ARTICLE · 23 OCTOBER 2026

Amended Rules On Allocation Of Deductible VAT

Schjodt

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The Swedish government has proposed significant changes to VAT deduction rules for mixed businesses, shifting from a "reasonable grounds" approach to a turnover-based allocation key for input VAT on joint costs. Following Supreme Administrative Court rulings that recognized taxpayers' rights under the VAT Directive, the new framework introduces specific calculation methods for different business scenarios, including area-based allocation for buildings and special provisions for financial activities.

SwedenTax

Ebba Perman Borg

Victor Elovsson

The Swedish Ministry of Finance published a memo in December 2025 proposing that the allocation key for deductible input VAT in mixed businesses shall be based on turnover. On 11 June 2026, the government moved the proposal forward by presenting its referral to the Swedish Council on Legislation regarding amendments to the Swedish VAT Act (2023:200). See the referral here.

Currently, the main rule is that input VAT on joint costs in mixed businesses, i.e., businesses containing VAT liable transactions as well as VAT exempt transactions, is deductible based on reasonable grounds. The Swedish Supreme Administrative Court (“HFD”) has however held, with reference to the direct effect of the VAT Directive, that a taxable person cannot be denied the option to calculate the deductible proportion based on turnover (HFD 2023 ref. 45 and HFD 2024 not. 41, both cases previously reported on by Schjødt).

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