Hannes Snellman Counsel to a Taxpayer in the Supreme Administrative Court’s Yearbook Case Outlining VAT Treatment of Coworking Services

The demand for coworking services has steadily increased during the past few years. This trend is on the rise particularly due to modern mobile ways of working and the booming startup scene in Finland. However, so far, there have been no clear authoritative guidelines as to whether the provision of coworking memberships is regarded as constituting “leasing of premises”, which, in principle, is not subject to VAT and does not allow the service provider to deduct the input VAT on purchases such as building of coworking premises, or regarded as constituting a VATable supply of services under the main rule with a right to deduct input VAT on purchases.

The Central Tax Board has previously outlined that the provision of coworking memberships and several associated services is deemed to form a group of services that are so closely linked that they form, objectively, a single indivisible economic supply, the splitting of which would be artificial. Most of the described coworking memberships were deemed to constitute VATable supplies taxed under the main rule with a right to deduct input VAT on the service provider’s purchases. One membership model was, however, found not to constitute a VATable supply, and hence it is associated with a more limited service provider’s VAT deduction right.

The Tax Recipients’ Legal Services Unit had filed an appeal to the Supreme Administrative Court and claimed that coworking memberships should be broadly regarded as “leasing of premises” and that as such they would not, as a starting point, enable the service provider to deduct the input VAT incurred in the provision of coworking services. Our client also filed an appeal claiming that the one membership model which the Central Tax Board found to constitute “leasing of premises” should also be interpreted as a normal VATable service which entitles to full VAT deductions.

The Court rejected both appeals and upheld the decision by the Central Tax Board. Thus, coworking services are now broadly seen as normal services that will entitle the service provider to full VAT deductions for all VAT incurred in the provision of the services. However, the design of the membership terms requires careful planning as the Court ruled that some forms of memberships can constitute “leasing of premises”. The Court’s favourable decision can be expected to further make possible the design of different types of packaged services where the access to premises only forms a part of the service which also bundles together other services, such as apartment as a service and office as a service.   

Our team comprised Piia Ahonen and Heikki Vesikansa.