VAT recovery on acquisition costs clarified by the Swedish Supreme Administrative Court

A company acquired a group, which consisted of a holding company and its subsidiary. Only the latter was actively in business. In connection with the acquisition, the parent company received consulting services to assist with the transaction and claimed a right to recover the related VAT on the basis that it would provide management services to the acquired subsidiary.

The court held that the right to deduct VAT on services related to the acquisition of a subsidiary cannot be excluded solely on the basis that the acquirer did not provide services to the company it acquired (i.e. the holding company).

The court held that there was an objective link between the acquisition of the holding company and the supply of services to its subsidiary. It found that the costs in question had a direct and immediate link with the acquiring company's overall economic activity and thus constitute a cost component of the services provided to the subsidiary of the company it had acquired.

The court therefore held that the company could recover the input VAT on its acquisition costs.

key takeaway

This judgment broadens the scope of the recovery of VAT on acquisition costs. It is follows a trend set with the recent rulings presented by the court with respect to the right to deduct input VAT connected with the sale of subsidiaries. The cases highlight that the court has now adopted a purpose-based approach, as advocated by the European Court of Justice.

Link to document: See here