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Increased possibility for VAT liable rental of collectively used areas

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PwC-skatteradgivning-House-1-solid_0001_maroon.pngThe Supreme Administrative Court (SAC) has determined that a property owner’s renting out of collectively used areas, in the context of health and special needs care, can be liable to VAT.

A real estate company applied for voluntary VAT liability during the construction of a building which was to be rented out to a municipality for use as a collective residence for individuals with special health care requirements. This application included spaces which would be used as a kitchen, meeting room, tv room, personnel areas, laundry room, cleaning equipment storage and garbage room, as well as a proportional share of the collective area comprised of a machinery room, storage and lobbies. The apartments of the individuals receiving care and the remaining portion of the collective areas were not included in the application.

The Tax Agency denied the application for voluntary VAT liability for the kitchen, meeting room, tv room and lobbies. The motivation for this was that these areas are not used exclusively by the personnel but also by the individuals receiving care and, therefore, comprise a part of their permanent residence, which cannot be included in voluntary VAT liability.

SAC concluded that the secondary spaces, in this case, the lobbies, cannot be covered by registration of voluntary VAT liability as they cannot be separately rented out. The kitchen, meeting room and tv room are, however, not secondary spaces, but comprise rentable space which, in principle, can be used in a number of different operations at the same time. SAC is of the opinion that it needs to be tested as to whether the spaces in the specific case at hand are to be used in one or a number of economic activities.

The apartments of the individuals receiving care contain all of the usual facilities for an apartment found in an ordinary apartment building. The common spaces do not, therefore, comprise a supplement to the apartments. In the common spaces, extensive care work is undertaken by the personnel, a number of whom are always present. As a consequence, and everything considered, SAC found that the kitchen, meeting room and tv room were to be seen to comprise space for the municipality’s care operations and that they could, therefore, incur voluntary VAT liability.

Comments

The Tax Agency´s opinion is that the collective spaces cannot incur voluntary VAT liability regardless of how they are, actually, used. The SAC decision gives rise to the possibility of property owners including collective areas in a voluntary VAT liability when, for example, they rent out the space as collective housing to the municipality. For the property owner, this implies that a major portion of the rent is VAT liable. Consequently, the property owner can deduct VAT on both investments, as well as on the ongoing operating costs referring to the collective, rentable areas.

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Lena Josefsson, Christina Grape and Sarah Ammar

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Sara Lörenskog

Sara Lörenskog

Sara Lörenskog arbetar med momsrådgivning på avdelningen för indirekta skatter på PwC:s kontor i Stockholm. Sara jobbar i huvudsak med rådgivning till internationellt verksamma företag bland annat i samband omstruktureringar och internationell handel.
010-213 35 56
Sara Lörenskog is a VAT advisor at indirect taxes department at PwC’s office in Stockholm. Sara mainly acts as an advisor to internationally active companies undergoing restructuring processes and trading internationally.
+46 10 213 35 56

Jesper Öberg

Jesper Öberg

Jesper Öberg arbetar på PwC i Stockholm med indirekt skatt och är specialiserad inom den finansiella sektorn. Jesper är doktor i finansrätt och har lång erfarenhet av att arbeta med momsfrågor för finans- och försäkringssektorn. Jesper är också en flitigt anlitad föreläsare i moms och medförfattare till flera böcker på moms- och EU-skatterättsområdet.
Kontakt: 010-212 95 53, jesper.oberg@pwc.com
Jesper Öberg works with indirect taxation at PwC in Stockholm and specialises in the financial sector. Jesper is a Doctor of Financial Law and has extensive experience of working with VAT issues for the financial and insurance sectors. Jesper is also a popular lecturer on VAT and co-author of a number of books on VAT and EU tax law.
+46 10 212 95 53
@ pwc.com">jesper.oberg@pwc.com
Jesper Öberg works with indirect taxation at PwC in Stockholm and specialises in the financial sector. Jesper is a Doctor of Financial Law and has extensive experience of working with VAT issues for the financial and insurance sectors. Jesper is also a popular lecturer on VAT and co-author of a number of books on VAT and EU tax law.
+46 10 212 95 53

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