Indirect tax snapshot
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Value Added Tax (VAT) is the main type of indirect taxation in Sweden and in other European Union (EU) countries.
It is a tax on consumption which is applied during the production and distribution process to most goods and services. It is also applied to goods, and certain services, entering the country. Although VAT is ultimately borne by the consumer by being included in the price paid, the responsibility for charging, collecting and paying it to the tax authority at each stage of the process rests with the business making the supply, ie the sale.
A business registered for the tax will charge VAT (output tax) on its sales, and incur VAT (input tax) on its purchases (including any VAT paid at importation). The difference between the output tax and the deductible input tax in each accounting period will be the amount of VAT payable by the business to the tax authority. Where the input tax exceeds the output tax, a refund will be credited to your tax account and later on repaid to your business.
A transaction is within the scope of Swedish VAT if the following conditions are met:
• it is a supply of goods or services. Although the term ‘supply’ is not defined in the legislation, it has a broad interpretation
• it takes place in Sweden
• it is made by a taxable person. For these purposes, a taxable person is a person or entity who is registered for VAT in Sweden, or has a liability to become registered
• it is made in the course or furtherance of any business carried out by that person or entity.
There are three rates of VAT that are applied to goods and services in Sweden; the standard rate 25%, the reduced rate of 12% and the reduced rate of 6%. In addition, some goods and services are exempted from the tax.
Businesses that make exempt supplies are normally unable to claim the input tax that they incur related to the exempt supply, so the VAT paid to suppliers will be a ‘real’ cost.
Most goods imported into Sweden from outside the EU are subject to VAT. The tax will have to be reported by the importer in connection with the importation. Where the importation is for taxable business purposes, it may be possible to reclaim the tax (subject to certain rules). Since January 2015, the import VAT should be reported in the VAT return to the Swedish tax agency in case the importer is registered for VAT in Sweden. These types of reports were earlier reported to Swedish Customs.
Importers not registered for Swedish VAT still need to report and pay import VAT to the Swedish customs. Paid import VAT to the Swedish customs can under certain conditions be reclaimed if the import has been made for taxable business purposes.
It is also important to note the interaction between VAT and customs duty. Customs duty is levied across the EU at the place where goods are imported into the community. It is levied in order to bring the cost of goods produced outside the EU up to the same level as those produced within it. Once duty (and VAT) has been paid by the importer, the goods are in ‘free circulation’ and they can then be released for use in the home market. Unlike other indirect taxes, such as VAT, once duty has been paid it is not usually recoverable by the importer. It therefore represents a bottom line cost to the importing business if it cannot be passed on in higher prices.
It is therefore very important to ensure that the correct rate of duty is applied and that it is only the importer that can report the import VAT as input VAT. VAT is charged on the value of the importation, including any custom duty.
A ‘person’ who either makes or intends to make taxable supplies of goods or services in the course or furtherance of a business must register for VAT. However, as of 1 January 2017, Sweden has a voluntary threshold for VAT registration of local businesses not exceeding an annual turnover of SEK 30,000 (the threshold will be raised to SEK 80,000 from the 1st of July 2022).
For these purposes, a ‘person’ includes any legal entity. Therefore, once a person is registered for VAT, all of his business activities will be covered by the registration – even if the nature of some of those activities are very different.
Two or more corporate bodies in the financial and/or insurance sector, or companies in ‘an agency relationship’ for income tax purposes can be registered together as a VAT group if they belong to the same group of companies.
The main advantage of VAT group registration is that any supply of VAT liable goods or services (for example administration and IT) by a member of the group to another member of the group is disregarded for VAT purposes. This reduces the VAT costs in the group.
Non-established businesses will need to register for VAT as soon as they commence trading in Sweden and provide supplies subject to local Swedish VAT for which the foreign company should report the VAT amount to the Swedish Tax Agency ie if the local reverse-charge mechanism cannot be applied. The threshold of SEK 30,000 (SEK 80,000 from the 1st of July 2022) is not applicable on foreign businesses, ie non-established businesses (see comments above).
Registration for VAT in Sweden may also be required where a non-established business is involved with distance selling. Distance selling occurs when a taxable supplier delivers goods from a country outside of the EU or an EU country to a customer in another EU country (other EU country than country of dispatch)- who is basically not registered or liable to be registered for VAT. Such customers are known as non-taxable persons and include private individuals and businesses and other organizations that are not registered for VAT for example that they are exempt from having to register due to the nature of their activities). The common examples of distance sales are goods supplied by mail order and via the internet.
Due to EU harmonized distance selling rules applicable since the 1st of July 2021, it is as a main rule not necessary for a non-established businesses to register for VAT in Sweden due to distance selling of goods to non-taxable persons in Sweden. A non-established business can for instance choose to declare these types of sales in an OSS or IOSS return in the non-established business’s country of establishment or identification.
The main rule within the EU is that electronic services supplied to private consumers should be taxed in the country where the private consumer is resident. The result of this is that local VAT is chargeable at the applicable rate in each of the member states in which electronically supplied services are made (ie where the private consumer is resident). To ensure compliance with this, suppliers have the choice to either register for VAT in each member state where their customers reside, or elect to register under the OSS simplification scheme in a single member state (usually the member state where the main establishment is located). Businesses with multiple establishments in the EU can choose in which member state they would like to register for the OSS scheme (the member state of identification). However, the OSS cannot be used to report local sales to customers in a member state in which suppliers of electronically supplied services have a fixed establishment. Non-EU suppliers without an establishment in a member state are free to select a member state of their choosing to operate OSS from and this member state becomes their member state of identification.
Since the 1st of July 2021 both distance sales of goods within the EU and electronical services supplied cross border to private consumers in other EU-countries can be reported via the OSS simplification scheme. Also some other types of cross border services taxable in the private consumer´s country of residence can re reported via the OSS-scheme.
The tax authority in Sweden may direct a person to appoint a VAT agent to act on his behalf for VAT purposes where the person:
• is a taxable person or makes taxable supplies or acquires goods in Sweden from one or more other EU countries
• is not established, and does not have a ‘fixed establishment’ in Sweden
• is established in a country or territory which is not an EU country (or part of such a country) and where there is
no VAT mutual assistance agreement in place between the EU and that country or territory.
The accounting period is a calendar month if the taxable amount, excluding intra-EU acquisitions and imports, is estimated to exceed SEK 40 million for the tax year.
The accounting period is three months (a calendar quarter) if the taxable basis excluding intra-EU acquisitions and imports is estimated to a maximum of SEK 40 million for the tax year.
The accounting period is an entire tax year if the taxable basis, excluding intra-EU acquisitions and imports, is estimated to exceed SEK 1 million for the tax year.
If you so request, the Swedish tax agency shall decide that the accounting period should be one calendar month instead of a calendar quarter. If the accounting period should be an entire tax year, you may request to be allowed to report VAT once per calendar month or once per calendar quarter. Normally, such a decision will apply for at least 24 consecutive calendar months. If there are special reasons, the Swedish tax agency shall decide that you must report VAT every calendar month or calendar quarter without your having requested this.
A default surcharge penalty of SEK 625 will be imposed by the tax authority if VAT returns are not submitted on time. If the related tax is not paid by the due date the tax authority will charge you interest.
Businesses that are registered for VAT in Sweden and make supplies of goods or services to traders registered for VAT in other EU countries are required to complete and submit EC Sales Lists (ESLs). The ESL’s must show details of the recipients of the goods and services. ECSL’s regarding intra EU supplies of goods are to be submitted monthly and ECSL’s regarding services quarterly. There are exemptions. Late filing fee is SEK 1,250.
Yes. A penalty of maximal 20% of the not reported/wrongfully reported VAT will be applied. There are no penalties for late payment of the tax, but the applicable interest rate could be quite high in certain cases.
Criminal proceedings may be brought in the case of more serious matters. However, criminal proceedings cannot be combined with the above penalty (so called double punishment is not allowed).
Yes, it may be possible to reclaim the VAT incurred in certain circumstances.
Two schemes exist, one for businesses established in the EU and another for businesses established elsewhere.
The EU cross border refund scheme is available in all EU member states, and enables a business established in an EU country to recover VAT incurred in another member State. To be eligible to make a claim, the claimant must be a taxable person established in an EU member State other than the one from which the claim is to be sought. In addition, the claimant:
• must not be registered, liable, or eligible to be registered in the member state from which he is claiming the refund
• must have no fixed establishment from which: VAT liable transactions are performed (ECJ C 318/11 och C 319/11 Daimler and Widex A/S 2012-10-25), seat of economic activity, place of business or other residence in the member state from which he is claiming the refund.
• during the refund period he must not have supplied any goods or services in the member state of refund, apart from certain limited exceptions.
The amount that is refundable is determined by the deduction rules that apply in the country making the refund. The claim is submitted electronically to the tax authority from whom the repayment is being sought.
The refund period must not cover more than one calendar year or less than three calendar months – unless it is covering the remainder of a calendar year. The claim has to be made by 30 September of the year following that in which the VAT was incurred.
Businesses established outside of the EU can, subject to certain conditions, also reclaim the VAT incurred on imports into Sweden as well as purchases of goods and services used in Sweden.
The following conditions must be fulfilled for the VAT to be refunded:
• the import or purchase must relate to taxable activities
• the supply, to which the purchase or import relates, is subject to Swedish VAT or would have been subject to VAT, or entailed the right to a refund if it had taken place in Sweden
• if the supply takes place in another EU country then it is subject to VAT or entitles the taxpayer to a refund in that country
• as a foreign entrepreneur, a VAT refund can be obtained for goods or services that are supplied in Sweden when a VAT-registered buyer is tax-liable for the turnover (known as ‘reverse charge’).
Taxpayers are not entitled to repayment if the Swedish VAT regulations prohibit deduction. In Sweden, there are limitations on the right to deductions for, among other things, cars and business entertainment. A travel agency business is not entitled to a refund for goods and services that directly benefit the traveler, such as hotel rooms, restaurants services and personal transport when the tour operators margin scheme rules are applied.
Claim forms have to be submitted to the Swedish tax authority no later than six months after the end of the relevant calendar year (claim form regarding VAT incurred during 2022 thus needs to be submitted no later than the 30th of June 2023).
A VAT invoice must show:
• an invoice number which is unique and sequential
• the seller’s name and address
• the seller’s VAT registration number
• the invoice date
• the time of supply (also known as tax point) if this is different from the invoice date
• the customer’s name and address
• the quantity of goods or the extent of the services
• a description sufficient to identify the goods or services supplied to the customer
• applied VAT rates
• total amount payable, excluded VAT, for each applied VAT rate
• The unit price or rate, excluding VAT.
• the total amount of VAT charged expressed in SEK (as a main rule).
Where a VAT invoice includes exempt supplies or when the reverse-charge mechanism is applied, it must:
• show clearly that there is no VAT payable on those goods or services
• show the total of those values separately
• reference indicating why VAT is not charged
• the reference ‘omvänd betalningsskyldighet’ or ‘reverse- charge’ when the revers-charge mechanism is applied.
Where a business makes a sale of goods or services within Sweden for SEK 4,000 or less including VAT, a simplified VAT invoice can be issued.
VAT invoices can be issued, received and stored in electronic format and there is no need to tell the tax authority. Electronic invoices must contain the same information as paper invoices. The method used to ensure the authenticity of origin, the integrity of content and legibility of the invoices is a business choice and can be achieved by any business controls which create a reliable audit trail between an invoice and a supply of goods or services.
For further information on indirect tax in Sweden please contact: