Modernizing Taxation: Sweden's VAT Act Renewed

In the VAT landscape, change is no stranger. However, it often slips in under the radar, and before you know it, there's a new act or rule that you weren't previously aware of. Fortunately, we stay in the loop, so you don't have to. This week's spotlight is on Sweden and the latest changes to the VAT Act. Here's what you need to know.

Introducing a new VAT Act

As of 1 July 2023, a new VAT act was enacted in Sweden. The changes are created and implemented in a way that makes a more modern VAT law, designed in a way that is easy to understand and apply in today's business environment. In a nutshell, the previous VAT act (enacted in 1994) has been given a more modern language and adapted to the EU legislature, structure, and systematics. Ultimately, a fundamental aim was to align better and adjust Sweden's VAT law with the EU VAT directive in an easy-to-understand and implementable way.

So, what's the current VAT Act, and how does it apply to your business? Let's take a closer look.

In brief, the new act focuses on three fundamental goals: modernization, compliance with the EU VAT Directive and expanded VAT exemptions. Here’s how.

Changes to the VAT Act

One of the changes concerns exemptions from VAT on internal services within associations and organizations. According to the old law, services provided within independent groups of legal or natural persons carrying out general interest activities may be exempt from VAT. However, these services had to meet specific eligibility criteria, such as:

The group or the individuals involved aren't subject to VAT for their activities.
The services are needed directly to operate the business.
The payment for the services matches the person's share of the total cost of providing those services.
This rule only applies to services that aren't usually offered by anyone else outside of the group (the competition requirement).

The change in the new law revises the so-called 'competition requirement' to better comply with the EU VAT directive. The old wording was complex to understand, which caused roadblocks concerning the transparency around what is required to stay compliant. The new language now aims to better align with the parallel wording in the EU VAT directive.

In the previous version, services exchanged between associations and organizations within a group weren't eligible for VAT exemption if these services were also available commercially. The amendment aims to broaden the scope of VAT exemption, a positive shift for associations and organizations that typically have restricted VAT deduction rights.

Conquer a changing landscape with VAT IT as your compass

Keeping up with the latest changes and amendments to VAT acts can be challenging, especially when you’re plagued with the administrative burden of managing the entire VAT reclaim process by yourself. Why not knock out two problems with one swing?

Effortlessly manage the tricky VAT landscape and all your VAT needs in one centralized solution. Alternatively, if you’re just looking for more details on VAT in Sweden, we’ve got you covered!