Date: 2022-12-13
Number: 8-2056104
1 Summary
In a VAT group, according to ch. 6 a. Section 2 first paragraph 1 of the Value Added Tax Act (1994:200), ML, includes taxable persons who are under the supervision of the Financial Supervisory Authority and who conduct financial activities exempt from tax liability. The Swedish Tax Agency considers that the legal text only provides room for the provision to be able to cover financial companies that are directly under the supervision of the Financial Supervisory Authority. It is thus not enough to be a taxable person who is only covered by a different obligation than that which applies to the person under supervision, e.g. reporting obligation.
2 Question
It appears from the preparatory work for ML that even a company that is only indirectly under the supervision of the Financial Supervisory Authority should be able to be such a taxable person that can be covered by ch. 6 a. Section 2 first paragraph 1 ML on the condition that it conducts tax-free financial activities. Furthermore, it appears that the indirect supervision refers to companies that are part of a banking group and that are subject to a special disclosure obligation according to the Banking Act.
Since the regulations on VAT groups were introduced in 1998, new regulations regarding the supervision of the Financial Supervisory Authority have been introduced. Furthermore, the Banking Operations Act has been repealed and replaced by the Act (2004:297) on banking and financing operations.
In this position statement, the Swedish Tax Agency states its view on how the provision in accordance with ch. 6 a. Section 2 first paragraph 1 ML must be interpreted and the meaning of the taxable person must be under the FI’s supervision in order to be included in a VAT group.
3 Applicable law, etc
3.1 The Value Added Tax Act and its preparatory work
A VAT group may only include
1. taxable persons who are under the supervision of the Financial Supervisory Authority and who conduct activities that do not entail tax liability because the turnover of services is exempt from tax liability with the support of ch. 3. Section 9 or 10, and
2. taxable persons with the main focus of providing taxable persons referred to in point 1 with goods or services
3. taxable persons who are commission companies and commission companies in such a commission relationship as referred to in ch. 36. the Income Tax Act (chapter 6 a, section 2, first paragraph ML).
In general, the financial companies are under the supervision of the Financial Supervisory Authority. This should also be the prerequisite for a financial company to be entitled to group registration. The Financial Supervisory Authority is a central administrative authority with the task of exercising supervision over financial markets, credit institutions and the individual insurance industry in accordance with what is stated in law or other constitution. The purpose of the group registration rules is that support services within a financial grouping should not be treated differently in terms of VAT than the support services produced within a financial company. Through the chosen delimitation, essentially only such business groups will be covered which conduct outward financial activities (prop. 1997/98:148, pages 35-37).
The licensing practice of the government and the Financial Supervisory Authority shows which activities in subsidiaries and affiliates are to be considered compatible with banking, insurance and securities activities. In a group where, for example, a bank is the parent company, the provisions on bank contagion in ch. 1 apply. Section 11 of the Banking Act also applies to the bank’s subsidiary, regardless of whether this is a credit institution or a general limited company. Also companies that are part of a banking group that are only indirectly under the supervision of the Financial Supervisory Authority through the obligation to provide information to the inspection as stipulated in ch. 1. § 11 of the Banking Act, should be considered to be covered by the proposed regulation, provided that they conduct tax-free financial activities (prop. 1997/98:148, page 69).
3.2 Provisions relating primarily to the supervision of the Financial Supervisory Authority
The Financial Supervisory Authority supervises credit institutions and foreign credit institutions that have established branches. For a credit institution, supervision includes that the business is run according to
1. this law,
2. other statutes that regulate the institute’s operations,
3. the institute’s articles of association, statutes or regulations, and
4. internal instructions that have their basis in statutes that regulate the institute’s operations.
The Financial Supervisory Authority also supervises that the credit institution’s owner and management meet the suitability requirements of this Act (Chapter 13 § 2 Act [2004:297] on banking and financing operations).
If a credit institution is part of a group, the other companies in the group must provide the Financial Supervisory Authority with the information about its activities and related circumstances that the inspection needs for its supervision of the institution (Chapter 13 § 5 Act [2004:297] on banking and financing operations ).
The Financial Supervisory Authority also has supervision according to other regulations such as e.g. Act (2007:528) on securities market and Act (2010:751) on payment services. Even in these regulations, there are provisions that specify which are covered by the Financial Supervisory Authority’s supervision and which are only covered by other obligations, e.g. obligation to provide information or right for the Financial Supervisory Authority to carry out investigations.
The Financial Supervisory Authority’s supervision is regulated by the Act (2014:968) on special supervision of credit institutions and securities companies which supplements the European Parliament’s and Council’s Regulation (EU) No. 575/2013 on supervisory requirements for credit institutions and investment companies and on amendments to Regulation (EU) No. 648/2012. Through the Act (2014:968) on special supervision of credit institutions and securities companies, two different directives have been incorporated into national law, the capital adequacy directive and the securities company directive. The Financial Supervisory Authority has also drawn up regulations to supplement these regulations.
4 Assessment
Except for companies that are part of a commission relationship according to ch. 36 the Income Tax Act, the following taxable persons can be included in a VAT group
- taxable persons who are under the supervision of the Financial Supervisory Authority and who conduct financial activities that are exempt from tax liability according to ch. 3 § 9 or 10 ML
- taxable persons whose main focus is to provide goods and services to such persons as specified in the first point.
Since the rules on VAT groups were introduced in Sweden, the rules regarding banking and financing companies and on the supervision of the Financial Supervisory Authority have been changed. The current rules are more detailed and are primarily based on directives developed within the EU.
The Tax Agency considers that ch. 6 a Section 2 first paragraph 1 ML is clear in that it states that the taxable person must be under the supervision of the Financial Supervisory Authority in order to be included in a value added tax group. The Swedish Tax Agency considers that the legal text only provides room for the provision to be able to cover financial companies that are directly under the supervision of the Financial Supervisory Authority. This means that the constitutional commentary from prop. 1997/98:148, page 69 from which it appears that even those who are indirectly under the supervision of the Financial Supervisory Authority can be covered by the provision not included in ch. 6 a. Section 2 first paragraph 1 ML. It is therefore not enough to be a taxable person who is only subject to a different obligation than that which applies to the person under supervision. Such other obligation can e.g.
Source: skatteverket.se
