Proposed threshold on net sales for VAT registration

The Tax Agency has proposed a threshold of net sales less than SEK 30,000. This proposal implies that companies with this limited amount of sales do not need to register or report output or input VAT.

Today, an entity undertaking VAT-liable operations is obliged to be registered for VAT and to report VAT from the first krona. This implies that businesses with a limited amount of net sales are obliged to register for VAT and are to report VAT on their sales. For this group of businesses and for the Tax Agency, this creates a mandatory, major administrative burden, and in many other countries there are thresholds in place placing a limit on when smaller companies are obliged to register and report VAT. The Tax Agency has now proposed, in a memorandum, that such a threshold on net sales also be introduced in Sweden. The Tax Agency has proposed a tax exemption for operations with net sales less than SEK 30,000.

For an entity which is not already registered for VAT, this exemption applies without application or a decision being issued by the Tax Agency. An entity which is currently registered for VAT and which meets the premises for the exemption must send in an application on tax exemption to the Tax Agency who will take a decision on the case. Exemption is to be granted if net sales during one of the most recent two years has not been in excess of SEK 30,000 and also when net sales will not exceed this limit in the current year. The entity who has received a decision on exemption does not need to charge VAT on its sales but neither does it have the right of deduction of VAT on costs incurred in the operations. The proposal is intended to come into effect on 1 January 2017.

If the proposal is implemented, this will imply that operations having only a very limited VAT-liable amount of net sales, for example, those providing electricity from own owned solar energy plants, can be exempt from VAT. Both the taxpayer and the Tax Agency will, in this manner, avoid the administration involved in VAT registration and VAT reporting. The proposal has been sent for consultation and the consultation parties are to have presented their statements on no later than 13 May 2016.