Buying services from abroad: reverse charge VAT explained

The invoice from Google, Adobe or your US hosting provider has no Swedish VAT on it. That isn’t a mistake. It means you have to work out the VAT yourself and report it on your own VAT return, the momsdeklaration. For most companies it costs nothing in the end, but the boxes have to be right.

The service counts as bought in Sweden

When one business buys a service from another, the main rule is that the service is taxed where the buyer is established. For your aktiebolag (AB, limited company) that means Sweden. The seller invoices without VAT and you become the one who reports Swedish VAT on the purchase. This is called omvänd betalningsskyldighet, reverse charge, and the Swedish Tax Agency explains it on its page about buying services from other EU countries.

For a seller inside the EU to invoice without VAT, it needs your VAT number. That is SE, your company registration number without the hyphen, and 01 at the end. A company with registration number 559999-9999 has SE559999999901. Add it to your account settings with every foreign supplier before the first invoice arrives.

Box 21 for the EU, box 22 for everywhere else

This is where most people slip. If you buy from a business in another EU country, you enter the amount excluding VAT in box 21. If you buy from outside the EU, for example the US, the UK or Norway, the amount goes in box 22. Property services, such as construction or office cleaning, have their own box, 24.

Then you calculate the output VAT and enter it in box 30, 31 or 32 depending on the rate. For almost every service you buy, software, ads, consultants and design, the rate is 25 percent and the box is 30. If the purchase is used in VAT-liable business, you deduct the same amount as input VAT in box 48, following the Tax Agency’s instructions for the VAT return.

One quarter with two foreign invoices

Say your company bought ads from an Irish company for 1,000 euros and server hosting from a US company for 200 dollars during the third quarter. Assume you convert at 11.00 kronor per euro and 10.00 kronor per dollar. These rates are made up for the example.

• Box 21: SEK 11,000 (the ads from Ireland)
• Box 22: SEK 2,000 (the server from the US)
• Box 30: SEK 3,250 (25 percent of SEK 13,000)
• Box 48: SEK 3,250, plus your other input VAT

The net effect is zero. You pay no extra VAT, but the Tax Agency can see that you bought services from abroad. In the books, most charts of accounts based on BAS use account 2614 for the calculated output VAT and 2645 for the calculated input VAT. Check which accounts your own chart has.

Which exchange rate to use

The amount has to be converted to Swedish kronor, but the Tax Agency’s pages on buying services don’t say exactly which day’s rate applies. They refer to the page on currency conversion, where the rates published by the Riksbank and the European Central Bank are the starting point. My advice is to use the rate for the invoice date or the date the service was performed, and then always do it the same way. Don’t use your card issuer’s rate for the VAT base just because it shows up on the statement.

Some services don’t follow the main rule

Restaurant meals, hotels and passenger transport, entry to trade fairs and concerts, and short-term car rental are taxed where they take place. The dinner at a conference in Berlin carries German VAT, and it doesn’t belong in box 21 at all. You can’t deduct that German VAT on your Swedish return.

The same goes when an EU seller has charged its own VAT because you never gave it a VAT number. Ask for a credit note and a new invoice without VAT. If that doesn’t work, the Tax Agency has an e-service for VAT refunds within the EU, and the deadline is 30 September the following year. Whether the other country will refund VAT the seller shouldn’t have charged is uncertain, so don’t count on it.

If your company’s business is VAT exempt

This is where it becomes a real cost. A company that buys services from abroad has to be VAT registered even if its business is VAT exempt, for example healthcare or some kinds of education. You then report output VAT in box 30 but can’t deduct it in box 48. A foreign consultant’s invoice of SEK 10,000 actually costs you SEK 12,500.

If you file quarterly, the VAT return for July to September is due by 12 November, according to the Tax Agency’s filing dates. Go through the quarter’s card statements now and pick out every foreign subscription. It’s usually the small monthly charges of 15 or 20 dollars that nobody thinks about, and they end up in box 48 with no box 21 or 22 entry, or not on the return at all.