For multinational businesses engaged in cross-border trade, understanding VAT liability on imports is critical for ensuring compliance and managing financial risks. In Sweden, legal uncertainty surrounding import VAT has intensified, particularly in cases where customs regulations are breached. While recent rulings from the Swedish Supreme Administrative Court (Högsta Domstolen, or HFD) have provided guidance, discrepancies remain in how authorities apply these decisions. In several instances, the Swedish Customs Authority (Tullverket) has maintained positions that diverge from established case law, leading to prolonged legal disputes and increased compliance challenges for businesses.
This article examines key legal developments, the ongoing tensions between regulatory authorities, and the implications for international businesses navigating Sweden’s evolving VAT landscape.
Background: VAT and customs duties in Sweden
Under Swedish law, VAT is generally levied on imports alongside customs duties. The Swedish VAT Act (1994:200) and the new VAT Act (2023:200) stipulate that the party liable for customs duties is also responsible for VAT, unless the Swedish Tax Agency (Skatteverket) can make an independent assessment of the presence of a representative (ombud) with a power of attorney (POA).
A crucial issue in recent legal cases has been determining VAT liability when customs rules are breached. Ordinarily, the importer or declarant bears this responsibility. However, uncertainties arise when goods enter Sweden without proper declaration or customs procedures are misapplied.
The first issue companies face when a breach occurs in accordance with Article 79 of the Union Customs Code is that the Swedish Customs Authority appoints a customs debtor under Article 79(3). The ambiguity and unpredictability of these investigations arise from the broad discretion the authority has in appointing a customs debtor, as it may designate not only the importer but also other involved parties such as freight carriers or customs representatives. This often leads to legal disputes over the correct determination of customs liability, as parties with limited or no control over the import process may still be held responsible as customs debtors.
The second issue that is a consequence of the investigation into whom should be appointed customs debtor is whether the Swedish Tax Agency or the Swedish Customs Authority is the competent body to assess VAT liability.
Sweden applies a dual system for import VAT. The competent authority to levy VAT on imports is the Customs Authority. However, if the declarant is registered for VAT, the competent authority is the Tax Agency. The purpose of this dual system is to prevent liquidity constraints, as the right to recover VAT is exercised simultaneously with the reporting of import VAT.
Previously, the Customs Authority was considered the competent authority for VAT on imports when customs regulations were breached. However, under case law from the Supreme Administrative Court (HFD 2021 ref. 54 and 57), the Tax Agency can be the competent authority, provided that there is an identifiable declarant for the import.
Despite these rulings, the Customs Authority continues to argue in court that a declarant cannot exist and sometimes reject customs declarations when a customs debt arises due to breaches of customs requirements, maintaining that the Customs Authority should remain the competent authority.
Key precedents and their impact
Since the Tax Agency can be considered the competent authority, another conflict has emerged: whether the Tax Agency can independently assess whether the customs debtor acted as a representative.
The Tax Agency has maintained that in cases where breaches of customs regulations were established and the Tax Agency was the competent authority, a representative – as defined in the Swedish VAT Act – could not exist. As a result, the declarant (importer) with the right to recover VAT was prevented from reporting the import VAT and subsequently exercising the right to recover it. Instead, the customs debtor – for example, a customs broker or freight carrier – is liable to report the import VAT, with severe difficulties to argue for a right to recover the corresponding input VAT.
A pivotal case, HFD 2024 ref. 59, saw the Supreme Administrative Court rule against the Tax Agency’s position. The court found that a company could, in fact, act as a representative with a valid POA even when import regulations had been breached.
This ruling opens the possibility for importers to report import VAT and, provided the goods are used in a taxable business, recover it. This prevents parties involved in the import from being burdened with import VAT as customs debtors and reduces the risk of civil disputes.
Following HFD 2024 ref. 59, the Tax Agency has taken an active stance in interpreting VAT liability in cases of customs non-compliance and has announced plans to revise the agency’s guidance.
Ongoing legal uncertainty: key challenges
Despite recent rulings, Sweden’s VAT and customs framework continues to pose challenges for international businesses. The key issues include:
Ambiguity in customs liability – courts have taken differing stances on who should bear customs liability when customs breaches occur, leading to uncertainty regarding the potential financial burden of import VAT; and
The role of customs representatives – the latest ruling, in HFD 2024 ref. 59, provides some clarity, but questions remain regarding how customs brokers and freight carriers should navigate liability risks.
How should businesses respond?
This decision will likely have significant implications for international businesses and customs brokers. The outcome of the Tax Agency’s updated guidelines will shape how customs agents and other stakeholders manage risks. Given Sweden’s evolving VAT framework, businesses importing into Sweden should take proactive steps to mitigate risks, such as the following:
Ensure proper documentation for customs procedures – key questions to consider: Who is listed as the declarant? Who is contractually liable for VAT?
Maintain proactive and clear documentation – companies involved in Swedish imports should ensure that POA agreements and customs declarations are properly documented, to avoid unexpected VAT liabilities.
Monitor legal developments – with Swedish VAT and customs case law still evolving, staying informed about rulings that affect VAT liability is essential.
Key takeaways regarding VAT liability on imports to Sweden
The ongoing legal debate confirms that VAT liability on imports to Sweden remains a complex and evolving issue. International businesses must closely monitor these developments to ensure compliance and mitigate risks associated with shifting VAT responsibilities.
Sweden’s dual import VAT system presents both challenges and opportunities. While its primary purpose is to ease liquidity restraints on import VAT, the system can appear seamless to importers under normal circumstances in everyday business. However, errors or breaches in customs procedures can trigger lengthy disputes with the Customs Authority and, subsequently, the Tax Agency, as businesses attempt to mitigate import VAT becoming what many stakeholders perceive as a penalty rather than a tax on consumption.
To navigate these complexities, proactive documentation, well-defined processes, and clearly established roles for customs brokers remain essential for businesses operating as importers.
