The supply of goods and services is, as a starting point, subject to VAT. However, a transfer of assets in conjunction with a transfer of the business is not regarded as a supply of goods or services. According to the Value Added Tax Act, this only applies provided that the tax would be deductible for the recipient or the recipient would be entitled to a refund of the tax.
A company operating in insurance brokerage applied for an advance ruling to learn whether a transfer of the business to its own subsidiary fulfils the conditions to not be deemed as a supply of goods or services.
The Board for Advance Tax Rulings concluded that the provision regarding business transfers cannot be applied since the subsidiary would not have been entitled to deduct the input tax. The question before the Supreme Administrative Court was whether the Swedish requirement regarding the recipient’s right to deduction or refund exceeds what is permitted under EU law in a situation where neither the transferor nor the recipient have the right to deduct input VAT.
According to the VAT Directive, Member States may take the measures necessary to prevent distortion of competition. The Supreme Administrative Court found that the Swedish requirement may be justified on the grounds of this purpose and therefore does not contravene the VAT Directive. The Supreme Administrative Court affirmed the advance ruling of the Board for Advance Tax Rulings.