VAT exemption for organisations and companies with limited current sales

As previously reported upon, the Government has proposed the introduction of a threshold amount as regards the liability of VAT registration. This proposal has now been implemented and from and beginning 1 January 2017, companies with net sales of a maximum of SEK 30,000 can be exempt from VAT.

These regulations imply that organisations or companies established in Sweden, and which have sales within this country amounting to a maximum of SEK 30,000, no longer need to be registered for VAT. This exemption applies if the liability to pay VAT arises from 1 January 2017 or later. For sales for which VAT liability came into effect prior to this date, the old rules continue to apply. This implies, for example, that if a delivery of electricity took place prior to 1 January 2017, then, the old rules are in effect and the sale is liable for VAT.

Who can incur VAT exemption?

VAT exemption applies to entities having net sales in Sweden of less than SEK 30,000 during one income year. If you, on the other hand, know already at the beginning of a given income year, that net sales will exceed SEK 30,000, you cannot apply the rules on VAT exemption. Neither can you incur exemption if you are voluntarily liable for VAT for letting of premises, the sale of art or the sale and mediation of the sale of investments in gold. VAT exemption applies to all types of organisations and can, therefore, be of interest to, for example, non-profit organisations and trusts with limited VAT liable operations.

What does VAT exemption imply?

VAT exemption implies that you do not need to report output VAT on sales made within the country but also that you, as a major rule, do not have the right to deduct input VAT on expenses. VAT exemption is voluntary and you can always choose to register for VAT even if your net sales are not in excess of SEK 30,000.

Even if the sales in question are exempt from VAT, you can be obliged to be registered for VAT. This applies, for example, if you are to report VAT on the purchase of goods or services from another EU country or if you as the purchaser are required to report VAT on the purchase of construction/building services.

If you are VAT exempt, you are to include no VAT amounts on the invoices issued for your sales. Instead, you are to state that the sale in question is exempt from VAT according to the regulations regarding VAT exemption.

How is the threshold amount to be calculated?

The threshold amount for VAT exemption is SEK 30,000 (excluding VAT) and the amount is to be calculated on the basis of a 12 month period. The sales to be included in the calculation are VAT liable sales of goods and services taking place in Sweden, including value of withdrawal taxation.

How can one secure VAT exemption status?

If you are not registered for VAT today, you are automatically VAT exempt as long as your net sales do not exceed the threshold amount of SEK 30,000. If you are registered for VAT today but wish to be VAT exempt, an application for exemption is to be presented to the Tax Agency. A premise for VAT exemption is that net sales have not exceeded SEK 30,000 during the last two years. The Tax Agency decides on VAT exemption after receiving the application.

Remember that if you have made major investments and are then, subsequently, granted VAT exemption through an application and a decision by the Tax Agency, there could be a risk that the VAT on investments which has previously been deducted, will be required to be refunded through the adjustment procedure.

Voluntary VAT exemption

Even if net sales are less than SEK 30,000, you can choose not to apply the VAT exemption alternative. If you have been made exempt at an earlier point in time you can voluntarily apply for VAT liability, requesting that the exemption be annulled. Remember that if you choose to be VAT liable in spite of failing to exceed the threshold amount, you cannot apply the VAT exemption earlier than two full income years after the year in which you received the decision on voluntary tax liability.

Points to remember – PwC’s comments

• The regulations on VAT exemption imply that non-profit organisations, trusts and other business operators with very limited net sales can avoid the administration involved in VAT reporting.
• In certain cases, the obligation to register for VAT can exist in spite of the organisation or company having chosen to apply VAT exemption.
• With VAT exemption, no output VAT needs to be reported but one does not have the right to deduct input VAT on expenses.
• If the organisation or company, after having being registered for VAT, chooses to apply the exemption, one should ensure that no liability to refund previously deducted VAT via netting will arise.