Judgments in VAT cases

In two cases, the Supreme Administrative Court has tried if registration for VAT gave rise to a legitimate expectation of the right to deduct input tax. The Swedish Tax Agency had denied deductions to a holding company and a partnership, respectively, because the agency considered that the companies – despite being registered for VAT – for various reasons were not engaged in economic activity. The lower courts, however, allowed deductions and considered that it would be contrary to the said principles to refuse deductions on that basis. In the assessments, the lower courts had relied on the case HFD 2021 ref. 52. However, the Supreme Administrative Court noted that the circumstances in the present cases were different from those in that case. That case concerned a company that conducted its economic activity in accordance with what had been described when it was registered for VAT, but where the Swedish Tax Agency later changed its assessment of the activities. The case concerned a changed assessment of the factual circumstances that applied to the company in question. The decision to register the holding company in the present case had been based on conditions which were not met. The registration itself could not therefore have given the holding company reason to expect that the Swedish Tax Agency, upon closer examination, would consider that it was carrying out economic activity. The decision to register the partnership was based on the Swedish Tax Agency's assessment of the legal situation of the economic activity carried out by the partnership. The assessment was later changed due to clarifications from the European Court of Justice and the Supreme Administrative Court, which the Swedish Tax Agency expressed in a statement. After this, the partnership could not reasonably have expected the agency to continue to hold that it was carrying out economic activity. The principles of the protection of legitimate expectations and legal certainty therefore did not prevent the Swedish Tax Agency in any of the cases from denying the companies deductions for input VAT.