Renting out of VAT-exempt exhibition premises

The Administrative Court of Appeal believes that a property owner who is a sub-supplier to an exhibition arranger does not provide VAT liable exhibition services but, rather provides VAT exempt renting out of premises, and the Court denied the exhibition arranger deduction of input VAT.

Background

Mässkonsult AB, the Company, arranges exhibitions and sells specially combined exhibition services to exhibitors. In conjunction with an exhibition, the Company purchased services from Stockholmsmässan in the form of premises and associated basic security services, access to cloakrooms, cleaning services, heating, lighting, staffing of the information desk and security and fire protection inspection services. In addition, the Company also purchased supplementary services such as technical services, rental of furniture, carpets, etc. Stockholmsmässan invoiced these services in one package as exhibition services with 25 percent VAT.

The Swedish Tax Agency denied deduction of input VAT on that portion referring to the renting of premises, including associated services, and levied a tax surcharge. The Agency determined that the provision of premises was to be considered to comprise a VAT exempt provision of premises and not the provisoin of an exhibition service, as this did not pertain to a provision of services to the exhibitors, themselves. However, the VAT on the supplementary services was correctly debited and the Company was granted deduction of input VAT on these services.

Decision by the Administrative Court of Appeal

The Administrative Court of Appeal in Stockholm believes, as a first stage in the assessment, that the agreement in concern argues for the interpretation that this is two separate types of provision of services – provision of the premises including associated services and provision of the specially ordered supplementary services. These parts do not have a very close relationship and so it would not be strange to separate them.

The subsequent stage was to test the nature of the provision of services referring to the premises including associated services. The Court is of the opinion that the associated services are necessary if the Company is to be able to use the exhibition premises in the manner intended and that they, due to this reason, are to be seen to be subordinate to the actual premises. The provision of these servcies comprises, therefore, a VAT exempt provision of premises. The Court confirms the Tax Agency’s decision regarding denied deduction of input VAT and the tax surcharge.

Comments

The Administrative Court of Appeal’s decision implies that sub-suppliers’ provision of premises, etc. to an arranger of an exhibition on the basis of the actual conditions involved in the case, cannot, in its entirety, be considered to comprise a VAT-liable exhibition service. This decision impacts not only the purchaser of the services through denied right of deduction but also leads to the seller/property owner incurring limited right of deduction of input VAT on its purchases, such as investments in the premises.

The Administrative Court points out that the actual content of the parties’ agreement has major importance in assessing the taxation issue. The question is if the outcome would have been different if all of the services had been included as standard services. Feel free to contact us for a discussion on this matter.