Stop double taxation of VAT on apps!

The problem of double taxation of VAT on apps and other electronic services must be solved now! This is what IT&Telekomföretagen and a number of other organizations demand in a joint open letter to the Director General of the Swedish Tax Agency, Ingemar Hansson.

At the end of March this year, we requested answers from the Swedish Tax Agency to questions about VAT on mobile applications and other electronic services for all companies with similar activities as Stardoll. At a meeting in April, the Swedish Tax Agency stated that the exemption for Stardoll cannot be seen as guidance for other companies but is a pure exception for this company. We also did not get an understanding that the Swedish Tax Agency is also obliged under EU law to prevent double taxation in VAT. We are still waiting for a solution.

The problem is acute for companies in this sector. Our frequent contacts with member companies show that the problems are spreading and that many see moving their business abroad as the only option. This is an industry with highly mobile capital and young, well-educated people with their own brainpower as their main asset. The business is based on micro-transactions with very low margins. There is no room to cover double VAT debits. Sweden now runs the risk of losing the clustering of companies that is so important for continued development in innovative industries if we do not get a quick solution. Sweden cannot afford to lose a single such company, but this requires quick and clear decisions.

The problem has two parts. The first part concerns the question of which EU country is entitled to tax the transactions. Here, countries make different assessments. This issue will be raised in the EU VAT Committee and we hope for clear guidelines from there. However, an answer from the VAT Committee does not resolve the second part of the question, which concerns Sweden's responsibility to avoid double taxation in the VAT area.

In this context, it is important to remember that VAT is not a business tax but a consumption tax. Businesses are merely unpaid collectors for the state and should not be subject to VAT demands from several different Member States. The rules on VAT are harmonized within the EU and there should be no double taxation. The prohibition of double taxation is a prerequisite for the functioning of the internal market with free movement. It is a fundamental legal principle of the EU Treaty.

Of course, we are not asking Sweden to waive VAT requirements in all situations. However, we are asking Sweden to resolve these conflicts directly with other Member States and without affecting businesses. These are deficiencies in the handling of the legislation and businesses should not suffer as a result.

When the Swedish Tax Agency has to make a decision in a case where another Member State has already taxed the services in question, there is an obligation to comply with the EU Treaty and take into account the prohibition of double taxation. Deficiencies in the regulatory framework must be resolved between the countries and must not affect companies that would otherwise be eliminated or forced to relocate. We therefore believe that a solution already exists within the existing regulatory framework. In the attached annex, we develop the EU law arguments.

For businesses, it is not enough that a sub-issue will be discussed in the EU VAT Committee in a month's time. The industry now needs a quick and clear message that Sweden will eliminate VAT requirements that would lead to double taxation so that companies can continue to operate in Sweden. We are not asking for general exemptions for the industry, but argue that the Swedish Tax Agency, by applying basic legal principles, can achieve the desired result, to avoid double taxation.

IT & Telecom
Director Anne-Marie Fransson

Företagarna
tax expert Annika Fritsch

Computer games industry
spokesperson Per Strömbäck

Swedish Software Industry Association
CEO Peter Bergh

PROMISE
CEO Mikael Svelch

Confederation of Swedish Enterprise
tax expert Anna Sandberg Nilsson