An overview by Flick Gocke Schaumburg, Taxand Germany
Charging electric vehicles involves complex questions about electricity supply and VAT, as multiple parties are involved, including users, charging station operators, and service providers. In a recent ruling (C-60/23), the European Court of Justice (ECJ) addressed whether charging constitutes a supply of goods under VAT law. The ECJ confirmed that electricity is tangible property, thus qualifying as a supply of goods. Rainald Vobbe and San Kim from our German member firm Flick Gocke Schaumburg have analysed this decision in further detail:
“Charging an electric vehicle might seem simple, but it raises some complex questions. That’s because multiple parties are involved: not only the user, but also the charging station operator and specialist service providers. So who actually supplies the electricity in a three-party relationship, and how is the invoicing treated for VAT purposes?
Ad-hoc charging is common in e-mobility. This means charging a vehicle (and possibly using other services) without having to register with the charging station operator beforehand. In some cases, prices are standardised. With a card issued by a service provider, users are authorised to use a charging station even if they are not registered with the operator.
Previously, the European Court of Justice (ECJ) dealt with the VAT treatment of fuel cards. This raised a number of questions for the affected parties: fuel card providers, haulage companies, and so on. However, in its new ruling of 17 October 2024 (C-60/23) on Digital Charging Solutions GmbH, the ECJ found that the principles underlying its earlier decisions are not applicable to the charging of electric vehicles.
In the Auto Lease Holland case (C-185/01), the ECJ previously determined that a leasing arrangement constituted a financing agreement. Later, in the Vega International case (C-235/18), the ECJ ruled that fuel cards constituted a credit mechanism enabling purchases to be pre-financed. In its new ruling (C-60/23), however, the ECJ addresses the problem of e-charging separately from these earlier cases.
ECJ referral
The applicant is a German e-mobility provider (EMP) that grants users of electric vehicles in Sweden access to a network of charging stations. It has an app that provides users with real-time information on prices, locations and availability, plus extra features such as a route planner. The EMP issues cards to users enabling them to authenticate themselves at charging stations operated by third parties. They can then charge their vehicles without having registered with the respective operator. The operator invoices the EMP monthly for this process.
In turn, the EMP invoices the users. The invoice includes the amount of electricity supplied each month and its price. Additionally, it shows the fixed fee charged for the provision of access to the network and the extra features. This fee is due each month regardless of whether the network and the other features are used.
The referring court first sought confirmation that the charging of a vehicle at a charging station constitutes a supply of goods within the meaning of the VAT Directive. It also requested clarification of whether the charging station operator supplies the electricity to the EMP, which then supplies it to the users. If so, this would constitute a chain supply.
Decision
In line with its previous case law, the ECJ found that the supply of electricity for charging a vehicle at a charging station constitutes a supply of goods within the meaning of the VAT Directive. Under Art. 15(1) of the VAT Directive, electricity is to be treated as tangible property.
The second question referred to the ECJ was more intriguing: Does the case described constitute a chain supply? Here, the ECJ highlighted the absence of a credit mechanism. Unlike in Auto Lease Holland (C-185/01) and Vega International (C-235/18), the case described involves neither a leasing contract in which the monthly instalments to the leasing company merely constitute advance payments, nor the issue of fuel cards for use at petrol stations. The assumption of a financing agreement is further weakened by the fact that the EMP receives a fixed fee rather than a percentage of the invoice price for the electricity consumed by users, regardless of the actual quantities supplied.
This satisfies the conditions for a contract under which commission is payable, meaning it constitutes a legal fiction of a supply chain for VAT purposes. This is because the commission agent, acting on behalf of the principal, places an order for the supply of goods. According to the ECJ, such an order can be seen either in the agreement between the EMP and the users (commission contract for purchase) or in the agreement between the EMP and the operators (commission contract for sale). Furthermore, the goods acquired by the commission agent must be assumed to be the same as the goods sold or transferred by the agent, as the electricity supplied by the operator to the EMP is identical to the electricity received by the users.
The ECJ leaves it to the referring court to decide whether the supply by the EMP constitutes a single supply principally characterised by the supply of electricity, or whether there are two separate supplies in the form of the supply of electricity and the granting of access to the charging station network. In any event, the assumption of a commission contract is not ruled out, even if the supply were assumed to be a single, comprehensive supply of goods. Therefore, even if the supply of electricity is accompanied by additional services for the user, this does not prevent it from being recognised as a dual transaction regarding the supply of electricity due to the commission.
Conclusion
The ECJ has clarified that the charging can be structured as a supply chain (commission contracts for purchase or for sale) with the involvement of a second person (EMP). The principles underlying its case law in Auto Lease Holland and Vega International are not applicable due to the specific nature of this matter.
As the EMP consequently becomes the supplier of electricity, follow-up questions arise. These include determining the place of performance (Sec. 3g of the German VAT Act [UStG]) or a possible change in the tax liability if a reseller is involved (Sec. 13b(5) and (2) no. 5 UStG). The EMP will also have to regularly register as a VAT payer at the place where the electricity is supplied and file VAT returns. Finally, the valuation of the other service components is also important, as it raises the issue of determining their place of performance. Key factors include whether the customer is a business purchasing the service for company use, and how this can be proven.”