Swedish Supreme Administrative Court Rules on VAT Treatment of Coworking Services

In September 2020, Hannes Snellman’s tax experts Partner Heikki Vesikansa and Specialist Partner Piia Ahonen advised a taxpayer in the Finnish Supreme Administrative Court’s yearbook case outlining the VAT treatment of coworking services. In its two judgments issued on 4 February 2021, the Swedish Supreme Administrative Court has now also considered the question of how the provision of memberships that provide access to premises with activity-based workplaces (“coworking”) should be handled under Swedish VAT law.

In the two Swedish cases, customers were offered activity-based workplaces and additional services, such as a staffed reception, access to meeting rooms, coffee, cleaning, etc., based on their membership and subscription. The Swedish Central Tax Board had previously concluded that some of these memberships and subscriptions constitute a VAT-exempt lease of premises without full right to VAT deduction for purchases.

The Swedish Supreme Administrative Court stated that in cases where no guaranteed right to a workstation is offered, the conditions for constituting a VAT-exempt lease of premises are not met and the service is thus liable for VAT. Services that entitle the customer to a workstation are also deemed to be subject to VAT because the customer is regarded as requiring the right to the disposal of a workstation and other services. The Swedish Supreme Administrative Court considered that these two parts should be equated and that neither part is more important than the other. Since exemptions from tax liability must be interpreted restrictively, this service is also deemed to be liable for VAT in its entirety.

Thus, the Swedish Supreme Administrative Court does not share the Swedish Tax Agency's and Central Tax Board's assessment that it is the availability of a workstation that constitutes the main part of the services. It is thus set forth that the provision of activity-based workplaces is a VAT-liable service. In addition to providers of coworking services, the outcome of the ruling is particularly important also for construction companies. In fact, the interpretation as a VAT-liable service provides wider possibilities for service providers to deduct the VAT included in construction, renovation, and other similar services. As a result of the rulings of the Swedish Supreme Administrative Court, the interpretation concerning the tax treatment of coworking is now the same on both sides of the Gulf of Bothnia.

Hannes Snellman’s Tax team will be happy to help with any related questions.