When a good or service is acquired for use in a business that entails tax liability, there is normally a right to deduct input tax on the acquisition. On the other hand, there is no right to deduct input tax to the extent that the acquisition relates to permanent housing .
It is clear from case law that the prohibition on deductions for permanent residence must be perceived as a standard rule (see, for example, RÅ 2003 ref. 100 I and II ). It is not only housing in the form of private consumption that is meant. The prohibition on deductions may also cover acquisitions used in an activity that entails tax liability.
However, the right to deduct may exist in some cases even if the building has the character of a permanent residence. This applies if a building or building part with a residential character has been adapted for activities that entail tax liability and this part is clearly separated from the residential part. A condition for the right to deduct is also that the building or part of the building is used exclusively for the business. However, in the case of a building that has the character of residential for private use, certain purchases, e.g. electricity or heating, which is related to the building’s function as a private dwelling is normally attributed to permanent dwelling.
A photovoltaic system is an asset used to produce electricity. All electricity produced or only surplus electricity can be sold to an electricity trading company. The electricity can also be delivered to one or more buildings for sale to e.g. tenants. The electricity can also be used in a separate economic activity in the building or as a complement to the operation of the building itself, e.g. for lighting in stairwells and electricity supply in a laundry room.
The Swedish Tax Agency considers that a photovoltaic system that has been installed on the outside of a building that constitutes a permanent home and that to some extent produces electricity that is used for the permanent home cannot as such be considered part of the permanent home (compare HFD 2019 ref. 50 ). What then governs the right to deduct input tax on the acquisition and installation of such a plant is what the self-produced electricity will be used for. The same applies to the right to deduct input tax on costs for repairs, operation and maintenance of the facility.
This means that the right to deduct input tax exists for the part of the above-mentioned costs that corresponds to the use for, among other things:
- Production of electricity for taxable sales to e.g. an electricity trading company, tenants or tenant-owners.
- Production of electricity for use in business premises, either premises in own business or premises that are rented out with so-called voluntary tax liability. If the premises are used in own operations, there is a right to deduct to the extent that the operations are taxable.
There is no right to deduct input tax for the part of the costs for the purchase and installation of the facility that corresponds to the use for permanent housing. There is therefore no right to deduct for, among other things:
- Production of electricity for delivery of electricity to tenants and tenant-owners where the electricity is included in the VAT-free rent or fee for the home.
- Production of electricity for use in the operation of the residential building itself.
- Production of electricity for use in business premises in a residential building that is not clearly separated from the living spaces and specially adapted for the business. Even if the business premises are clearly separated from the living spaces in a building that has the character of housing for private use, e.g. a villa, there is no right to deduct if the supply of electricity to the premises can not be separated from the delivery to the living spaces, e.g. through a separate meter in the premises.
As the actual use is not known at the time of acquisition, a distribution must be made on a reasonable basis. The reasonableness assessment must be made on the basis of the acquisition’s use. A distribution of input tax should therefore, in the opinion of the Swedish Tax Agency, normally be made on an annual basis based on what the electricity produced in the plant is to be used for.
Source: skatteverket.se
