and the same premises, only to a particular area.

In the case at hand, HFD concluded that merely the fact that premises are used by several tenants – all of whom are engaged in VAT‑able activities ­– without any of them having an exclusive right to a particular area, does not in itself mean that voluntary VAT cannot be applied on the letting. HFD noted that the meaning of the term continuous use is not entirely clear. However, it must be determined based on the property owner's intention with the letting and an assessment must be made on a case-by-case basis.

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