Vinge has advised the real estate company Wallenstam in a successful case before the Administrative Court of Appeal. As a result of the judgment, Wallenstam is not required to pay tax on profits generated by sales of packaged real estate. The Gothenburg Administrative Court of Appeal issued its judgment on 8 January 2013 in a case which has attracted a great deal of attention and publicity within the real estate industry. The judgment entails that Wallenstam is not required to tax in the amount of approximately SEK 450 million.
The dispute was based on the “packaging” of blocks of flats performed by Wallenstam through the subsidiary, Guldmyran. The properties were placed into subsidiaries of Guldmyran, following which the shares in the subsidiaries were sold to tenant-owners associations which had been formed by the tenants. In conjunction with such sales, the total profit for the years, 2006, 2007 and 2008 amounted to SEK 1 668 million.
The Swedish Tax Agency (and subsequently the Administrative Court) took the view that due to the significant volume of sales, the shares in the subsidiaries should be classified as taxable inventory items. However, according to the Administrative Court of Appeal, the shares in question constituted assets held for business purposes and thus the profit on the shares was tax exempt.
At the inception of the dispute, Vinge applied for a precedent from the Supreme Administrative Court by submitting a request for an advance ruling on how the relevant tax rules should be construed. In the summer of 2012, the Supreme Administrative Court issued a favourable advance ruling which was referred to in the Administrative Court of Appeal’s reasons for its judgment. The ruling of the Supreme Administrative Court and the judgment of the Administrative Court of Appeal are of major significance for the real estate industry since up to now there has been a great deal of uncertainty surrounding the conditions under which sales of packaged real estate can take place.
Mart Tamm and David Kleist at Vinge in Gothenburg have advised Wallenstam throughout the course of the litigation.