Administrative Court Rules Full VAT Deduction for Company, Tax Agency to Appeal Decision

• The Administrative Court of Appeal has decided that the right to deduct VAT should not be limited, allowing the company to deduct all input tax.
• The court believes that even though only actively managed subsidiaries are invoiced for services, all subsidiaries bear the holding company’s costs according to the group’s transfer pricing model.
• The Tax Agency’s method for allocation is considered not to account for economic conditions and does not reflect which part of the input tax may pertain to non-economic activities.
• The court finds no basis for making an allocation in relation to non-economic activities.
• The tax-exempt share sale should not affect the deduction size, as the costs are not directly and immediately related to the disposal of shares in the subsidiary.
• The Tax Agency disagrees with the court’s assessment and will appeal the decision to the Supreme Administrative Court.
• The Tax Agency believes that passive holding of subsidiary shares constitutes a non-economic activity and that an allocation of input tax should be made when there is both active and passive management.
• The Tax Agency argues that the profit benefits the entire group and that an allocation of input tax should therefore be made.
• The Tax Agency contends that the court has drawn incorrect conclusions from previous cases (HFD 2017 ref. 20 and HFD 2023 ref. 41).

Source: www4.skatteverket.se

Note that this post was (partially) written with the help of AI. It is always useful to review the original source material, and where needed to obtain (local) advice from a specialist.

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