Sweden VAT Rules for Online Training Subscriptions: Key Insights

November 29, 2024

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The Swedish Tax Court issued an advance notice explaining the VAT rules for subscription fees to access a platform with live and on-demand training services. The company that provides subscription services raised the question of whether those services are subject to a reduced VAT rate.

Background of the Case and Decision

The Company that requested clarification on VAT rules offers and provides subscription-based monthly access to a training platform that includes live and on-demand training. With internet access, users can access the platform and training sessions using mobile phones, tablets, or any computer or similar device.

Live training sessions are performed in real-time, based on the schedule provided by the Company. In addition to the training sessions strictly available to members who pay monthly fees, some sessions are available to new platform users as part of a trial period.

The on-demand sessions are divided into several categories, and users can access them whenever they want, even offline, if they are saved in the application.

The Company considered that these services are subject to a 6% reduced VAT rate since that rate applies to sports activities in the form of physical training. In addition, the Company stated that the training services that it provides in digital form should be equal to those offered in sports and gymnastics facilities. Ultimately, the customers have the same experience and perform the same exercises in both situations.

After carefully examining the case's merits, including the relevant European Court of Justice rulings, the Tax Court did not share this opinion and view. Moreover, it concluded that the standard VAT rate of 25% applies.

As stated in the decision, the main question was which VAT rate applies to streaming live and on-demand training sessions. Ultimately, the Tax Court concluded that on-demand streaming is the core of the Company's businesses, whereas live streaming is only a small part. Therefore, the VAT Directive's provision for a reduced tax rate cannot apply to the subscription service.

Conclusion

The Tax Court's clarification gives insight into how the court analyzes and interprets the VAT national and EU rules and regulations based on the case's specific circumstances. Although the Company provides training sessions similar to those in regular gyms, the Tax Court looks at this from a different angle.

The main issue was the company's core businesses and which VAT rules and rates apply to that predominant business activity.

Source: Swedish Tax Court - 40-24/I

What VAT rate applies to online training subscriptions in Sweden?

The Swedish Tax Court ruled that online training subscriptions, including live and on-demand services, are subject to the standard VAT rate of 25%.

Why doesn’t the reduced VAT rate of 6% apply to digital training services?

The Tax Court determined that the reduced VAT rate of 6%, typically applied to physical sports activities, does not cover digital training platforms, as the core business involves on-demand streaming rather than live physical training.

Does the VAT rate differ between live and on-demand training sessions?

No, the Tax Court concluded that the standard VAT rate of 25% applies to both live and on-demand sessions, as the primary focus of the platform is on-demand content.

Can users access training sessions offline?

Yes, users can access on-demand training sessions offline if they save the sessions in the platform's application.

What was the main issue analyzed by the Swedish Tax Court in this case?

The main issue was determining which VAT rate applies to the subscription service, focusing on whether the platform’s services were similar enough to physical sports facilities to qualify for the reduced rate.

How does this decision align with EU VAT rules?

The decision aligns with the VAT Directive, as it considers the nature of the core business (on-demand streaming) rather than comparing it directly to traditional sports activities.

VAT