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VAT when buying services from other EU countries.

Posted on: 2016-09-10 16:20:20]

I run a company in Sweden that buys services (digital goods delivered digitally) over the Internet from a company that is registered in the United Arab Emirates and that business have a bank account in Cyprus which I send money to when I buy the products.

I have sent them my VAT number to the supplier.

The information I have received from them is that I should account it as "Purchase of services from EU country" because their bank account located in Cyprus, is that correct?

I wonder also how it is with the VAT on this, then I understand if I purchase goods digitally for 100 dollars then the VAT is as follows: 25 dollar input VAT, 25 dollar output VAT?

It means that when I sell the goods, I have to add 25% on the price as I do not get back, I must therefore sell the product for at least 125 USD to not loose money? Or can I deduct the input VAT in any way?

When I look at my accountings so it looks like I'm going to pay thousands in VAT and that I may not deduct any VAT when I sell the goods here in Sweden as a service?

Grateful for answers, continue to have a nice weekend!


We will try to guide you into the right direction.

Facts, circumstances and assumptions
We understand the situation as follows. A company established in Sweden ("SWco) purchases electronic services from a UAB company via the internet and pays the renumeration into a Cypriotic Bank account. Subsequently, SWco sells the goods to customers established in Sweden.

From an EU VAT perspective, the service is taxable in Sweden and the VAT due is levied from SWco by way of the reverse charge, i.e. SWco has to account for the VAT due and can deduct this VAT at the same time in the relating periodical VAT return. As a consequence, the electronic service is freed from any VAT.

The onward supply to Swedisch customers is taxable in Sweden and the Swedisch VAT due is levied from WSco. Whether the Swedisch customer has the right to deduct VAT depends on the nature of the client, i.e. a taxable person with the right to deduct VAT (such in contrast to privat persons/end users and taxable perons that perform VAT exempt activities).

Going forward
You questions indicate that you have very little to no knowledge about VAT (or doing business) and the area of electronic services is a mine field especially if you start selling to non Swedisch clients. Also, you have to be aware of all compliance regulations (filing VAT returns, invoice requirements, etc. etc.). We are not certain whether or not Sweden applies a registration threshold or has another way of supporting what we call small companies.

You may risk penalties and the levy of interest if you don't ensure the correct VAT treatment and reporting. You may wish to contact a local Swedisch administration or accountancy company to help you avoid doing things you may regret at a later stage.

We wish you all the best,

Kind regards,

Toon Hasselman


Answered by:
Toon Hasselman
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