The Swedish Tax Agency decided to impose income and value added tax on an individual regarding an activity that consisted of supplying, in exchange for payment, test takers with the correct answers to the Swedish Scholastic Aptitude Test. The individual appealed the decision to the administrative court, which overturned the decision. As regards income tax, the administrative court justified its decision on the grounds that there was no cause to depart from the main rule pursuant to legal precedent according to which criminal activities are not taxable, and regarding value added tax that the activities did not compete with any legal alternatives.
The administrative court of appeal interpreted the case law differently and held that recent case law entails that criminal activities are to be assessed in the same manner as legal activities as regards issues of tax liability and the demarcation of income category. The administrative court of appeal therefore overturned the judgment of the administrative court in that respect which pertained to income tax and remanded the case to the administrative court for new proceedings. The administrative court of appeal affirmed the administrative court’s judgment in that respect which pertained to value added tax.
The Supreme Administrative Court found, with reference to previous case law, that the income from the activity should not be taxed in the business activity income category, since the proceeds of criminal offences generally are to be confiscated and the activity could therefore not be regarded as having a profit purpose. According to the Supreme Administrative Court, the fact that it is a question of income from criminal activities does not preclude taxation in the employment income category. Since the individual had asserted other objections to income taxation of the activity, the case was remanded to the administrative court for new proceedings in that respect.
As regards value added tax, the Supreme Administrative Court found, with reference to case law from the European Court of Justice, that the activity could not be deemed to possess such special characteristic by which all competition with a legal economic sector is precluded and that it therefore could not be exempted from liability for value added taxation. In this regard, too, the Supreme Administrative Court found that the case should be remanded to the administrative court for examination of the individual’s other objections to the decision of the Swedish Tax Agency.