BDO Indirect Tax News

European Union - Advocate General opines that card/app provider makes supply of goods for VAT purposes

The number of registered electric vehicles (EVs) in the EU is increasing steadily in accordance with the objectives of the European Green Deal to be climate neutral by 2050. E-mobility requires its own infrastructure, and the VAT treatment of fuel cards and charging cards has been a topic of discussion for years.

In e-mobility, the question arises whether the electricity is supplied directly by the CPO (Charge Point Operator) to the EV driver (owner of the vehicle) or whether the CPO supplies the electricity to the eMSP (E-Mobility Service Provider), which subsequently supplies the electricity to the user of the vehicle. The same question arises when charging an EV at home: who supplies electricity to whom? The answer to this question is important as it determines how transactions should be treated for VAT purposes and who is entitled to deduct input VAT. The VAT aspects of e-mobility are complex and depend on the facts and circumstances.

On 25 April 2024, Advocate General (AG) Capeta of the Court of Justice of the European Union (CJEU) issued her opinion in a case (Digital Charging Solutions) involving the VAT treatment of the supply of electricity between the CPO, the eMSP and the EV driver. After examining various options to determine the correct VAT treatment of supplies of electricity to EVs, the AG decided that the provider of a card and app that allows EV drivers to charge their vehicles should be treated as a commissionaire agent.
Digital Charging Solutions (DCS) is a German company that provides EV drivers in Sweden access to a network of charging points. DCS does not manage or operate the charging points itself as an eMSP but has contracts with operators (CPOs). Through the DCS network, EV drivers receive real-time information on prices and the location and availability of charging points, in addition to functions for locating charging points and route planning. EV drivers receive a card and an authentication app they can use to charge their EV. When the card or app is used, the charging session is recorded by a CPO, which invoices DCS for the session. Subsequently, EV drivers receive a monthly invoice from DCS, which includes a fixed amount for DCS services and a separate amount for charging sessions. The fixed fee applies regardless of whether the user purchased electricity during the relevant period.

The following questions were referred to the CJEU:
  • Does charging the EV at the charging point qualify as a supply of goods?
  • If so, should each link in the chain be considered a supply of goods?
AG opinion
Since the CJEU already ruled in 2023 that the charging of a vehicle must be considered a supply of goods consisting of the supply of electricity, AG Capeta only addressed the second question (for prior coverage, see the tax alert dated 23 May 2023). She examined the following options for determining the VAT treatment of transactions involving the use of a card or app:
  1. A supply of goods from the CPO to the EV driver and an exempt financial service consisting of the provision of credit by DCS
  2. Buy-sell model, under which DCS acts in its own name and on its own account
  3. Commissionaire model, under which DCS acts in its own name but on behalf of the EV driver.
  • Supply of goods and exempt financial service: The CJEU has issued two important decisions (Auto Lease Holland and Vega International) on the VAT treatment of fuel cards, concluding that where vehicles are re-fuelled using a fuel card, the card issuer (a leasing company and a group company in the cases) does not own the purchased fuel because it cannot determine the use of the fuel, i.e., the issuer only acts as an intermediary by providing cards that are used by the EV driver to refuel vehicles at gas station pumps. Therefore, the CJEU concluded that there is a direct supply from the fuel supplier to the EV driver. The company issuing the fuel card also carries out a VAT-exempt financial service, according to the Court. As a result, the company will not be able to fully reclaim the VAT charged to it.
According to the AG, these decisions cannot be applied directly to DCS’ situation because the business model for charging EVs differs from the business model for providing fuel cards. EVs use different charging systems and can only be charged at the charging points of the relevant network. Charging is not possible without using the card or app that provides access to the network.

If the same VAT treatment is applied in the current situation, DCS would face input VAT deduction restrictions because it would supply an exempt financial service.
  • Buy-sell model: Under a buy-sell model, DCS acts in its own name and on its own account meaning that DCS would purchase the electricity from the CPO and resell it in its own name and on its own account to the EV driver. This situation can exist only if DCS can (briefly) obtain ownership of the electricity. Although the AG does not exclude the possibility that this model applies, it fits less well with DCS’ situation because DCS does not have any business risk. In this situation, both supplies are subject to VAT.
  • Commissionaire model: The commissionaire model applies where a commissionaire (DCS in this instance) acts in its own name but on behalf of another person. In this case, DCS would operate as an intermediary between the CPO and the EV driver, with the result that the commissionaire would be deemed to have received goods or services from the CPO and to have subsequently supplied those goods or services to the EV driver. In this case, the EV driver should “appoint” DCS to act on its behalf, although this need not be explicit. The provision of a card or app can be interpreted as an implicit instruction to DCS to purchase a specific quantity of electricity, and the supply of electricity in the transaction between the CPO and DCS is not different from that in the transaction between DCS and the EV driver, so the AG concluded that the commissionaire model best fits the economic reality of the business model for charging EVs. The VAT consequences of this model are the same as in the situation of the buy-sell model, i.e., both supplies are subject to VAT.
For years, there has been uncertainty in the e-mobility sector about how transactions within the EV chain should be treated for VAT purposes. In 2021, the VAT Committee took the position that a CPO supplies goods (i.e., electricity) to the eMSP and the eMSP makes the same supply to the EV owner. However, the committee’s guidelines are not legally binding, and it is unclear how different tax administrations view these guidelines.

The AG's opinion is welcome for the e-mobility sector. By applying the commissionaire fiction, there are two successive VAT-taxable supplies in the EV chain, ensuring the parties’ right to deduct input VAT, which would not be the case if an exempt financial service was involved. Although the AG’s opinion is not binding on the CJEU, it is hoped that the court will adopt the AG’s reasoning and provide clarity on the VAT classification of the supply of electricity between the CPO, eMSP and the EV driver.

Madeleine Merkx
BDO in Netherlands
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