Charging of electric vehicles is a supply of goods for VAT

21/04/23

The question of whether charging electric vehicles and making the charging network available to users should be regarded as performing a service or supply of goods for VAT purposes has been subject to debate. The Court of Justice of the European Union (“CJEU”) has now provided clarity and concludes that there is a composite supply for VAT purposes. Furthermore, it considers that such supply constitutes a supply of goods, since the transfer of electricity is a characteristic and predominant element from the point of view of the average consumer. This judgement is in line with the opinion of the VAT Committee of the European Union, which also published a Working Paper (a non-binding document) in 2019 in which it discussed the VAT treatment in the electric vehicles (hereinafter: EV or EVs) value chain and also came to the view that there should be a composite supply, qualifying as the supply of goods.

What does this mean for your organisation?

The CJEU's judgement provides clarity. The outcome of the case is particularly relevant for entrepreneurs who are part of the value chain for charging EVs, such as Charge Point Operators (entrepreneurs who install and manage charging stations) and E-mobility Service Providers (entrepreneurs who provide services and access to charging networks to their users).

The finding that there is a composite supply consisting of the supply of goods has a number of consequences.

For the abovementioned businesses in the EV value chain, it may entail that, for example, electric charging abroad may lead to a VAT registration in the relevant Member State. Naturally, certain invoicing obligations apply, including the possible application of the reverse charge mechanism with regard to the supply of electricity (depending on the capacity of the customer). In addition, attention will have to be paid to the design of the ERP system in order to handle transactions correctly from a VAT perspective. We recommend that you map out whether your incoming and outgoing performances are correctly designated for VAT purposes and whether the ERP system is set up correctly.

Background

The case in question takes place in Poland. The interested party intends to install and operate publicly accessible charging stations. Users have the right to charge their EV at a price that depends, among other things, on the charging time. Payments can be made after each charging session (via NFC) or after an agreed billing period (with a charging card, for example). In addition to supplying electricity, the interested party provides access to charging equipment, guarantees the optimal charging speed tailored to the EV, provides technical assistance to vehicle users and makes a specialised platform, website or IT application available to users the possibility to reserve charging stations and to have access to the transaction history and the digital wallet.

With regard to its intended activity, the interested party has requested a tax ruling from the tax authority in Poland, asking whether these activities should be regarded as providing a service or supply of goods within the meaning of VAT legislation. After preliminary questions asked by the highest Polish administrative court, the CJEU concludes that the unique and complex performance performed by the interested party, consisting of the supply of electricity, including the associated services (giving access to the charging equipment, integration of the charger in the vehicle, technical assistance, making computer applications available) must be regarded as a composite supply. That supply then qualifies as the supply of goods within the meaning of Article 14(1) of the VAT Directive. This is because, according to the CJEU, the transfer of electricity is, in principle, the characteristic and predominant element of the composite supply in question.

According to the CJEU, this conclusion is not affected by the fact that the fee for charging EVs takes into account not only the electricity purchased, but also the fee for the downtime during charging. Furthermore, the service constitutes a minimum service necessarily associated with the supply of electricity and is therefore not a characteristic element. According to the CJEU, technical assistance is also not an end in itself, but a means to offer the main service, i.e. the supply of electricity, under the best conditions.