The Supreme Administrative Court, HFD, has tried a question about deduction for input tax on costs in connection with the sale of shares in subsidiaries.
HFD has established that costs that have arisen in connection with the sale may have such a direct and immediate connection with the company’s overall economic activity that is required for the right to a deduction for input tax. The fact that the company’s operations consisted solely of providing taxable services to its Swedish subsidiaries and that the company thus had no business of its own besides participation in the administration had no significance for the assessment of the right to deduction.
The Swedish Tax Agency’s position “Right to deduct VAT on purchases in connection with the sale of shares in subsidiaries”, dated 19 December 2017, dnr 202 377722-17/111, does not comply with HFD’s ruling. Through the judgment, the position has been overplayed and should therefore not be applied.
The case has, however, been remanded to the Court of Appeal for consideration of whether the right to deduct should be limited taking into account, on the one hand, any non-economic activities that the company conducts as a passive holding company, and on the other hand the sale of shares exempt from tax liability.
According to the Swedish Tax Agency’s assessment, a holding company is not entitled to a full deduction for input tax on costs in connection with the sale of shares if the holding company conducts both active and passive management in relation to its subsidiaries. A distribution of the input tax must be made (see also the Tax Agency’s position “Holding company – right to deduct VAT” from 19 December 2017, dnr 202 377677-17/111).
The Tax Agency’s opinion is also that a holding company that sold shares in a subsidiary to which it provided taxable services for compensation (an active management) does not have full right to deduct the input tax on the costs because the company has a share sale exempt from tax liability. A distribution must be made taking into account the tax-free transaction.
If the holding company has sold shares in a subsidiary to which it has not provided any services for compensation (passive management), the deduction must not be limited due to the sale of shares (HFD 2017 ref. 20). The right to deduct, however, assumes that the costs have a direct and immediate connection with the company’s financial operations.
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.
