The state and the VAT provisions on reverse charge for the purchase of construction services per January 2022

1 Summary

The state is a single legal entity and constitutes a single tax subject. In the opinion of the Swedish Tax Agency, the state conducts economic activities to some extent and is therefore a taxable person. The state is also a taxable person who more than temporarily in its economic activity provides such construction services that are covered by the provisions on reverse charge. Reverse tax liability therefore applies when the state purchases such a construction service. This applies regardless of whether the purchase is made for the state’s economic or non-economic activities.

This position replaces the position “The state and the new rules on reverse charge to VAT when purchasing construction services” from 7 May 2007, no. 131 307716-07 / 111 . The position involves a changed assessment. Reverse tax liability for the purchase of construction services applies regardless of whether the purchase is made for the state’s economic activity or for the non-economic activity.

2 Question

In the Value Added Tax Act (1994: 200), ML, there are provisions on reverse charge in the construction sector. The provisions mean that certain buyers will be obliged to report outgoing tax when purchasing specially listed services (in the position referred to as construction services). In these cases, when the buyer is liable to tax, the seller shall not invoice and report any outgoing tax on his supply.

When a seller is to invoice for construction services, he must determine whether the buyer is such a taxable person for whom the provisions entail that reverse charge is to be applied.

Questions have arisen as to how the concept of taxable person should be interpreted in connection with the purchase of such goods and services that may be subject to reverse charge.

In this position, the Swedish Tax Agency gives its view on what applies with regard to reverse tax liability when the state purchases construction services.

3 Applicable law etc.

The state does not refer to state-owned enterprises (Chapter 1, Section 16 ML).

A taxable person means a person who, regardless of the place, independently carries out an economic activity, regardless of its purpose or results. Economic activity refers to any activity carried on by a producer, a trader or a service provider, including mining and agricultural activities as well as activities in the liberal and equivalent professions. Utilization of tangible or intangible assets for the purpose of continuously generating income shall in particular be considered as economic activity (Chapter 4, Section 1 ML, cf. Articles 9 and 10 of Council Directive 2006/112 / EC on a common system of value added tax, VAT Directive).

Activities carried out by the state, a state enterprise or a municipality are not economic activities if they are included as part of the exercise of authority or refer to evidence, minutes or the equivalent in such activities. This does not apply if it would lead to a significant distortion of competition (Chapter 4, Sections 6 and 7 ML, cf. Article 13 of the VAT Directive).

The person who acquires a service referred to in the second paragraph is liable to pay VAT (taxable) if he is

a taxable person who, in the course of his business, not only temporarily provides such services, or

another taxable person who provides such services to a taxable person referred to in the first indent (Chapter 1, Section 2, first subparagraph, point 4 b ML, cf. Article 199 (1) of the VAT Directive).

The services specified in the second paragraph of the section are

1. services relating to immovable property relating to earthworks, construction works, building installations, finishing of buildings or rental of construction machinery by driver;

2. building cleaning, and

3. hiring out of labor for such activities as are referred to in 1 and 2 (Chapter 1, Section 2, second paragraph ML).

The construction services must be sold within the country for taxation to take place in Sweden. I 5 kap. Sections 5 and 8 of the ML contain provisions on the country of sale of the construction services.

4 Assessment

The state is a single legal entity and as such constitutes a single tax subject. Government agencies are part of the legal entity state. State-owned companies and state-owned enterprises are special tax subjects and do not form part of the state.

A person who to some extent conducts an economic activity independently is a taxable person. In the opinion of the Swedish Tax Agency, the state conducts economic activities to some extent and is therefore a taxable person.

In order for the provisions on reverse charge in the purchase of construction services to be applicable, it is also required that the buyer in an economic activity more than temporarily provides construction services.

The assessment of whether reverse charge is to be applied in sales to the state may therefore be determined on the basis of whether the state is such a taxable person who more than temporarily in its economic activity provides construction services. In the Swedish Tax Agency’s view, e.g. The Swedish Transport Administration is a government agency that provides construction services not only temporarily. There is no requirement that the business must primarily be construction business in order for reverse charge to be applied. Reverse tax liability also applies when a taxable person in a ancillary business provides construction services. Even if only one or a few state authorities provide construction services more than temporarily, these supplies mean that the state as such is an acquirer covered by the provisions on reverse charge.

When a buyer is such a taxable person that the provisions on reverse charge become applicable, reverse charge applies even if the purchased construction service is not resold or if the purchased construction service is used for non-economic activities.

Since the state is such a taxable person who more than temporarily in its economic activity provides construction services, the state therefore becomes taxable for all purchases of such construction services that are covered by the regulations. Reverse tax liability thus applies even if the purchased construction service is to be used in the state’s executive activities.

This position replaces the position “The state and the new rules on reverse charge to VAT when purchasing construction services” from 7 May 2007, no. 131 307716-07 / 111. The position involves a changed assessment. Reverse tax liability for the purchase of construction services applies regardless of whether the purchase is made for the state’s economic activity or for the non-economic activity

Application information (no. 8-1284726)

The Swedish Tax Agency has reworked the previous position on the state and reverse tax liability for the purchase of construction services. The new position means a change in the agency’s previous view. Reverse tax liability for the purchase of construction services applies regardless of whether the purchase is made for the state’s economic activity or for the non-economic activity.

In light of the above, the new approach should not be applied to the Swedish Tax Agency’s initiative until 1 January 2022.