When navigating the VAT landscape, some businesses can get by with a basic understanding of specific processes on a high level. However, more often than not, VAT-related methods require a deep understanding of the details, requirements, and rules that apply to your business. This can be tricky when the processes keep changing.
This week, we're bringing some transparency to a recent VAT shift in Sweden that may confuse the process of delivering and transporting goods. Here's what you need to know if you're providing goods and services with only one transport of an item out of the EU. Significant changes have occurred as of 1 July 2023, so let's cover the essentials.
VAT on multi-stage deliveries from Sweden
According to new rules, companies must adjust how they handle situations where goods are delivered in several steps but remain a part of a single transportation process. We'll get to what this looks like from a practical point of view. First, let's focus on the fundamentals.
Here are some of the most critical things to consider:
- Let’s assume your business delivers goods in several stages (on paper). However, in reality, there is only one transport from point A to the endpoint outside of the EU. In this case, businesses must attribute the transport to a specific stage of the delivery process. By pinpointing the transportation to a particular stage, companies can more accurately determine whether a delivery is classified as occurring within the country's borders for taxation purposes.
- According to the Swedish Tax authorities, the transportation is connected to the stage where the seller is located, who is responsible for arranging the transport out of the EU (the last point of contact within the EU).
- An exception to this rule applies when the purchaser is a taxable entity (and is responsible for the transportation) but is not physically located within this country. In such situations, the transportation should be associated with the transaction in which the non-resident taxable entity acts as the buyer.
What does being responsible for transport entail?
Being responsible for transportation means that you handle the process of moving goods. This can be done by hiring a shipping company or a third-party freight service to carry out the transportation out of the European Union (EU). Alternatively, you can also transport the goods from the EU by yourself.
What does this look like in practicality?
Let's look at a use case to help clear up the facts:
- A Swedish company, Company A, sells a product to Swedish company B, which further sells the product to Swedish company C, which in turn sells the product to a company based outside of the EU. Let’s say Switzerland.
- The goods travel directly from the Swedish company A's warehouse to the Swiss company with a single transport carrier.
- Swedish company B hires a forwarder to carry out the transport. This means that company B is responsible for the transport.
- The stage from Company B to Company C will be pinpointed as the transportation stage for tax purposes.
- The Swedish company A's delivery has taken place without transport and is made within the country because the goods are in Sweden when the delivery occurs. This delivery is taxable.
- The Swedish company B's delivery takes place by transport, and it is made within the country because the goods are in Sweden when the transport begins. This delivery constitutes such export that is subject to exemption from tax liability.
- The Swedish company C's delivery took place without transport and was made abroad because the goods were outside of Sweden when the delivery took place. The scope of VAT does not cover this delivery.
Fortunately, you don’t have to become an overnight expert to stay compliant. Contact the VAT IT team, and we’ll help answer your questions.