Charging electric cars constitutes as a supply of goods for VAT | ECJ Judgement

According to the CJEU’s April 20 ruling, the main doubt of the electromobility sector regarding the classification of vehicle charging under the Polish VAT law has been finally clarified.

An overview of the case

The disputed issue concerned a company intending to conduct the business of installing and operating public electric vehicle charging stations. The services provided by the company on a case-by-case basis as part of the charging cycle, depending on the needs of the interested user, would include the following:

• provision of charging equipment, including integration of the charger with the vehicle’s operating system,
• provision of a flow of electricity with suitably adapted parameters to the batteries of that vehicle,
• necessary technical support.

The company also intended to create a special platform to enable interested consumers to use the services. The company planned to charge an equal fee for all services.

The company applied for an individual tax ruling confirming that the planned activity constitutes a “supply of services” within the meaning of Article 8 of the Polish VAT Act. Ultimately, the case reached the Supreme Administrative Court, which decided to suspend the proceedings and refer a preliminary question to the Court of Justice of the European Union as to whether the disputed service constitutes a supply of goods or a supply of services.

Court ruling

The court pointed out that:

• a transaction involving the flow of electricity to the battery of an electric vehicle constitutes a supply of goods, in that the transaction entitles the user of the charging station to consume, in order to propel the vehicle, the electricity transferred, which is a good;
• the supply of electricity to an electric vehicle’s battery involves the use of appropriate charging equipment, which may include a charger that is subject to integration with the vehicle’s operating system. It follows that the granting of access to such equipment constitutes a minimal provision of services that is inherent in the provision of electricity, and therefore cannot be taken into account in evaluating the part that the provision of services represents in the entire complex transaction, which also includes this provision of electricity;
• technical support, which may be necessary for the users concerned, is not an end in itself, but a means to make the best use of the supply of electricity necessary to propel an electric vehicle. It is therefore an ancillary service.

Tax implications of the ruling

Until now, under the VAT law, it was not clear how to qualify services related to charging electric cars. This is because there is no doubt that charging electric vehicles is a complex service, consisting of the supply of electricity and services consisting of providing access to the widely understood infrastructure. More than once the tax authorities have taken the position that such a service constitutes a supply of goods due to the fact that it is the consumption of electricity (and therefore goods) that is the primary purpose of charging station customers.

Given the above, there is no doubt that the ruling is significant. As already mentioned, charging electric cars constitutes as a supply of goods for VAT. Adopting such a thesis entails a number of tax consequences. First of all, for the supply of electricity, the legislator has provided a specific moment of tax obligation related to the date of issuance of the invoice. Recognizing vehicle charging as a supply of goods also makes it necessary to determine the place of delivery, which is particularly important in transactions with foreign entities. The settlement proves that companies that have so far considered car charging as a service have acted incorrectly. However, in domestic transactions, this did not result in an understatement of tax. Companies that cooperated with foreign traders may have a problem – they did not report VAT on the transactions and will have to adjust their settlements.

It’s also worth mentioning that treating EV charging as an energy supply may also entail excise and regulatory implications.

However, despite the possible adjustments mentioned above, the commented ruling ultimately unifies the rules of taxation, an increasingly popular electric car benefit on the market.

Klaudia Bielecka

Senior Tax Consultant | Accace Poland

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