The European Commission has decided to refer Sweden to the Court of Justice over its application of VAT on postal services. According to the Commission, Sweden applies VAT to some services that, under EU rules, should be exempt from VAT.

The EU VAT Directive states that services supplied by ‘public postal services’, and the sale of stamps, should be exempt from VAT. The Court of Justice has clarified (Case C-357/07) that the VAT exemption on postal services has to be provided to any universal service provider, irrespective of whether the provider is a public or private operator. However, it has to be limited to the ‘universal service’. Supplies of services for which the terms have been individually negotiated are not allowed to benefit from the VAT exemption.

Sweden does not exempt postal services from VAT. All operators, including the one which provides the universal service, are obliged to charge VAT. Therefore, in the Commission’s view, Sweden has failed to apply an exemption provided for under EU legislation.