Boozt's victory over Norwegian Tax Authorities: A landmark decision for web sales

Background of the Case

Boozt Fashion AB, a Swedish company, operates an international e-commerce platform selling clothing, sports equipment, cosmetics, and home decor to consumers in 13 countries, including Norway. Approximately 13% of Boozt's sales are to Norwegian customers. Despite having no physical presence, employees, or offices in Norway, Boozt has been registered in the Norwegian VAT register through a Norwegian representative since 2009.

In 2021, Boozt sought to change its VAT registration from the standard registration to the simplified VOEC registration, which is designed for foreign companies selling digital services and low-value goods to Norwegian consumers. The Norwegian Tax Administration (Skatteetaten) denied this request, arguing that Boozt's operations were sufficiently connected to Norway to warrant a standard VAT registration. This decision was based on factors such as the use of Norwegian language on Boozt's website, prices listed in NOK, and the provision of Norwegian customer support.

Court's Decision

The Borgarting Court of Appeal ruled in favor of Boozt, finding that the company met the criteria for simplified registration under the Norwegian VAT Act. The court emphasized that Boozt's business activities were primarily conducted outside Norway, and the connection to Norway was weaker compared to previous cases, such as the Ifi OY case from 2006. The court noted that Boozt's marketing and sales strategies were globally coordinated and that the company's Norwegian operations were minimal.

The court's decision highlighted several key points:

Boozt's lack of physical presence in Norway, including no employees or offices.

The fact that sales agreements were clearly stated to be with a Swedish company.

The global nature of Boozt's marketing campaigns, which were not specifically targeted at Norwegian consumers.

Implications for Businesses

This ruling has significant implications for foreign e-commerce businesses with sales to Norwegian consumers which are subject to customs duties. It clarifies that the presence of localized elements on a webpage, such as language and currency, does not necessarily constitute a sufficient connection to require standard VAT registration. Instead, the overall organization and operation of the business, and the extent of its activities in/towards Norway, are more critical factors.

Financial Impact

The decision is expected to have a substantial financial impact for foreign e-commerce operators, with Boozt estimating that it will save approximately 45 million NOK annually in import duties. This outcome has also sparked concerns about competitive imbalances, as Norwegian companies continue to pay full import duties on textiles, while foreign companies like Boozt benefit from the VOEC scheme.

Are you considering opting into the VOEC scheme?

At PwC Norway, we understand the complexities and challenges that international e-commerce businesses face when navigating VAT regulations.

This landmark decision underscores the importance of understanding and leveraging the appropriate registration schemes to optimize tax obligations.

For more information and to discuss how this ruling may affect your business, please reach out to our team at PwC Norway. We are here to help you navigate the evolving landscape of international VAT regulations.

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