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VAT issues during the coronavirus pandemic
This is a summary of how companies' VAT can be affected by, for example, aid, donated products and suspended operations during the coronavirus pandemic.
Your company's VAT can be affected if the company has, for example, received donations or aid, lowered rent for tenants or donated hygiene products to hospitals. Here we present different cases that could affect your company's VAT.
Private business owners and part-owners of trading companies
Here you will find all appropriate information for you as a private business owner or part-owner of a trading company.
Have you taken loans or received aid and wonder how it affects your VAT?
Loans that you have taken due to COVID-19
Financial measures in the form of loans do not affect your right to deduct tax in your company. Examples of such loans are those from Almi.
Aid that you have received due to COVID-19
The government has taken several financial measures, including options for aid, to alleviate the financial consequences of the COVID-19 pandemic. The type of aid that your company receives will determine whether you charge VAT or not, and whether you have the right to deduct VAT or not.
Aid directly linked to the price
Have you received aid from someone other than your customer as a full or partial payment for a good or a service that is sold? That aid may be directly linked to the price, in which case it must be included in the compensation for the good or service. You must then charge VAT on the total compensation you have received, i.e. the compensation you received from the customer and the aid you received from another source.
Your right to a tax deduction is not affected if you receive aid directly linked to the price.
One example of aid that is directly linked to the price is the government aid paid out when certain tenants are given a reduced rent.
How should I invoice customers when aid is linked to the price?
If you are taxable on a voluntary basis for renting out premises and you receive a government aid for a reduction on rental costs, you should not issue an invoice to the government. You are only required to invoice your tenants. If the price has been agreed excluding VAT, the tenant must pay VAT on the aid if it is directly linked to the price.
What happens in the event of customer loss when there is aid linked to the price?
The legal guidance tab contains information about what happens in the event of customer loss when you have received aid directly linked to the price.
Aid which is not linked to a sales price or a quid pro quo
Your company can receive aid that is not linked to the price for a certain sale and which does not mean that you have a quid pro quo to the giver of the aid. In this case it is a so-called independent aid, such as a donation or other gift from private persons. You must not charge VAT on gifts. Your right to a tax deduction is not affected when you receive an independent aid.
An example of an independent aid is government aid to culture and sport as a result of the financial consequences of COVID-19.
Have you suspended operations (dormant company) due to COVID-19 and wonder how it affects VAT?
It may be that, as an entrepreneur during the current COVID-19 pandemic, you have suspended normal operations to accept employment or because you do not have any commissions. This may affect your VAT.
If operations are suspended
The concept of dormancy does not exist in Swedish tax legislation, i.e. it is not possible to report your company as dormant. However, you may be forced to suspend operations due to a temporary lack of sales. If you intend to continue operations at a later stage, i.e. not wind up your company, you must continue to be registered for VAT, and as long as you are registered for VAT you must submit a VAT report for each accounting period. This applies even if you do not have any VAT to report.
If you wind up the company
If you choose to wind up your company, you must cancel your registration for VAT. However, you must continue to be registered for VAT during the time you make VAT deductions, report withdrawals made or carry out obligatory adjustments. If you resume operations that are liable for VAT, you must register again.
If you change your operations
If, instead of winding up operations, you temporarily change them (such as starting a new type of operations) you must report this to the Tax Agency. You can use an e-service for this at verksamt.se.
If you do not have any sales in your company
If you suspend operations for a period of time and you do not have any sales in the company, you no longer have the right to deduct VAT.
However, you have the right to deduct VAT on certain costs related to taxable operations that you carried out. Examples of these are costs during the notice period for various subscriptions such as broadband or mobile phones and rental agreements for premises. However, you cannot deduct VAT on costs for subscriptions or agreements that you do not cancel.
If you take out goods from the company without paying
If you take out goods and/or stock from the company without paying for them, these are taxable. For example, you take a computer or other item for use at home. For it to be classified as a withdrawal, you must have previously deducted VAT on such goods and/or stock items that you withdraw.
Making a taxable withdrawal means that you must report output VAT on the withdrawal. The same applies for goods and/or stock that you transfer from operations liable for VAT to non-VAT operations.
Temporary customs duty and VAT exemption on the importation of goods to combat COVID-19
Exemption from customs duty has been introduced for a limited time period for certain goods imported to combat COVID-19, such as medical materials. This applies to imports on commission by one of the following organisations:
- government agencies
- public bodies
- other public bodies under public law (such as local government and municipalities)
- emergency aid organisations approved by Swedish Customs
- other charity or philanthropic organisations approved by Swedish Customs.
You can apply retroactively for such exemption for imports made between 30 January and 31 July 2020.
Apply for exemption from customs duty at Swedish Customs office to obtain exemption from VAT
If imported goods are exempt from customs duty under this regulation, they are also exempt from VAT. If your company is registered for VAT on imports, the Tax Agency will determine whether you can be exempt from VAT, but you must first apply to Swedish Customs for exemption from customs duty in order to be able to obtain exemption from VAT.
One condition is that the goods are intended to combat COVID-19. If you are granted exemption from customs duty on the import but you later decide not to use the goods for this purpose, you must contact Swedish Customs and report this fact. In most cases, you will then have to pay customs duty and VAT on the goods. Exceptions may apply.
Read more about conditions for exemption from customs duty and VAT at www.tullverket.se
VAT and renting out premises and hotel rooms during the COVID-19 pandemic
If premises that are rented out with voluntary tax liability are used in any other way than in the tenant's normal taxable operations, you must be ensure that the requirements for voluntary tax liability are still met, otherwise it could affect the right to tax deductions and obligatory adjustments.
Temporary renting for medical premises
Sports arenas or trade fair halls are examples of premises that may be rented out to regional government for exceptional purposes due to the COVID-19 pandemic, such as for medical purposes. If you have previously rented out such premises subject to voluntary tax liability, this is not normally affected if you make agreements for temporarily renting them to a region for medical purposes. Among other factors, this is because the nature and the scope for use of a sports arena or trade fair hall indicates that the premises will continue to be rented out for operations liable for VAT in the future.
If you conclude a temporary rental agreement with a new tenant, such as a real estate company, which in turn temporarily rents out the premises to the local government for medical purposes, you cannot be voluntarily liable for tax since the tenant's rental is not considered as permanent and is exempt from VAT. If your voluntary tax liability ceases temporarily, there may be an obligation to adjust your tax.
Rent-free months
Due to the COVID-19 pandemic you, as a landlord, may grant a tenant – such as a restaurant business – a certain rent-free period in order to retain the rental agreement. If you previously had voluntary tax liability for the rented premises this is not normally affected if you temporarily reduce the rent to SEK 0 for commercial reasons, provided that you intend to continue renting the premises with VAT liability.
Shorter-term rental agreements
If you usually rent out premises with voluntary tax liability, such as restaurant or retail premises, this is not normally affected if you temporarily rent out the premises on a short-term agreement to a tenant whose business is liable to pay VAT. This depends to some extent on the layout and location of the premises; if they are in a commercial area, this may indicate that the premises will continue to be used for VAT liable operations, regardless of the length of the rental agreement.
Vacant premises
If premises that have had voluntary tax liability are empty, the voluntary tax obligation does not normally cease until the premises are rented out for other categories than tenants with taxable business operations. This is the case if you start to rent the premises to a tenant not engaged in VAT liable operations.
Hotel rooms rented out for longer than usual
If you are in the hospitality sector, you may start to rent out hotel rooms for longer periods than usual due to the COVID-19 pandemic. The renting of rooms in the hospitality sector that is liable for VAT refers to renting accommodation at a daily or weekly price for a short period of time, i.e. not normally more than four months to the same tenant according to the Tax Agency. If during the COVID-19 pandemic you temporarily rent out hotel rooms for longer time periods, such rentals may continue to be liable for VAT. Such rentals normally continue to be liable for VAT if, for example, you were to rent out one or more rooms to the local government or municipality for evacuation accommodation from April to December 2020. Liability for VAT assumes that you then return to normal rental periods in your hotel operations. There is more information under Legal guidance on what is required for your rentals to continue to be liable for VAT in the case of long-term rentals.
If, on the other hand, you change to long-term rental of rooms on a permanent basis, this would fall into the category of housing rental exempted from VAT.
If rentals are changed from VAT liable to VAT exempt, the right to deduct input VAT is affected. In addition, you may be obliged to adjust your tax.
Renting out hotel rooms for purposes other than accommodation
If you are in the hospitality sector, you may temporarily start to rent out hotel rooms for purposes other than accommodation due to the COVID-19 pandemic. For example, if you rent a room to a tenant who is going to use the room as an office, this is normally exempt from VAT. For the rental to have voluntary tax liability, it must be on a long-term basis to a tenant with operations liable for VAT.
If your rental of hotel rooms is changed from liable to VAT to exempt from VAT, this affects your right to deduct input VAT. In addition, you may be obliged to adjust your tax.
Can I deduct VAT on office equipment purchased for employees to use at home?
Normally, you cannot deduct VAT on items for employees’ home use, because deductions are not allowed on purchases made for a permanent residence. This includes office equipment such as desks and chairs. However, different rules apply if you purchase office equipment for an employee to use only temporarily when working from home due to the COVID-19 pandemic. If the intention is to return the equipment to your company’s workplace after this temporary period, then the purchase is not considered to have been made for the employee’s permanent residence. In such cases, you may be entitled to deduct VAT. This applies provided that the purchase has been made for a VAT-liable operation.
Private business owners and part-owners of trading companies
Here you will find all appropriate information for you as a private business owner or part-owner of a trading company.
Have you taken loans or received aid and wonder how it affects your VAT?
Loans that you have taken due to COVID-19
Financial measures in the form of loans do not affect your right to deduct tax in your company. Examples of such loans are those from Almi.
Aid that you have received due to COVID-19
The government has taken several financial measures, including options for aid, to alleviate the financial consequences of the COVID-19 pandemic. The type of aid that your company receives will determine whether you charge VAT or not, and whether you have the right to deduct VAT or not.
Aid directly linked to the price
Have you received aid from someone other than your customer as a full or partial payment for a good or a service that is sold? That aid may be directly linked to the price, in which case it must be included in the compensation for the good or service. You must then charge VAT on the total compensation you have received, i.e. the compensation you received from the customer and the aid you received from another source.
Your right to a tax deduction is not affected if you receive aid directly linked to the price.
One example of aid that is directly linked to the price is the government aid paid out when certain tenants are given a reduced rent.
How should I invoice customers when aid is linked to the price?
If you are taxable on a voluntary basis for renting out premises and you receive a government aid for a reduction on rental costs, you should not issue an invoice to the government. You are only required to invoice your tenants. If the price has been agreed excluding VAT, the tenant must pay VAT on the aid if it is directly linked to the price.
What happens in the event of customer loss when there is aid linked to the price?
The legal guidance tab contains information about what happens in the event of customer loss when you have received aid directly linked to the price.
Aid which is not linked to a sales price or a quid pro quo
Your company can receive aid that is not linked to the price for a certain sale and which does not mean that you have a quid pro quo to the giver of the aid. In this case it is a so-called independent aid, such as a donation or other gift from private persons. You must not charge VAT on gifts. Your right to a tax deduction is not affected when you receive an independent aid.
An example of an independent aid is government aid to culture and sport as a result of the financial consequences of COVID-19.
Have you suspended operations (dormant company) due to COVID-19 and wonder how it affects VAT?
It may be that, as an entrepreneur during the current COVID-19 pandemic, you have suspended normal operations to accept employment or because you do not have any commissions. This may affect your VAT.
If operations are suspended
The concept of dormancy does not exist in Swedish tax legislation, i.e. it is not possible to report your company as dormant. However, you may be forced to suspend operations due to a temporary lack of sales. If you intend to continue operations at a later stage, i.e. not wind up your company, you must continue to be registered for VAT, and as long as you are registered for VAT you must submit a VAT report for each accounting period. This applies even if you do not have any VAT to report.
If you wind up the company
If you choose to wind up your company, you must cancel your registration for VAT. However, you must continue to be registered for VAT during the time you make VAT deductions, report withdrawals made or carry out obligatory adjustments. If you resume operations that are liable for VAT, you must register again.
If you change your operations
If, instead of winding up operations, you temporarily change them (such as starting a new type of operations) you must report this to the Tax Agency. You can use an e-service for this at verksamt.se.
If you do not have any sales in your company
If you suspend operations for a period of time and you do not have any sales in the company, you no longer have the right to deduct VAT.
However, you have the right to deduct VAT on certain costs related to taxable operations that you carried out. Examples of these are costs during the notice period for various subscriptions such as broadband or mobile phones and rental agreements for premises. However, you cannot deduct VAT on costs for subscriptions or agreements that you do not cancel.
If you take out goods from the company without paying
If you take out goods and/or stock from the company without paying for them, these are taxable. For example, you take a computer or other item for use at home. For it to be classified as a withdrawal, you must have previously deducted VAT on such goods and/or stock items that you withdraw.
Making a taxable withdrawal means that you must report output VAT on the withdrawal. The same applies for goods and/or stock that you transfer from operations liable for VAT to non-VAT operations.
Temporary customs duty and VAT exemption on the importation of goods to combat COVID-19
Exemption from customs duty has been introduced for a limited time period for certain goods imported to combat COVID-19, such as medical materials. This applies to imports on commission by one of the following organisations:
- government agencies
- public bodies
- other public bodies under public law (such as local government and municipalities)
- emergency aid organisations approved by Swedish Customs
- other charity or philanthropic organisations approved by Swedish Customs.
You can apply retroactively for such exemption for imports made between 30 January and 31 July 2020.
Apply for exemption from customs duty at Swedish Customs office to obtain exemption from VAT
If imported goods are exempt from customs duty under this regulation, they are also exempt from VAT. If your company is registered for VAT on imports, the Tax Agency will determine whether you can be exempt from VAT, but you must first apply to Swedish Customs for exemption from customs duty in order to be able to obtain exemption from VAT.
One condition is that the goods are intended to combat COVID-19. If you are granted exemption from customs duty on the import but you later decide not to use the goods for this purpose, you must contact Swedish Customs and report this fact. In most cases, you will then have to pay customs duty and VAT on the goods. Exceptions may apply.
Read more about conditions for exemption from customs duty and VAT at www.tullverket.se
VAT and renting out premises and hotel rooms during the COVID-19 pandemic
If premises that are rented out with voluntary tax liability are used in any other way than in the tenant's normal taxable operations, you must be ensure that the requirements for voluntary tax liability are still met, otherwise it could affect the right to tax deductions and obligatory adjustments.
Temporary renting for medical premises
Sports arenas or trade fair halls are examples of premises that may be rented out to regional government for exceptional purposes due to the COVID-19 pandemic, such as for medical purposes. If you have previously rented out such premises subject to voluntary tax liability, this is not normally affected if you make agreements for temporarily renting them to a region for medical purposes. Among other factors, this is because the nature and the scope for use of a sports arena or trade fair hall indicates that the premises will continue to be rented out for operations liable for VAT in the future.
If you conclude a temporary rental agreement with a new tenant, such as a real estate company, which in turn temporarily rents out the premises to the local government for medical purposes, you cannot be voluntarily liable for tax since the tenant's rental is not considered as permanent and is exempt from VAT. If your voluntary tax liability ceases temporarily, there may be an obligation to adjust your tax.
Rent-free months
Due to the COVID-19 pandemic you, as a landlord, may grant a tenant – such as a restaurant business – a certain rent-free period in order to retain the rental agreement. If you previously had voluntary tax liability for the rented premises this is not normally affected if you temporarily reduce the rent to SEK 0 for commercial reasons, provided that you intend to continue renting the premises with VAT liability.
Shorter-term rental agreements
If you usually rent out premises with voluntary tax liability, such as restaurant or retail premises, this is not normally affected if you temporarily rent out the premises on a short-term agreement to a tenant whose business is liable to pay VAT. This depends to some extent on the layout and location of the premises; if they are in a commercial area, this may indicate that the premises will continue to be used for VAT liable operations, regardless of the length of the rental agreement.
Vacant premises
If premises that have had voluntary tax liability are empty, the voluntary tax obligation does not normally cease until the premises are rented out for other categories than tenants with taxable business operations. This is the case if you start to rent the premises to a tenant not engaged in VAT liable operations.
Hotel rooms rented out for longer than usual
If you are in the hospitality sector, you may start to rent out hotel rooms for longer periods than usual due to the COVID-19 pandemic. The renting of rooms in the hospitality sector that is liable for VAT refers to renting accommodation at a daily or weekly price for a short period of time, i.e. not normally more than four months to the same tenant according to the Tax Agency. If during the COVID-19 pandemic you temporarily rent out hotel rooms for longer time periods, such rentals may continue to be liable for VAT. Such rentals normally continue to be liable for VAT if, for example, you were to rent out one or more rooms to the local government or municipality for evacuation accommodation from April to December 2020. Liability for VAT assumes that you then return to normal rental periods in your hotel operations. There is more information under Legal guidance on what is required for your rentals to continue to be liable for VAT in the case of long-term rentals.
If, on the other hand, you change to long-term rental of rooms on a permanent basis, this would fall into the category of housing rental exempted from VAT.
If rentals are changed from VAT liable to VAT exempt, the right to deduct input VAT is affected. In addition, you may be obliged to adjust your tax.
Renting out hotel rooms for purposes other than accommodation
If you are in the hospitality sector, you may temporarily start to rent out hotel rooms for purposes other than accommodation due to the COVID-19 pandemic. For example, if you rent a room to a tenant who is going to use the room as an office, this is normally exempt from VAT. For the rental to have voluntary tax liability, it must be on a long-term basis to a tenant with operations liable for VAT.
If your rental of hotel rooms is changed from liable to VAT to exempt from VAT, this affects your right to deduct input VAT. In addition, you may be obliged to adjust your tax.
Can I deduct VAT on office equipment purchased for employees to use at home?
Normally, you cannot deduct VAT on items for employees’ home use, because deductions are not allowed on purchases made for a permanent residence. This includes office equipment such as desks and chairs. However, different rules apply if you purchase office equipment for an employee to use only temporarily when working from home due to the COVID-19 pandemic. If the intention is to return the equipment to your company’s workplace after this temporary period, then the purchase is not considered to have been made for the employee’s permanent residence. In such cases, you may be entitled to deduct VAT. This applies provided that the purchase has been made for a VAT-liable operation.
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