Judgment of the Court in Case C 808/23 Högkullen AB (3 July 2025)

On 3 July 2025, the Court of Justice of the European Union (CJEU) delivered its judgment in Case C-808/23, involving Högkullen AB, a Swedish holding company, and Skatteverket, the Swedish Tax Authorities. The case addresses the determination of the taxable base for intra-group services charged by a parent company to its subsidiaries, which do not have a full right to VAT deduction.

Högkullen AB, a Swedish parent company of a real estate group, provides various services, including company management, financial, real estate management, investment, IT and HR services to its subsidiaries, which do not have a full right to VAT deduction. The dispute with the Swedish tax authorities dates back to 2016, when Högkullen AB invoiced the services performed to its subsidiaries using the cost-plus method. The taxable base charged to the subsidiaries was however lower than the total amount of all expenses incurred by the Swedish parent company, since “shareholder-related expenses”, such as the costs relating to the drawing up of the annual accounts, audit fees and expenses related to the general assembly meetings, as well as the costs of raising capital, were excluded from the taxable base. The Swedish tax authorities disagreed with the way Högkullen AB calculated the taxable base for its services rendered and claimed that the taxable base should include all costs borne by the company, including shareholder expenses. The Swedish tax authorities  considered the services invoiced by the parent company as a single complex and unique service, for which no equivalent exists between independent parties on the open market and for which the taxable base should as a consequence be determined by the costs incurred by the parent company.

The questions submitted to the CJEU came down to:

• Whether the services provided by Högkullen AB to its subsidiaries should be considered as a single complex and unique service, thus preventing the use of the open market comparison method to determine the taxable base.
• Whether all costs, including costs of raising capital and shareholder expenses, should be included in the taxable amount. 

The Court starts with a reminder that, as a general rule, the taxable amount is the consideration agreed between the parties and actually received by the taxable person.

As an exception to this general rule, it is foreseen that the taxable base should be the “open market value” if (1) the transaction takes place between related companies, (2) the consideration is lower than the “open market value,” and (3) the recipient of the service does not have a full right of VAT deduction.

Since the first and third condition are clearly met, the dispute relates to the “open market value” concept laid down in the second condition. Where the Swedish tax authorities consider that the parent company is providing one single complex and unique service - for which no equivalent exists between independent parties on the open market - the Court considers that in the case presented, the services invoiced by the parent company to its subsidiaries, although invoiced at an overall price, can be seen as distinct and independent transactions. As a consequence, the comparative method is not automatically ruled out as a method to determine the “open market value” of such services. Due to the answer given to the first question, the Court did not have to answer the second question.

The CJEU’s decision clarifies that the services performed by a parent company to its subsidiaries are not in all cases to be seen as a single supply for which the comparison method could not be used. Whether the cost-plus method would have to include all costs incurred, including the shareholder expenses, to determine the “open market value” was unfortunately not answered. In light of this case, it is recommended for companies to review their intra-group charges, not only to review the determination of the taxable base, but also to review whether the correct supply rules are applied if the intra-group services have to be regarded as distinct and independent services and not as a single complex service.