Proposal for net sales threshold for VAT – of major significance for the non-profit sector

Today, a non-profit organisation or trust operating business activities which are subject to income tax is liable for VAT regardless of the amount of net sales. This implies that even organisations with very limited taxable business operations are to be registered for VAT and are to report VAT on their sales. The Tax Agency is now proposing exemption from VAT for those organisations with net sales less than SEK 30,000.

VAT registration and the obligation to report output and input VAT implies an administrative burden, both for the associations/trusts and for the Tax Agency. The Tax Agency has, therefore, proposed in a memorandum that exemption from VAT be granted for those organisations with net sales less than SEK 30,000.

This proposal implies that organisations with net sales from VAT liable business operations, which during one of the most recent two years had net sales less than SEK 30,000, can apply for exemption from VAT. In addition, the premise is that the organisation’s net sales will also not be in excess of SEK 30,000 in the current year. The organisations who are already registered for VAT must send in an application for exemption to the Tax Agency. Those who have received a decision on VAT exemption do not need to charge VAT on sales but neither do they have the right to deduct VAT on costs in the operations. For organisations who are not already registered for VAT, the exemption applies without the need to apply for or receive a decision. The proposal is intended to come into effect on 1 January 2017.

The proposal was recently distributed for consultation and the consulting parties are to have presented their statements on no later than 13 May 2016. The response should be positive, as many non-profit organisations with very limited VAT liable operations will no longer need to undertake the burdensome administration associated with VAT administration.