Following a recent decision by the Swedish Supreme Administrative Court (SAC) and updated guidance from the Swedish Tax Agency (STA), the scope of the Swedish transfer of a going concern provision has been reduced. This development is likely to affect how companies approach restructurings and business transfers.
Under the Swedish VAT Act (Mervärdesskattelagen), a transfer of a going concern (the sale or transfer of a business as a continuing operation, or TOGC) can be exempt from VAT if certain criteria are met. According to the wording of the provision, it is only applicable if the recipient of assets would have been entitled to deduct input VAT. Historically, this provision has enabled VAT-neutral restructurings and business transfers.
The Supreme Administrative Court’s decision
On June 5 2025, the SAC delivered its decision in case HFD 2025 ref. 32, addressing the interpretation of the Swedish TOGC rules. The case concerned a company conducting VAT-exempt insurance mediation activities that intended to transfer its business to a wholly owned subsidiary.
The central question was whether the transfer of assets to the subsidiary fell within the scope of the TOGC provisions under Swedish VAT law when neither the transferor nor the transferee was entitled to deduct input VAT. Both the STA and the insurance company argued that the TOGC provision should apply to the transfer.
The SAC held that the TOGC provision should be interpreted in accordance with its wording, meaning that it applies only where the recipient of the assets would have been entitled to deduct input VAT or claim a refund if VAT had been charged on the transfer. In this case, the recipient of the assets was not entitled to deduct input VAT as its activities were VAT exempt.
The SAC reasoned that applying the TOGC provision in such circumstances could result in a competitive advantage for the recipient compared with other operators engaged in similar VAT-exempt activities, which would otherwise incur irrecoverable VAT on asset acquisitions. This, the court found, would distort competition by allowing some businesses to avoid VAT costs that others must bear and potentially pass on to their customers.
Updated guidance from the Swedish Tax Agency
Following the SAC’s ruling, the STA revised its guidance on the application of the Swedish TOGC rules. According to the updated guidance, the TOGC provision now applies only if both the following criteria are met:
VAT would be chargeable on the transfer of any of the assets under the general provision of the Swedish VAT Act; and
The recipient of the assets is entitled to deduct input VAT on the acquisition.
If the purchaser lacks the right to deduct input VAT or has only a limited right to such deduction – for example, in cases of mixed activities – the TOGC provision will generally not apply.
KPMG’s commentary
In light of the SAC’s ruling and the STA’s updated guidance, the scope for VAT-neutral transfers of businesses or parts thereof has become significantly more limited. These changes will have consequences for companies planning restructurings, mergers, and internal reorganisations. More transactions will now be subject to VAT, particularly transfers involving VAT-exempt businesses, which will generally fall outside the scope of the TOGC provision and result in VAT costs.
Hence, even if it is a whole business that is transferred or merged, etc., taxable persons may have to assess the VAT treatment of each individual asset involved in a transfer to determine whether VAT should apply on the transfer of that asset.
Given this development, businesses must carefully assess the VAT implications of any planned restructurings and acquisitions in accordance with the revised application of the TOGC rule. Identifying the VAT status of all assets involved in transfers, as well as any potential costs, will be increasingly important.
