There has been some discussion recently in the press about the deductibility of input VAT for passenger cars under financial leasing. The message has been that the Swedish Tax Agency may completely deny VAT deductions for the lease of company cars under financial leasing agreements.
Finansiell leasing? Skatteverket ändrar i sitt ställningstagande. Håll tungan rätt i mun när du leasar bilen till företaget. - tjänstebilsfakta

The issue itself is not entirely new but originates from a ruling by the European Court of Justice in October 2017, where the court established that financial leasing agreements for VAT purposes may be equated with installment purchases under certain conditions. The Swedish Tax Agency issued a legal opinion in the spring of 2024 outlining its view on the matter.
Finansiell leasing, mervärdesskatt | Rättslig vägledning | Skatteverket

‍There is no right to deduct input VAT on the purchase of passenger cars, while half of the VAT on the leasing fee is deductible. If the Swedish Tax Agency classifies a financial leasing agreement as an installment purchase, it means that no part of the input VAT on the leasing fee can be deducted.
In short, the Swedish Tax Agency's position is that financial leasing constitutes the delivery of goods in the following cases.

• The agreement states that ownership of the goods transfers to the buyer at the end of the contract term because the buyer is required to either purchase the goods or designate another buyer.

• There is a purchase option, and it is clear at the time of signing the agreement that the buyout price at the end of the rental period is so low compared to the estimated market value of the goods at the same time that it is obvious to the buyer that the only economically rational option is to take over the goods.

The Swedish Tax Agency further believes that the VAT assessment should be made regardless of how the leasing is handled according to accounting rules and regardless of income tax rules.

The Swedish Tax Agency has now, as far as we know, for the first time publicly commented on the effects that a reclassification of leasing would have on the right to deduct input VAT and clearly stated that if leasing agreements are to be assessed as the delivery of goods (i.e., installment purchases) for VAT purposes, there is no right to deduct input VAT on the leasing fee.
Miljardsmäll: Stopp för momsavdrag på tjänstebilar | Carup.se

Our assessment is that there is an imminent risk that the Swedish Tax Agency, in case of an audit, will challenge the right to deduct VAT related to company and staff cars financed through financial leasing. It cannot be ruled out that the Swedish Tax Agency, during an audit, will choose to go back in time and investigate all years that are open for reassessment (the current year and six years back in time). Notably, the Swedish VAT Act's definition of passenger cars is broad and also includes "craftsman cars" that have a van body and not a flatbed.

To limit the risks, we recommend considering the following measures for those who have leased cars:

1. Review existing leasing agreements to assess whether there is a risk that they will be classified as the delivery of goods for VAT purposes.
2. Consider discussing ongoing contracts with lessors to possibly reduce existing exposure.
3. Review the company's car policy to ensure that future leasing agreements take into account the risks of denied VAT deductions.
4. Review the various options available both in terms of leasing forms and the choice of leasing objects for your business.
5. Consider the effects that a denied VAT deduction and a possible reassessment of open tax periods would have on the ability to distribute dividends, etc.

If you would like to discuss the issue further, you are more than welcome to get in touch.

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