Swedish VAT Rules for Foreign Group Transactions

On January 16, the Swedish Tax Agency released its position on the rules and provisions of services between a company's permanent establishment in Sweden and a foreign VAT group of which the company is a member. The key issue the Tax Agency addressed was whether transactions between a foreign VAT group and its Swedish permanent establishment (PE) are also taxable when the establishment is not treated as independent of the group.

The Applicable VAT Rules and the Tax Agency's Position

The Tax Agency noted that, in Sweden, VAT grouping is limited to entities and PEs located within the country, meaning that PEs abroad are not included in a Swedish VAT group. Consequently, such PEs are treated as separate taxable persons within the VAT group, and transactions between them may be subject to VAT if the general VAT conditions are met. 

Furthermore, the same principle applies when a Swedish PE interacts with a foreign VAT group in another EU country, if the establishment is regarded as a separate taxable person in relation to that group. Nonetheless, this does not apply where the Swedish PE is itself a member of a Swedish VAT group.

To clarify the applicable rules, the Tax Agency provided several scenarios and examples of how relevant VAT rules and provisions apply. Notably, whether the Swedish PE is treated as an independent taxable person depends on the VAT grouping rules in the country where the VAT group is established, not solely on Swedish regulations.

If the foreign VAT group is formed in an EU country that applies geographically limited VAT grouping, such as Sweden, the Swedish PE is treated as an independent taxable person and is not part of the VAT group. Thus, transactions with that establishment may be subject to VAT if all other conditions for taxation are met. 

In the situation where a foreign VAT group is established in an EU country that does not apply geographically limited VAT grouping, the Swedish PE is regarded as part of that foreign VAT group. As a result, the establishment is not treated as an independent taxable person, and transactions between the group and its Swedish PE are treated as internal movements and fall outside the scope of VAT.

Finally, if the VAT group is formed in a non-EU country, the same type of assessment must be carried out to determine whether the Swedish PE should be regarded as independent or as part of the group. Throughout the assessment process, the same principles that apply when the VAT group is established in an EU country must be respected.

Conclusion

The clarification provided by the Tax Agency replaces the previous 2019 position statement on the provision of services between a company established in Sweden and a foreign VAT group of which the company is a member, taking into consideration revised VAT rules, subsequent case law, and administrative practice. However, the revisions are purely formal and do not affect the substantive interpretation or application of the rules.

Source: Swedish Tax Agency