The taxable amount for value added tax is comprised, as a main rule, by the consideration for a good or service. In the event the consideration paid is less than the open market value of the good or service, however, the taxable amount may, under certain circumstances, be set at the open market value (so-called revaluation). As a main rule, the open market value for a service is to be determined at the amount which the customer would have paid to an independent supplier. Where there is no comparable service on the open market, the open market value instead consists of an amount corresponding to the vendor’s cost for performing the service.
The question in the case was whether the taxable amount should be revalued in respect of services that a parent company had provided to its subsidiaries. The Swedish Tax Agency was of the opinion that the services should be regarded as a single complex supply for which there was no comparable service on the open market. The authority had therefore decided to revalue the taxable amount on the basis of the parent company’s costs, and in doing so had concluded that the taxable amount should be set at an amount corresponding to the company’s combined costs for the relevant year.
The Supreme Administrative Court decided to seek a preliminary ruling from the European Court of Justice. The European Court of Justice’s judgment states that the services in question did not constitute a sub-component of a single complex supply and that they could not therefore be regarded as unique on that basis.
The Swedish Tax Agency maintained its position that there were grounds for revaluation in accordance with the agency’s original decision, even if the services constitute separate supplies. However, the Supreme Administrative Court found that the investigation in the case did not provide sufficient support for this conclusion. Consequently, the Swedish Tax Agency’s decision on value added tax and tax surcharges was overturned.