EV charging: Are you applying the VAT rules correctly?

The purchase of electric vehicles (EVs) has significantly increased in recent years. Employers are also shifting focus to more sustainable fleets and increasingly offer the option to choose an electric car. However, making driving more sustainable does not necessarily mean that the VAT implications become easier. On the contrary, they can become even more complex. The VAT treatment of charging station installation and the supply of electricity through charging stations is highly dependent on the specific facts and circumstances.

This article looks at the opinion of the VAT Committee of the European Commission, as well as recent case law in this area. If you are planning to install charging stations at your business location or at employees' homes, this topic is likely to be of interest.

Issues relating to fuel cards and e-mobility

The Court of Justice of the European Union (CJEU) has issued two important decisions on the VAT treatment of fuel cards, concluding that where vehicles are re-fueled 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 acted as an intermediary by providing cards that are used by the lessees and/or employees to refuel vehicles at the gas station pumps. Therefore, the CJEU ruled there is a direct supply from the fuel supplier to the lessees, and  the employer. 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.

Several EU member states apply the fuel card decisions strictly. However, it appears that the consequences can be avoided by setting up a commission agent model. In addition, in the Netherlands, it is possible for a company issuing fuel cards to treat the fuel as ongoing costs or a chain of supplies.

VAT treatment of charging e-vehicles

The VAT treatment of EV charging is different. In 2021, the VAT Committee took the position that a charge point operator (CPO) supplies goods (i.e., electricity) to the e-mobility service provider (eMSP) and the eMSP makes the same supply to the EV owner. The place of supply of the CPO to the eMSP is the place where the eMSP has established its business. If this is in an EU country where the CPO is not established, VAT is reverse charged. The place of supply from the eMSP to the EV owner is the place where the charging station is located. Currently, this means that an eMSP will have to register for VAT purposes in the EU member state where the charging station is located, unless a local reverse charge mechanism applies.

The VAT Committee does not address the situation of home charging, which involves a second electricity supplier and an employer in addition to the CPO and eMSP.

The VAT Committee's view differs from the CJEU’s conclusions in the fuel card cases. The consequences of the committee’s position in practice is unclear, because its guidelines are not legally binding, although they do provide direction.

Importance for practice

With the increase in EVs and new charging stations, a discussion seems to be emerging about the qualification of the supply of electricity between the CPO, eMSP and the driver. The VAT Committee has published some guidelines, but it is unclear how the tax administration views these guidelines.

More information?

If you would like to know more about this topic or if you are planning to install a charging station at your business location or for your employees, please contact one of our advisors. We are happy to assist you!