Swedish Tax Agency clarifies its view of VAT on factoring

In a new position statement, the Tax Agency specifies the circumstances in which factoring and invoice discounting comprise VAT liable operations and also addresses the manner in which interest income is to be treated in relation to other expenses.

The position statement states, amongst other things, the following. The various forms of receivables collection activities comprise such financial services as those aimed at realizing payment of an economic liability. According to the Tax Agency’s assessment, the collection of other entities’ invoiced receivables comprises a VAT liable service. Consequently, all services implying that one collects invoiced receivables on behalf of another entity are liable to VAT even if there is another purpose behind the transaction, for example, financing. As collection is to be seen as one, single provision of services, all compensation received for collection services is VAT liable even if the compensation in question is divided up into different payments and is referred to, for example, as interest.

When it comes to the amount of compensation incurring VAT, the Agency states that this is comprised of the difference between the invoice’s nominal amount and the amount paid. Otherwise, such compensation is comprised of a separately reported amount. The view of the taxation of these services is not affected by the circumstance that the invoices are purchased prior to, or after, maturity date when the purpose is to collect the invoiced receivables on behalf of the company selling the invoices.

Comments

In spite of the fact that the Tax Agency claims that its position statement comprises a clarification, it would appear to also be able to be seen to imply an adjusted view of the matter. This applies primarily to the view of collection work comprising one, single VAT liable service, even in relation to compensation referring to interest on the credit provided in acquiring the invoices. The Tax Agency believes that this is also to apply to interest on invoice discounting when there is a commitment to collect the receivables during the period during which the invoices are discounted. According to our understanding, the Tax Agency has uncertain legal support for this reclassification of the calculated interest incurred on the credit provided into compensation for VAT-liable services. This matter may need to be tested in the courts.