CJEU - Recent Developments in Direct Taxation 2025

1. Introduction

Assume that a Swedish customer engages an entrepreneur (service provider/subcontractor/company) established in another Member State. The foreign entrepreneur does not have a permanent establishment (PE) in Sweden. The entrepreneur invoices the Swedish customer for work carried out in Sweden. Under the Swedish Tax Procedural Act, unless the foreign entrepreneur presents Swedish F-tax approval, the Swedish customer is obliged to withhold 30% of the invoiced amount to cover potential tax liabilities that the foreign entrepreneur may incur in Sweden. However, an interesting aspect is that a foreign entrepreneur is subject to limited tax liability in Sweden and is only liable to tax in respect of income attributable to a PE situated in Sweden. In the absence of such PE, no tax liability arises under Swedish domestic law. Sweden has no specific legislation in relation to service providers (nor any specific clauses regarding services in its tax treaties). The normal rules on limited tax liability apply.

S. 298The legal issue in the case pending before the CJEU, concerns whether the obligation imposed on the Swedish customer to withhold tax on payments made to service providers who...