The Swedish tax consequences of e-commerce


What are the tax consequences of e-commerce and the virtual economy in Sweden? Direct taxation of e-commerce is not very complicated. If a profit is made when a company sells a product or a service, it should be taxed in accordance with the general rules of Swedish Tax Law. In order to be liable to pay tax, the company has to be resident or have a permanent establishment in Sweden. As it can be difficult to determine this, each case needs to be assessed individually. With regard to e-commerce, the Swedish Tax Agency (Swe: Skatteverket) has issued guidelines which state that the mere presence of a server in Sweden can constitute a permanent establishment here.


When a Swedish company sells services, e.g. makes programs, music or movies available on the internet to private customers in Sweden or in the EU, it is required to collect VAT relating to the purchase price. However, if the company provides the service to a recipient outside the EU it should not collect VAT. When a Swedish company sells goods or services to a company within the EU, VAT does not have to be added as long as the buyer can refer to his VAT number in other Member State.


If an individual liable to tax in Sweden makes a purchase over the internet, he or she may be required to pay customs duty and VAT. When an individual imports goods (new or used) from a company in a country outside of the EU, he or she has to pay both customs duty and VAT. Depending on the goods, the customs duty rate varies between 0-20% and the basic VAT rate is 25%. When an individual imports goods or buys services, e.g. downloads programs, music or movies from a company in a country within the EU, he or she does not have to be concerned about VAT filings. Depending on whether the company is registered for VAT or not, it is up to the company to add either Swedish or the other country’s VAT.

Poker sites and gambling

Revenues for a company providing poker sites are taxable here if the company resides in Sweden or if the company’s revenues derive from a permanent establishment in Sweden. Whether a private person’s income from poker is taxable depends on where the company owning the poker site resides. The income for a poker player is not taxable if the poker site company is resident within the EEA. However, if the income derives from a poker site located outside these countries, the income is taxable. The reason for this is that income from lotteries in Sweden is exempt from tax. Since the income is not taxable in Sweden it can neither be taxed in any of the other countries within the EEA. Income that exceeds SEK100 [approx. EUR 9/£8] from poker sites (and other lotteries) located outside the EEA is considered as capital gains and is taxed at a tax rate of 30%. The poker game participation cost (the “rake”) is not deductible and every income (meaning every pot won) should be taxed in accordance with Swedish Tax Law. These tax rules only apply to the income from the internet defined as lotteries and not to income deriving from the online games such as chess, strategic games and bridge. Online poker games and lotteries are not subject to VAT.

Virtual economies and VAT

The Swedish Tax Agency has issued a decision that earnings in a virtual currency can be subject to taxation if it is possible to convert currency into real money.

In Sweden, VAT is paid by companies and individuals who supply goods or services in the course of a professional business within Sweden. A business is regarded as professional if it fulfils the requirements of business activity or if it is conducted in a comparable way.

Virtual economy platform providers

Providing the platform for the internet games could be subject to VAT in Sweden depending on where the service provider and the buyer are located.

  • If the service provider is a Swedish company or an individual with a professional business and the buyer is a Swedish professional business, a Swedish individual or an individual within the EU, Swedish VAT should be paid by the service provider.

  • If the service provider is a company or an individual with a professional business within the EU or outside the EU, and the buyer is a Swedish professional business, Swedish VAT should be paid by the buyer.

  • If the service provider is a company or an individual with a professional business outside the EU, Swedish VAT should be paid by the service provider when services are sold to an individual, an organisation or an authority in Sweden that does not carry out business activities in the country.

Service providers within the virtual economy

The Swedish Tax Agency has decided that income in virtual currencies generated in virtual economies can sometimes be subject to taxation and VAT. The first criterion for a virtual income to be taxable is whether or not the currency or other commodity in the virtual world can be converted into a real currency. If this is not possible, the virtual incomes in the virtual world cannot be taxed. The amount an individual earns in virtual currencies in the virtual economy by selling services and commodities together with avatars etc. that he or she has sold for real currency should be taxed as an earned income since it is considered to be an income emanating from a hobby.

According to the Swedish Tax Agency, a service provider in the virtual economy is considered to operate a professional business if it sells services corresponding to a value of at least SEK 30,000 [approx. EUR 2,800/£2,400]. Therefore, VAT has to be paid on services provided by persons with a turnover of more than SEK 30,000. Since virtual services are classed as services, the VAT is dependent on where the provider and the consumer are located. The same rules on the VAT liability that apply for the platform providers apply for the service providers.


As there are no specific VAT-rules for virtual economies, the above mentioned rules are the Swedish Tax Agency’s own interpretation. The interpretation of the Swedish Tax Agency has not yet been contested in a court of law and therefore cannot be regarded as final. The Swedish Tax Agency’s position on the matter has raised both questions and criticism. The main focus of the criticism has been on the fact that the services received are objects that do not really exist.

Another issue to resolve is when the transaction has occurred and when the taxpayer should be taxed. Should the taxpayer be liable to tax as soon as he receives virtual money or when he changes the virtual currency into real currency? A final obvious problem for the Swedish Tax Agency (and other tax authorities who want to tax income in the virtual world) is the difficulty of controlling the income. In most internet games, the characters are anonymous and the IP addresses are hidden to other players. One possible solution is that tax authorities will benefit from the enforcement tools being provided by legislators seeking to combat illegal file sharing on the internet.