Case: The significance of registration for a passive holding company’s right to deduction

The Administrative Court has examined a question regarding the significance of registration for the right to deduct input tax for a holding company’s expenses related to the management of subsidiary companies. The holding company had been providing services to the subsidiaries for over 3 years without charging for them.The Administrative Court believes that the Swedish Tax Agency cannot retrospectively deny the deduction of input tax for the purchases made by the holding company since the Tax Agency had registered the holding company for value-added tax.However, according to the Tax Agency’s view, registration cannot have such legal force as to grant someone the right to deduction when the right to deduction is linked to non-economic activities. The company had used the relevant acquisitions for non-economic passive activities, and regardless of registration, the EU Court of Justice has clarified that deductions should be denied if a parent company manages a subsidiary passively, i.e., without charging for the services provided.The Tax Agency has appealed the verdict to the Supreme Administrative Court, which has granted leave to appeal in the case. For further details, refer to the Tax Agency’s legal commentary on case KRNG, case numbers 599-601-22, regarding the significance of registration for the right to deduct input tax.

Source: www4.skatteverket.se

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