Growing importance of the ECJ case C-235/18 (Vega International) on similar business models, also VAT treatment of charging electric vehicles

On 15 May 2019, the Court of Justice of the European Union (CJEU) delivered its judgment in Vega International Car Transport and Logistic (Case C-235/18), which centred on the question of whether the supply of a fuel card scheme should be treated as a VAT taxable supply of fuel or as a VAT exempt supply of pre-financing services.

The CJEU based a large part of its judgment on the Auto Lease Holland (C-185/01)  judgment, in which the CJEU concluded that a fuel management agreement between a lessor and a lessee did not form a supply of fuel by (i) a petrol station to the lessor and (ii) a subsequent supply of that fuel by the lessor to the lessee. In essence, this judgment was based on that the lessor did at no point in time have the power to dispose of the fuel as a true owner. Instead, it was the lessee that should be considered the true owner. The CJEU followed by stating that the lessor merely provided a financing service. The CJEU did not however consider whether this financing service fell inside the scope of the VAT exemption for the granting of credit, since this was not a question that was referred to the CJEU at that time.

In its Vega International judgment, the CJEU takes the opportunity to further crystalize this matter by first applying the Auto Lease Holland to the case at issue and concluding that Vega International does not supply fuel to its subsidiaries but rather provides a financing service to its subsidiaries.

Secondly, the CJEU considers that — based on the nature of this financing service — Vega International in essence grants credit to its subsidiaries. The fact that Vega International is not a financial institution and the fact that Vega International does not charge “interest” under an explicit “credit agreement” does not change this. By taking this “substance over form” approach, the CJEU reasons towards the conclusion that such an activity should be considered as the VAT exempt granting of credit.

This judgment is not only relevant for fuel card schemes, but may also be applied to any supply chain where customers can pay for goods or services at a later moment, e.g., through an intermediary such as a platform or an app. Carrying out VAT exempt activities will in most cases lead to input VAT recovery restrictions, but in certain cases it may lead to VAT optimization possibilities, depending on the nature of the costs (with VAT or free of VAT) and the type of customers ((EU- or non- EU based) businesses or private individuals).

Link to the ECJ Case

• C-235/18 (Vega International) – Judgment- Financing in advance purchase of fuel is an exempted financial service

VAT Expert Group

• On November 30, 2020, the VAT Expert Group issued a document ”Selected CJEU Cases with impacts on businesses operating in the EU Single Market”, which discusses amongst other the ECJ Case C-235/18 (Vega International)

EU VAT Committee – Working Paper 1020 discussed during the VAT Committee on November 22, 2021

• The document that the VAT Expert Group presented on November 30, 2020 was presented to the EU VAT Committee on April 19, 2021
  • Presentation of the VAT Expert Group to the VAT Commitee on selected ECJ/CJEU Cases
• During its meeting on November 22, 2021, the EU VAT Committee discussed Working Paper 1020 which is related to the ECJ Case C-235/18 (Vega International)
  • WP 1020 – Commission – Case Vega International – Fuel cards – EN

Related ECJ VAT Cases

• C-185/01 (Auto Lease Holland) – A lessor of a vehicle did not make a supply of fuel to the lessee when the lessee fills up his car
• C-159/14 (Koela-N) – Order – VAT Deduction for an intermediary in a Chain Transaction
• Roadtrip through ECJ Cases – Focus on ”Exemption – Financial transactions – Credits and transfer of Credits” (Art. 135(1)(b))

Reference to the Case in the EU Member States

• Austria – Purchase and resale of fuel through fuel cards (BMF) (November 28, 2019)
• Belgium – VAT Comment. Exemptions envisaged by Article 44 of the VAT Code – Granting, intermediation and management of credits – Art. 44, § 3, 5° (01.06.2021)
• Germany – BMF issued a draft letter which would be applicable as of Jan 1, 2022: Fuel card sales – draft of a new BMF letter
• Poland: Ruling dd. February 16, 2021 clarifies when input VAT may be recovered for fuel card purchases

VAT Treatment of charging Electric Vehicles

• EU VAT Committee
  • On June 3, 2019, the EU VAT Committee discussed during its 113th meeting the ”Working Paper 969 Transactions related to the recharging of electric vehicles”
    • Minutes 113th VAT Committee meeting dd. June 3, 2019
  • On April 19, 2021, the EU VAT Committee discussed during its 118th meeting the ”Working Paper 1012 – Italian question on the recharging of electric vehicles”
    • Minutes not yet available
• Developments in the EU Member States + UK
  • KMLZ – VAT Committee of the European Commission is again dealing with the practical issues relating to the VAT law treatment of charging electric vehicles (so-called e-charging)
  • Germany – Update on the VAT treatment of recharging electric vehicles (e-charging)
  • UK HMRC Policy paper – Revenue and Customs Brief 7 (2021): VAT liability of charging of electric vehicles