When distance sellers exceed the threshold of 320,000 Swedish krona (SEK), they must account for local VAT on distance sales to Swedish individuals.
However, sometimes distance sellers only realize they need to register and account for Swedish VAT long after the threshold has been exceeded, so they register retrospectively.
Historically, the Swedish Tax Agency considered the taxable amount to be the total remuneration received by the customer, and therefore charged output VAT at 25 percent of the total remuneration received.
The Tax Agency charged 25 percent VAT whether or not the registration was initiated by the distance seller itself or if the registration was initiated through an investigation by the tax authorities.
In the recent ruling from the Swedish Supreme Administrative Court, the court had to decide the amount on which to calculate the output VAT. The seller had invoiced sales of VATable services as VAT-exempt. Consequently, the seller had not reported any output VAT to the authorities, so they were retrospectively charged 25 percent VAT on the total remuneration received for the service.
In contrast to the Tax Agency, the court held that output VAT was to be deemed included in the total remuneration received from the customers, i.e. 20 percent1 of the remuneration received.
This judgment could be understood as applicable on distance sales that have been retrospectively subject to Swedish VAT as well. In that case distance sellers may be able to re-assess previous tax assessment decisions and argue that the Tax Agency should refund the difference between 25 percent and 20 percent VAT. Potential tax penalties, and debit interest, imposed by the Tax Agency may also be re-assessed.
1 20 percent = 25 percent/1.25