When it comes to reclaiming VAT, the waters can often feel murky, especially when those services are tied to strategic changes like a future sale. But a recent decision by the Swedish Supreme Administrative Court has brought some much-needed clarity.
On 26 May 2025, the Court ruled in favour of OneMed Sverige AB in a case that tested the deductibility of consultancy and the question regarding costs connected to a future sale and whether these should be attributed to the operation of the company or the sale of shares. The decision marks a significant win for Swedish businesses and sets a reassuring precedent for companies across Europe dealing with similar questions.
If your business is investing in cost optimisation or operational improvements, particularly in the context of a potential sale or restructuring, this ruling is worth your attention.
The Case: Consultancy Services, a Potential Sale & a Tax Dispute
Consultancy services were incurred by OneMed Sverige AB’s parent company. There services were for the improvement of OneMed Sverige AB’s operations and profitability prior to the divestment of the group. Once the parent company had divested in OneMed Sverige AB, they re-invoiced these consultancy expenses to OneMed Sverige AB. . These services focused on cost reduction strategies and operational efficiencies, part of a broader initiative to optimise business performance ahead of the potential sale.
The Swedish Tax Agency (STA), however, took issue with the VAT deduction. They argued that these consultancy costs were directly linked to the sale process, and therefore not deductible for either income tax or VAT purposes. Lower courts agreed.
Their reasoning? Since the services were initiated by the parent company and related to a potential sale, they were not considered ordinary operating costs for OneMed itself, but rather the parent company’s cost for the disposal
But OneMed disagreed and escalated the case.
The Ruling: Supreme Administrative Court Sides with OneMed
The Supreme Administrative Court took a more pragmatic approach. While the services were indeed initiated in the context of a possible sale, the Court emphasised that they delivered value to OneMed’s own operations, independent of the transaction outcome.
Here’s what the Court clarified:
- Income Tax: Consultancy services aimed at improving operational efficiency fall within the scope of costs incurred “to acquire and retain income.” Therefore, they a re deductible for income tax purposes.
- Input VAT: Because the consultancy services benefited OneMed’s own business activities, they qualify as legitimate business expenses. As a result, input VAT on these services is also deductible.
In short: The general rule is that expenses are deductible if incurred to acquire or maintain income as part of the business activity while costs incurred in order to sell shares are seen as capital gains. The question arose to determine if costs in connection to the future sale of a company are attributed to the shares or the operation of the company. The Supreme Court concluded that the costs could be deductible by OneMed as they were related to the companys operations and the benefit of a higher profit on the sale for the shareholders was not relevant.
Why This Matters for Businesses
This ruling is more than just a local tax win. It provides clear, practical guidance for businesses navigating the overlap between operational strategy and tax deductibility. Here’s why it matters:
1. Clarifies the deductibility of consultancy services
Many businesses engage consultants for things like:
- Streamlining operations
- Cutting costs
- Restructuring departments
- Preparing for IPOs, mergers, or sales
Until now, there’s been a grey area around whether these costs, particularly when tied to potential ownership changes, qualify for deduction. The Court’s ruling confirms: If the services benefit the business and the expenses are incurred to acquire and maintain income, the tax authority shouldn’t block the deduction.
2. Confirms input VAT recovery on internal efficiencies
VAT reclaim is often denied when tax authorities perceive a service to be for “non-business” purposes. But this case highlights a key principle: Intent matters less than benefit.
Even if the motivation for engaging consultants is strategic (like preparing for sale), if the end result is a stronger business, the input VAT is recoverable.
3. Creates space for reassessment of denied claims
Perhaps most importantly, the ruling opens the door for businesses to challenge previous input VAT rejections, especially where cost-cutting or operational improvement projects were involved.
If your business has had VAT claims rejected in Sweden for similar services, this decision may give you grounds to request a reassessment.
Key Takeaways
- Operational improvements that benefit the business, even if tied to a future sale, can be deductible for both income tax and VAT.
- Intent behind the services (e.g., preparing for a sale) doesn’t negate deductibility if the outcome strengthens the operating business.
- Businesses may be entitled to reassessment where deductions were previously denied for consultancy services focused on efficiency or restructuring.
Real-World Application: What Finance Teams Should Do Now
The implications of this case go far beyond Sweden. It reinforces a principle that applies across many VAT regimes: If a cost is tied to revenue-generating activity, it may qualify for VAT recovery.
Here’s what your finance team can do now:
Review previously denied VAT claims
Reassess past consultancy or restructuring projects where input VAT was denied due to perceived non-operational purposes. This ruling may give you leverage to recover that VAT.
Tighten documentation
Ensure that consultant invoices, contracts, and project briefs clearly demonstrate business benefit. Being able to show the link between services rendered and business performance is crucial in any VAT audit.
Separate advisory vs. transactional services
Where consulting involves both operational improvements and transaction support (e.g., sale preparation), separate the two in your invoicing and reporting. Only the operational portion may be deductible, clarity here could make or break a VAT claim.
Seek expert guidance
VAT legislation varies significantly by jurisdiction. Work with a VAT reclaim specialist who can help navigate nuances and build a strong case for recovery.
Final Thoughts
Tax authorities are often quick to deny VAT deductions when a service seems even tangentially linked to a sale. But the Swedish Supreme Administrative Court has now clarified an important distinction: Services that improve how a company operates, whether or not a sale is in the works are still for the benefit of the business.
For VAT reclaim purposes, that benefit matters. And so does your ability to prove it.
As businesses continue to optimise, restructure, and prepare for strategic shifts, this case offers a timely reminder: Reclaiming input VAT isn’t just possible, it’s often entirely justified.
Need help reviewing your consultancy-related VAT claims?
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