All entrepreneurs dealing domestically in goods or services in a professional business activity are liable to pay VAT.
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The term 'dealing' refers to sale of goods, provision of services, exchanges and your own withdrawals from the business. VAT (Value Added Tax) is charged in every step of the production and distribution chain for products and services, up to and including sales to end consumers. In Sweden, VAT is referred to as "moms".
VAT is not an expense for you as an entrepreneur. Although you pay VAT on your purchases, you are entitled to deduct the same VAT. You pay the difference between the VAT you charge on your sales (output VAT) and the VAT you pay on your purchases (input VAT).
Registration of VAT
If you are planning to run a business that entails liability to pay VAT or gives the right to a refund of VAT, you should register for VAT with the Swedish Tax Agency no later than two weeks before the business is started.
VAT is rated at 25, 12 and 6 per cent
There are three tax rates for VAT.
- 25 per cent VAT is the general tax rate, which applies to most goods and services.
- 12 per cent VAT is charged on foodstuffs, hotels and artists' own sales of works of art, for example.
- 6 per cent VAT rate applies to newspapers, magazines, books, passenger transport (taxis, buses, flights and trains) in Sweden and concerts etc.
When you add VAT, you must add it to the total amount paid by the customer for goods or services, excluding any interest charged.
Deductions for input VAT
Deductions for input VAT are permitted if the purchases are necessary for the operations of the business.
VAT must appear on invoices and receipts
The company's invoices must show what percentage of the selling price is VAT. For input VAT to be deductible, the amount of VAT has to be shown on an invoice. You may not deduct VAT when you purchase certain items, such as passenger cars and motor cycles.
How do I report VAT?
If your annual turnover is less than SEK 1 million, you report VAT once a year in your VAT return. If your annual turnover exceeds SEK 1 million, you report VAT every three months in a VAT return. If the annual turnover exceeds SEK 40 million, you must report VAT every moth.
You may apply to report VAT more frequently than once a year or every third month. Thus if you exceed the limits (SEK 1 million and SEK 40 million) you may never report VAT more seldom than regulated.
When do I report VAT?
Those with an annual turnover not exceeding SEK 1 million and who do not voluntarily report VAT more often, shall once a year report VAT in a VAT return. You may apply to report VAT every third or every month if desired.
Sole traders and estates not trading with other countries and who gives an annual tax return may report their VAT once a year in a VAT return. You have to report your VAT return at the latest in may 12 th the year after the end of the income year.
Trading partnerships have to report their VAT return at the latest on the 26 th in the second moth after the end of the accounting period.
Other type of companies who gives VAT return for an income year and don't trade with other countries shall report VAT in accession of giving the annual tax return.
Date of reporting VAT is decided of the expiration of the financial year and if the report is given on paper or electronic.
For small business with an annual turnover not exceeding SEK 40 million the VAT return shall be reported every third month, at the latest on the 12 th in the second month after the end of the accounting period. The company may apply for monthly VAT return.
For business with an annual turnover exceeding SEK 40 million counts for monthly VAT returns. Reporting VAT returns at the latest on the 26 th in the month next to the accounting period.
Reverse VAT liability in the construction industry
When reverse VAT liability is applied, it is the purchaser and not the vendor that is obliged to report and pay VAT. A company which performs and sells construction services, more than on a temporary basis, must pay VAT for its sub-contractors. If the purchaser of the service is not a construction company, the vendor shall add VAT to the invoice. If the purchaser of the service is a construction company, the vendor shall not add VAT to the invoice. Instead, the purchaser will be responsible for reporting the output VAT.
Reverse VAT liability does not apply to sales which consist solely of materials.
Trade with other countries
You do not charge VAT when you sell and send goods to a VAT-registered purchaser in another EU country who quotes a valid VAT registration number. Instead, the purchaser reports the VAT in his own country. If the purchaser is not VAT-registered, you charge Swedish VAT. You do not charge VAT when exporting goods (selling to country outside EU), regardless of who the purchaser is.
Responsible: Swedish Agency for Economic and Regional Growth