This article first appeared in The Energy Mag. The original article can be read here. The Energy Mag (formerly The Miner Mag) provides news, data, and analysis on the intersection of energy, compute, and markets.
The Swedish Tax Agency has issued draft VAT decisions concerning subsidiaries of Northern Data AG and has secured appellate rulings against two Swedish subsidiaries of HIVE Digital (NASDAQ: HIVE). The companies claim their facilities provided computing power or infrastructure services to identifiable clients. However, the tax authority believes at least part of this activity constituted cryptocurrency mining, which is outside the VAT system and thus does not grant the right to deduct input VAT on equipment and other expenses.
These actions come as Sweden faces a separate complaint from the European Commission regarding a rule requiring customers to withhold 30% of payments to certain foreign contractors. This case, currently before the Court of Justice of the European Union, does not involve cryptocurrency mining or input VAT. However, it has drawn broader attention to Swedish tax rules that can create significant cash flow pressure before a company's final liability is determined.
For miners, the consequences of this are increasingly visible in where they direct capital. HIVE directly linked its decision to gradually wind down cryptocurrency mining compute capacity in Sweden to the tax disputes and related enforcement actions. Northern Data's pivot was already part of a broader corporate strategy, but the Swedish VAT investigation accompanied the company throughout its transformation from a cryptocurrency miner into an AI cloud services and data center operator.
The result has been an uneasy transition for northern Sweden. The region attracted data centers due to hydropower, low temperatures, and, until 2023, reduced electricity taxes. Those same industrial sites are now being positioned for AI, yet their former mining activities continue to trigger tax assessments, appeals, and—in Northern Data's case—a criminal investigation.
When VAT Hinges on Proof-of-Work
According to Swedish Tax Agency guidance, cryptocurrency mining is not a service provided for consideration because the reward for proof-of-work in a blockchain lacks an identifiable counterparty. The agency applies similar reasoning to transaction verification fees when the payer and verifier cannot identify each other. Therefore, such activity is outside the scope of VAT.
This classification matters far beyond accounting for mining revenue. Generally, a company can deduct input VAT on purchases used to make taxable supplies. If servers, electrical equipment, and operational services are used for activity outside the VAT system, the tax authority may deny such deductions or demand repayment of sums already refunded.
Disputed business models add another layer of complexity. Both HIVE and Northern Data assert that their Swedish legal entities provided infrastructure, hashrate, or associated computing services to third parties. Under this narrative, the commercial transaction is a sale of computing power to an identifiable client, such as a mining pool, rather than the company engaging in cryptocurrency mining itself, working with end consumers.
Selling AI cloud compute may fit more neatly into traditional VAT frameworks, as there is typically a contract, an identifiable client, and a clearly defined computing service. However, this does not automatically resolve the tax treatment of each data center. Authorities may still examine what the equipment was actually used for, which organization operated it, and whether the contractual structure matched the actual activity.
Northern Data Faces Charges and Criminal Investigation
Northern Data's Swedish case dramatically became public in September 2025, when investigators conducted searches at premises linked to the company in Frankfurt and the Swedish towns of Boden and Luleå. Four individuals were arrested as part of an investigation into suspected large-scale VAT fraud exceeding €100 million. No indictments have been issued against the company, and the allegations remain under investigation.
Northern Data stated it was surprised by the escalation and believes authorities misinterpreted the tax treatment of its GPU-based cloud services as well as the economic and legal structure of its previously conducted cryptocurrency mining activities. The company said it is cooperating with the investigation and believes it complies with international tax standards.
Further detail emerged in subsequent deal documents. According to a prospectus prepared in connection with Northern Data's acquisition by Rumble Inc., the Swedish Tax Agency conducted audits of three subsidiaries: Decentric Europe BV, Hydro66 Svenska AB, and Hydro66 Services AB.
The Agency issued draft decisions asserting that certain activities at Northern Data's Boden facilities constituted cryptocurrency mining outside the VAT system. It proposed denying previously claimed input VAT refunds of approximately SEK 300 million (€28 million) from Decentric Europe and SEK 218 million (€20 million) from Hydro66 Svenska. These figures included potential penalties but excluded interest.
Northern Data formally contested the Decentric proposal and stated it intends to contest the Hydro66 proposal. The company argued the activity involved providing infrastructure and services to third parties and therefore represented taxable supplies. It also noted the agency may have relied on incomplete operational data and assumptions not reflecting commercial agreements.
At the time of the prospectus publication, the proposed decisions were not yet final tax bills. Northern Data had not booked a provision, concluding an outflow of funds was unlikely, but disclosed these matters as contingent liabilities.
Tether, Northern Data's controlling shareholder prior to the Rumble deal, committed to providing up to $200 million to fund certain tax liabilities should they become payable or need to be accrued. This support may provide liquidity, but deal documents warn it does not eliminate the associated economic costs.
HIVE Books a Provision That Northern Data Doesn't
The dispute involving HIVE has progressed further in Sweden's administrative courts.
Its subsidiaries Bikupa Datacenter AB and Bikupa Datacenter 2 AB received a series of rulings starting in December 2022 that denied input VAT refunds and demanded repayment of previously refunded amounts along with reassessments and interest. HIVE appealed, arguing the rulings were inconsistent with Swedish law and failed to account for the technical nature of its hashrate service business.
The Administrative Court and the Court of Appeal ruled against the company. On July 20, 2026, HIVE filed a petition for leave to appeal to the Supreme Administrative Court, although its Swedish counsel advised the chances of a favorable outcome were low.
These court rulings prompted HIVE to book a provision of SEK 822 million, or $84.7 million, for all disputed periods through June 2026. This non-cash expense includes $76.6 million in VAT, $1.5 million in additional tax assessments, and $6.6 million in interest. The size of the risk may grow as interest continues to accrue.
This expense exceeded HIVE's quarterly revenue of $79.1 million and contributed to a net loss of $142.9 million. With $208 million in cash at the end of June, the provision is significant despite no corresponding cash payment being made during the quarter.
HIVE continues to contest these assessments. The company stated its position is supported by EU guidance, a preliminary ruling, a forensic expert opinion, and a legal opinion from a Swedish VAT professor.
HIVE is also taking the dispute beyond Sweden's normal tax appeal process. In an August 11 regulatory filing explaining a quarterly report delay, the company reported it initiated proceedings with the European Commission regarding what it called a “systemic failure of Swedish administrative courts to refer unsettled questions of EU law to the Court of Justice of the European Union.”
HIVE also reported preparing a civil lawsuit against a Swedish government agency seeking damages for losses incurred due to the tax authority's actions on the disputed VAT matters. The company did not state whether the civil lawsuit had already been filed, specify which court it would be filed in, or name the amount of damages it would seek.
HIVE directly linked its operational shift in Sweden to tax enforcement actions. In March, the company stated security requirements for disputed tax assessments and input VAT uncertainty made its traditional hashrate production model in Sweden potentially uneconomical.
It began phasing out ASIC-based compute capacity at its major Boden site, while separately retrofitting a separate 7-megawatt facility to Tier III standards for AI and high-performance computing. HIVE also plans a similar upgrade for its 32-megawatt Big Boden facility and signed a non-binding letter of intent for colocation covering up to 25 megawatts.
This move is part of HIVE's broader expansion into GPU-based cloud infrastructure, not merely a reaction to tax changes. Nevertheless, its disclosures make clear that Sweden's approach to mining helped determine which workloads it will continue to run in the country.
Broader Swedish Tax Reform
The VAT stance is not the sole policy change affecting the economics of Swedish data centers.
Sweden abolished a preferential electricity tax rate for data centers effective July 1, 2023, after the government concluded the relief was no longer appropriate. The government stated electricity should perhaps go to sectors employing more people and that removing the relief could incentivize greater data center efficiency.
This change affected data centers generally, not just cryptocurrency miners. HIVE reported its Swedish sites' electricity costs rose by approximately SEK 0.30 per kilowatt-hour.
Another Swedish rule is currently being challenged in Luxembourg. In case C-577/25, the European Commission argues Sweden breached EU and European Economic Area rules by requiring customers to withhold a preliminary income tax of 30% of gross payments to certain foreign contractors without a Swedish F-tax certificate or permanent establishment in the country.
The Commission argues these contractors may have no Swedish income tax liability but could nonetheless wait up to two years for a refund, creating an obstacle to cross-border services. Sweden presented its defense in November 2025, and the case remains pending.
This litigation may not set a legal precedent for either HIVE or Northern Data. It concerns preliminary income tax withholding, not VAT deductions, and applies based on cross-border tax status, not company size or compute workload.
However, its significance is broader. In both cases, authorities are using tax withholding, denial of refunds, repayment demands, or security requirements to protect tax collection while the underlying tax liability is contested. These mechanisms can impose financial and administrative costs long before courts issue final rulings.
