What is VAT?

VAT, also known as value-added tax, is a tax applied to almost all types of sales of goods and services in Sweden. For private individuals, VAT is something they do not think about since it is included in the price. However, businesses, especially those that are VAT registered, need to be aware of VAT and how to handle it. All VAT-registered businesses must add VAT to their sales and report it to the Swedish Tax Agency.

VAT Registration

The requirement for VAT registration applies if you are a taxable person conducting economic activities. You must register for VAT if you can be taxed for VAT-liable income and purchases and run a business. This can also include small operations like hobby projects, as long as they "continuously provide goods or services for compensation."

In summary, most businesses need to apply for VAT registration. However, it’s important to note that there are exceptions to this requirement:

• Businesses with low turnover

• Businesses engaged in VAT-exempt activities

VAT Exemption due to Low Turnover

Businesses conducting economic activities with sales not exceeding 80,000 SEK (excluding VAT) per fiscal year do not need to be VAT registered. Sales must also not have exceeded this amount during the past two fiscal years.

VAT exemption for businesses with low turnover is voluntary. The advantage of VAT exemption is that the business owner does not need to add VAT to sales, report and pay it to the Swedish Tax Agency. The disadvantage is that no VAT is refunded on purchases made. This can be a bad deal for newly started businesses with large VAT-liable investments in the startup phase with low income.

VAT-Exempt Activities

Some businesses do not need to be VAT registered, regardless of their annual turnover, because their goods and services are exempt for VAT. Examples of such activities include banking, insurance, education and healthcare.

VAT Periods

How often VAT needs to be reported depends on the size of the annual turnover. Below are the turnover amounts and the periods businesses can choose to report VAT to the Swedish Tax Agency.

• Up to 1 million SEK | Fiscal year, calendar quarter, or calendar month

• Up to 40 million SEK | Calendar quarter or calendar month

• Over 40 million SEK | Calendar month

Thus, you can be VAT registered and choose to declare once a year, quarterly or monthly, depending on your annual turnover and the need for VAT reporting. It is important to follow the specified reporting periods and ensure that VAT and other taxes are paid on time to avoid interest and penalty fees.

Changing VAT Period

Businesses can choose to change how often VAT is reported, provided the turnover is within the limits in the table above. It is usually an easy process to apply for increasing the frequency of VAT reporting. On the other hand, it can be more restrictive to reduce the reporting frequency, as a request for this must be approved after 24 months.

The notification is made via the Swedish Tax Agency’s e-services (Verksamt.se) or via the form “SKV 4639 – Ändringsanmälan”.

Input & Output VAT

Input VAT is the VAT that the business pays when purchasing goods and services. This VAT is later refunded by the Swedish Tax Agency and does not constitute a cost for the business.

Output VAT is the VAT that the business adds to the sales amount when selling its products or services to customers. This VAT is paid by the customer, which is then reported and paid by the business to the Swedish Tax Agency.

If the total output VAT is more than the total input VAT, the business must pay the difference to the Swedish Tax Agency. If the total input VAT is more than the total output VAT, the business receives the difference back from the Swedish Tax Agency.