The Supreme Administrative Court (Högsta förvaltningsdomstolen) issued a judgment holding that a value added tax (VAT) deduction was available with respect to consultancy costs arising from a corporate restructuring that concluded with the divestment of shares in a number of subsidiaries.
The taxpayer was engaged in forestry activities. In addition to this core business, the taxpayer group was also involved in other business sectors. In restructuring the business, certain business activities (including an insurance business) were disposed of by means of a divestment of shares in two subsidiaries. In completing these transactions, the taxpayer incurred costs with respect to various consultancy services (legal, financial, advisory and accounting services), and claimed a deduction for the input VAT with respect to these costs.
The court, in its May 2017 decision, granted the taxpayer’s claim for the VAT deduction. The court observed that in recent judgments, the Court of Justice for the European Union (CJEU) had looked to a functional approach, and that in the present case, the divestment of the companies had been aimed at streamlining operations by focusing on the forestry activities and in releasing capital to allow a focus on the remaining operations. The Swedish court thus found that the consultancy costs (legal, financial, advisory and accounting fees) had a direct and immediate link with the company's overall economic activity. Also, it was noted that these consultancy costs were not reflected in the price of the shares, but in the price of the company's products in the forestry business. The consultancy costs, thus, were viewed as general costs, and the VAT deductions were to be allowed for the amount of input VAT on these costs.
Read a May 2017 report (Swedish) prepared by the KPMG member firm in Sweden
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