On July 3 2025, the Court of Justice of the European Union (CJEU) delivered its judgment in Case C-808/23, in which it explicitly rejects the Swedish Tax Agency’s (STA’s) application of the revaluation rules.
For a long time, the STA has revalued supplies between related parties where the recipient of the supplies is not in a full VAT recovery position.
The STA considers the active management of subsidiaries as a unique, coherent intragroup service with no free-market equivalent. This approach has led to an extensive and routine application of the revaluation rules (Article 80 of the VAT Directive, implemented in the Swedish VAT Act) with the consequence that Article 72(1) of the VAT Directive becomes null and void in Swedish legal practice.
Background to C-808/23
Högkullen is the parent company of a real estate management group and is actively involved in the management of its subsidiaries. On that basis, in 2016, Högkullen provided its subsidiaries with business management services, financial services, real estate management services, investment services, and IT and staff administration services.
Högkullen charged a price that was determined by applying the cost-plus method and consisted of an amount corresponding to the costs for providing the services and a mark-up. Hence, Högkullen regarded ‘shareholder’ costs – such as the costs of drawing up the annual accounts, auditing, and the general meeting, as well as the costs of raising capital – as general costs that have a direct and immediate link to its business as a whole. Those costs were therefore excluded from the calculation of the consideration for the business management services, as the costs were associated with a planned share issuance and a stock exchange listing.
The STA took the view that the services supplied by Högkullen to its subsidiaries had been charged at a price lower than the open market value. Since, according to the STA, there were no comparable services freely available on the market, the agency determined the taxable amount as the total amount of costs borne by Högkullen for 2016.
The judgment by the CJEU
The first question addressed to the CJEU was whether an intragroup service always constitutes a unique service where a comparable market value is lacking. The second question was how the market value should be determined if the cost of providing the service is to constitute the tax base.
The CJEU stated that the various services a holding company provides to its subsidiaries do not constitute a unique composite service. The CJEU considered that the services (business management, finance, property management, IT, and personnel administration) were not unique, as all these services were available on the market and could be acquired separately. Therefore, the market value for the various services should be determined based on a comparable price for each service.
Referring to the answer to the first question, the CJEU stated that it is not relevant to determine the market value based on the holding company’s costs for providing the services. Therefore, the second question was not answered.
KPMG’s commentary
For almost a decade, KPMG’s view has been that it is not compatible with the VAT Directive to apply the rules on revaluation in the way that the STA does. Unfortunately, the STA has been rather successful in applying revaluation both decisively and aggressively.
The CJEU judgment is a rejection of the STA’s standardised and routine application of the revaluation rules. The STA’s overtaxation of companies, through incorrect application of the VAT Directive and the Swedish VAT Act, may now come to an end. The revaluation rules should be applied restrictively and only in cases of tax evasion or tax avoidance.
The judgment highlights the importance of defining which services are provided within a group so that each service can be assigned a market value. For global groups, it also involves navigating the borderline between VAT and transfer pricing. This, in turn, raises the question of the benefit to the recipient and whether there is a connection between the acquisition and the recipient’s operations. The latter issue has been assessed by the CJEU in Case C-527/23 (Weatherford Atlas Gip).
Both cases emphasise the importance for groups to have a well-developed process for documenting intragroup services performed, both from a VAT and transfer pricing perspective.
