Response to interpellation 2024/25:342 on internal VAT
Translated from Swedish by AI; the translation may contain errors. The Swedish text is the original.
Summary AI, written in advance
1 M argues that the government refrains from commenting in the EU Court because the Swedish legislation is identical to the EU directive and there is no reason to clarify the rule 1. 2 3 M emphasizes that they have not over-implemented but have done as well as possible for civil society 2 3. 3 M argues that the legislation is good and benefits Swedish civil society 3. 1 2 3 M considers that it is the interpretation of the new legislation that is being tested and that the government must follow the interpretation of EU law 1 2 3. 4 S hopes that the government continues to work on measures to ensure that civil society organizations do not need to pay internal VAT 4. 4 S considers it important that the promise to abolish internal VAT for associations is fulfilled 4. 5 M argues that civil society still plays a major role and that many have been active in voluntary associations 5. 5 M considers that it is about how the existing legislation should be interpreted by authorities and that the issue should be tested in a higher instance 5.
Written by AI in advance and may contain errors. The numbers lead to the speech a statement builds on; check against the text below.
Finansministern Elisabeth Svantesson (M)
Madam Speaker! Marie Olsson has asked me, partly on what grounds the Swedish government refrains from commenting on a question that is so fundamentally important for Swedish civil society, and partly whether I and the government intend to take any other measures to ensure that civil society organizations do not have to pay internal VAT.
The question is posed against the background that Sweden has had the opportunity to submit a written opinion in the Court of Justice of the European Union's case T-558/24. It concerns two questions from the Supreme Administrative Court regarding how the VAT Directive's provision on exemptions from tax liability for the provision of services within independent groups, so-called internal VAT, shall be interpreted.
The government's role regarding tax legislation is to submit proposals for rules which, if adopted by the Riksdag, become Swedish law. When a tax law has been adopted and entered into force, it is normally the Swedish Tax Agency (Skatteverket) that applies the law.
The Swedish rules on the so-called internal VAT were changed on 1 July 2023 to fully align Swedish legislation with the EU's VAT Directive. The legislation received a virtually identical wording to the corresponding rule in the directive. The purpose of the change was, among other things, to ensure that the Swedish rules are not applied more narrowly than the directive's rules when it comes to groups, associations, and other actors carrying out activities of general interest.
There is not particularly much case law from the Court of Justice of the European Union on how the exception should be interpreted. Therefore, the Supreme Administrative Court has now requested a preliminary ruling regarding whether the services in question are covered by the exception for internal services.
It occurs that Sweden expresses itself in cases concerning preliminary rulings from the Court of Justice of the European Union. An assessment is made on a case-by-case basis as to whether there is a need for the government to express itself. In the assessment, several factors must be considered, for example how the Swedish legislation is designed in relation to EU law and whether a Swedish authority is already a party to the case.
In this case, the question is not whether the Swedish legislation is compatible with EU law, but how EU law should be interpreted and applied. Since the Swedish legislation is already identical to the directive in question, the case also does not affect the possibility for Sweden to design the Swedish legislation in this area. There is therefore also no need to clarify the purpose of the specific Swedish rule.
What the government, from its role in the tax legislation, could comment on would therefore not add much to the case. Upon a collective assessment, the government has concluded that there are insufficient grounds to submit a statement in this case.
What potential measures may need to be taken in light of the Court of Justice of the European Union's future judgment is too early to comment on. Sweden is, however, obliged to follow EU law as it is interpreted by the Court of Justice of the European Union.
Marie Olsson (S)
Madam Speaker! I would like to thank the Minister for the answer to the interpellation.
At the end of April 2023, the Riksdag decided on a new VAT tax. In the decision, there was broad consensus in the Riksdag to simplify the provisions on VAT charged on cooperation within civil society organizations, what we call internal VAT.
Before that, civil society organizations had for many years fought for the internal VAT to be abolished. Millions and millions of kronor that could have gone to non-profit activities have instead gone back to the state treasury – all depending on whether an organization is one or several legal entities at the national, regional, and local level.
After the decision on the new VAT law in the Riksdag, the government stated that the issue would be resolved and that the internal VAT was abolished. But the joy among civil society organizations over the decision in the Riksdag was quite short-lived. After the decision, the Swedish Tax Agency announced that the legislation did not entail any change in how they would apply the VAT law. In short, the internal VAT would, according to the Swedish Tax Agency, remain in the form it had had until then.
It was a great disappointment for many voluntary forces who have long longed for a relief. The internal VAT costs civil society hundreds of millions a year and impairs the possibility of using the resources in the best way.
Non-profit organizations such as the sports movement, study associations, trade unions, employer organizations and religious communities are normally not liable for VAT. They are not VAT-registered and can also not make VAT deductions. They shall therefore, according to the Swedish Tax Agency, pay internal VAT but cannot deduct any VAT. The Swedish Tax Agency states that they interpret the law based on EU law as the Supreme Administrative Court has concluded. The new legislation has not changed the interpretation.
Madam Speaker! Of course, Sweden shall follow the directives that we agree upon within the EU. But Sweden may not always need to apply them in the strictest possible way. In Denmark, which in many ways resembles Sweden, there are no problems with the internal VAT for civil society organizations within the framework of the same EU directives. If it is possible in Denmark, it should be possible in Sweden. The political will exists, we know that. We have so far been in complete agreement on the abolition of the internal VAT.
The Minister states, among other things, in his response that it occurs that Sweden expresses itself in cases concerning preliminary rulings from the Court of Justice of the European Union and that an assessment is made on a case-by-case basis as to whether there is a need for the government to express itself.
Furthermore, the Minister answers that in the assessment there are several factors that must be considered, for example how the Swedish legislation is designed in relation to EU law and whether a Swedish authority is already a party to the case. In this case, a Swedish authority is a party to the case. It is the authority Skatteverket, which has interpreted the EU directive and the Swedish legislation in a way that is not compatible with the political will in this chamber.
The Minister replied that what the Swedish government could comment on would not add much to the objective and that there are insufficient grounds to submit a statement. My question then becomes how, after the decision in the Riksdag, the government could go out and say that the issue of the internal VAT was resolved and that the internal VAT was abolished. Why does the government not point out the problems to the Court of Justice of the European Union now when there is actually an opportunity to comment?
Finansministern Elisabeth Svantesson (M)
Madam Speaker! I thank Marie Olsson for an important question, which I know is of interest to many. We are more of an association country than many other countries. Civil society is strong and large and does great good. Therefore, the question is also important for us in the government. I will be very direct. I tried to be so even in the previous contribution.
The reason is that we made decisions on the legislation here in the chamber in the summer of 2023. Now it is a matter of interpreting the legislation. We are legislators, and now this is to be tested in the EU Court of Justice. In that case, it does not matter what Sweden as a legislator says. We have enacted law as we perceive the VAT directive. We have also ensured not to over-implement, but on the contrary, to do it as well as it can be done for Swedish civil society.
Now the review is being conducted, and it must decide who is right in this case. This will also apply to Denmark, for the rest. This will therefore be important to follow. But in this situation, when the law has just been enacted and the interpretation of the law is being tested, we did not feel it was reasonable to submit any particular opinion. It is the interpretation that is in focus now.
Marie Olsson (S)
Madam Speaker! Many organizations within civil society are in an extremely difficult financial situation. We can take the study associations as an example, as this question in the European Court of Justice concerns Vuxenskolan, which is a study association. The government has, on one hand, carried out major cuts to state grants, and on the other hand, has now refrained from commenting on a very important issue for these organizations. This is also occurring in a security situation where study associations and other organizations within civil society could play an extremely important role in the construction of and public education on crises and civil preparedness.
Folkbildningen and other organizations in civil society have a network of contacts out among the population across the entire country that the state, the regions, and the municipalities do not come close to. In this situation, we in Sweden have a government that chooses to significantly reduce the appropriations.
The case brought before the Court of Justice of the EU concerns the study association Vuxenskolan. Many civil society organizations have, just like Vuxenskolan, chosen to centralize certain functions in order to be able to work both cost-effectively and securely throughout the entire organization. This can involve a shared payroll function, financial management, or human resources function. That way of organizing operations often provides security for local associations where they do not have the possibility to build up that competence themselves.
It would also be problematic from a democratic point of view if the VAT legislation were to govern how civil society organizations organize themselves. In that case, it is not what is best and most effective for the organizations and their activities locally that gets to govern, but rather what is best from the perspective of the VAT legislation.
Madam Speaker! Most organizations in civil society are dependent on grants from the state, the regions or the municipalities. The idea then cannot be that we should increase the grants to those organizations so that, in the next step, they shall pay the money back to the state in the form of internal VAT.
The organizations that have organized themselves in such a way that the Swedish Tax Agency requires them to pay internal VAT are structured so that they have a central organization, regional organizations, and local organizations. They have different organization numbers but see themselves as an organization. I believe there are many more of us than Vuxenskolan who see Vuxenskolan as an organization – not as a mass of organizations.
Given all this, it is remarkable that the government chooses to refrain from commenting to the ECJ. One has the opportunity to comment but chooses to refrain. The case does indeed concern how EU law should be interpreted in this instance, but that should not prevent the government from commenting when one actually has the opportunity to do so, especially considering that there is total agreement on the issue here in the chamber.
A preliminary ruling from the ECJ before the 2026 decision is legally binding and is counted as a judgment. As soon as it is published, it becomes part of EU law. The outcome in just this case can therefore not only affect larger non-profit organizations in Sweden but also civil society in other EU countries. My question then becomes why the government cannot at least express its concern for how the interpretation that Skatteverket makes largely affects the economy for many organizations in civil society.
Finansministern Elisabeth Svantesson (M)
Madam Speaker! One can naturally have different opinions on when a state and a government should intervene or submit different types of documents. I believe this is important. The member – who sits on the Committee on Taxation, if I have understood the matter correctly – knows how, for example, the VAT directive works. Sweden implements legislation following decisions here. We ensured that we did not over-implement. I know that many parties in the Riksdag think that over-implementation is a very bad idea.
The Swedish Tax Agency has provided its view on the matter and made its interpretation, and now that view is being tested in the Court of Justice of the EU. It is therefore about the interpretation of new and amended legislation. I actually believe that the basic position would have been the same if some others had sat in government. Sweden rarely expresses itself on this type of case. In this case, when it so clearly concerns new legislation that is to be interpreted, we believe that there are insufficient grounds to do so. One can, of course, have different opinions on that matter.
Just as Marie Olsson says, it will be very interesting to follow this because it does not only affect Swedish association life but also civil society all around Europe – including the Danish one, of course. This is going to be an important issue. But when we receive the judgment or the statement, we will have to base it on that. If the ruling should not be in our favor, there is every reason to continue discussing the issue. The commission consists of people – at least 27 of them. It is a system that can, of course, be changed, but we believe that the legislation is good and fundamentally benefits Swedish civil society.
We all know that some associations grow and become very large. There is also a line drawn, according to the directive and the legislation, regarding the question of whether internal VAT is applicable or not.
Marie Olsson (S)
Madam Speaker! It is still the case that the government has the opportunity to comment to the Court of Justice of the EU. Therefore, I am somewhat surprised when the Minister does not consider that there is any reason to do so in such an important issue.
I note that the government does not consider itself to have any interest in expressing itself or in supporting the civil society organizations affected by the Swedish Tax Agency's interpretation. These are organizations that want to spend as much money as possible on activities for citizens all around our long country. These are organizations that have chosen to organize themselves to derive the greatest possible benefit for the citizens and for their members. I cannot emphasize enough how important their work is, has been, and will be in the future – but they may have to carry it out with less money than they could have had.
I also cannot overstate the importance of these organizations in the situation we find ourselves in in Sweden today.
I would have wished that the government saw the strength in Sweden as a country built on associations. In associations, many people throughout the country are given the opportunity to pursue their interests. They can receive popular education, personal development, and much more. Many of us have also received our democratic training in associations. It is of even greater importance today that we can continue to receive it.
I hope that this interpellation debate at least leads to the government continuing to work on finding other measures to ensure that civil society organizations do not have to pay internal VAT and fulfill the promise that was given that the internal VAT would be abolished. I also hope that the government understands how important the issue is for the economy of many organizations within civil society. It is important that the promise to abolish the internal VAT for associations is fulfilled. There is a unanimous will regarding this in the chamber.
Finansministern Elisabeth Svantesson (M)
Madam Speaker! When I am out speaking both in and outside the country, I often tell about the journey that Sweden made during a hundred years, from being one of the world's poorest countries to being one of the richest. There are many ingredients in this, so I will not spend many minutes on just that.
An important factor is precisely what the interpellator mentions, that is, Föreningssverige, with everything from the temperance movement to the free church movement and the labor movement. There are as many movements as one can imagine that flourished during a period. They have contributed enormously to Sweden's successes.
Furthermore, we realize that we do things together in Sweden. We have fairly flat organizations, and we can all contribute. And here, civil society still plays a major role. Even though Sweden looks different now, this is still a very important part. Many of us are or have been active in various ways in non-profit associations.
To conclude that the government does not care about civil society because we have not submitted a statement is to take it very far. It is fundamentally about how the legislation that is in place should be interpreted. And it is not the government that makes interpretations, but the authorities do. In this case, it is to be examined in a higher instance. I hope for a good outcome. It matters greatly for Sweden and for many other countries.
I thank the member for raising the issue. We can hope that in many ways we will get a good outcome.
Source: The Swedish Parliament. The speeches come from the open data of the Riksdag, translated into English by AI, which may contain errors.