VAT Deductions For Private Equity Investors Under The Microscope

In September 2025, the Supreme Administrative Court (SAC) issued a landmark decision KHO 2025:61, which partially revised the interpretative guidelines on the VAT deductibility of transaction costs, particularly in transactions led by private equity investors.

While the decision clarified certain principles, it is also problematic, imposing a strict burden of proof on companies regarding the allocation of costs. A particular risk for private equity investors is that transaction costs could be allocated to them retroactively, with no right to deduct VAT due to the nature of their business. In the absence of more precise guidance, companies cannot be certain they will have the right to deduct VAT without seeking a preliminary ruling, and retrospective adjustment carries a significant risk of tax penalties.