The recent ruling by the Supreme Administrative Court in Sweden has clarified the division of input tax for economic and non-economic activities. This ruling has significant implications for businesses operating in the country, as it determines how they can claim deductions on their VAT payments.
Under Swedish law, there is a provision for the division of input tax in cases where a purchase is used for both economic and non-economic activities. This means that if a taxable person uses a purchase for both taxable and exempt transactions in their economic activity, they cannot be denied the use of the turnover-based calculation method to determine the deductible portion of input tax on common costs in the mixed activity.
It is important to note that this division within the mixed activity only becomes relevant after the input tax has been divided according to the provision in the Tax Act. This means that businesses must first determine the total amount of input tax they are entitled to deduct based on the specific provisions outlined in the Tax Act. Once this division has been made, the turnover-based calculation method can be used to determine the deductible portion of input tax on common costs in the mixed activity.
The Supreme Administrative Court’s ruling has clarified that the division of input tax for both economic and non-economic activities is not affected by the VAT directive. The VAT directive, which is a European Union regulation, does not have specific provisions for this division. Therefore, the ruling by the Supreme Administrative Court cannot have a direct effect on the VAT directive.
However, there are situations where the ruling can still affect the deductible input tax in cases of division for non-economic or private use. This means that if a taxable person uses a purchase for non-economic or private purposes, the ruling may impact their ability to claim deductions on the input tax related to that purchase.
It is important for businesses to understand the implications of this ruling and ensure that they are in compliance with the division of input tax regulations. Failure to do so could result in penalties or additional tax liabilities.
In conclusion, the recent ruling by the Supreme Administrative Court in Sweden has clarified the division of input tax for both economic and non-economic activities. While the ruling does not directly affect the VAT directive, it does have implications for businesses operating in the country. It is crucial for businesses to understand and comply with the division of input tax regulations to avoid any potential penalties or additional tax liabilities.
Source: www4.skatteverket.se
