Providing a card with which a business driver can charge an electric vehicle should be seen as the fictitious supply of energy and therefore goods. This is the conclusion of the Advocate General in a lawsuit at the European Court of Justice.

This decision could have a positive effect on the deductibility of VAT for these card suppliers. Previously, it was ruled that a fuel card for fossil vehicles should be seen as a service, namely lending. The delivery of the good – fuel – took place directly between the energy supplier and the card user. This led, among other things, to non-deductible VAT for fuel card issuers. In the Netherlands, deductions are still permitted under certain conditions.

There has not yet been a decision on charging electric vehicles. The advice would be positive for entrepreneurs who provide such charging cards in the EV chain. ‘By coming to the conclusion that such entrepreneurs carry out a supply of goods through the commission agent’s fiction, there is no question of a credit provision and the right to deduct VAT is guaranteed. The AG appears to have been inspired by the EU VAT Committee, which previously came to a similar conclusion,” PwC analyzes.

The lawsuit concerns the German company Digital Charging Solutions, which provides users of electric vehicles with access to a network of charging points in Sweden. Contracts have been concluded with operators about this; they register the charging sessions via the user cards and then invoice the costs to Digital Charging Solutions, which then sends the users a monthly invoice. That amount is independent of the actual electricity consumption.

The Swedish tax authorities believe that Digital Charging Solutions supplies electricity to users, to which network access is secondary. But the company itself believes that the supply of electricity and network services are two separate supplies and that only the part of the supply that relates to electricity is taxable in Sweden.

The Swedish court asked the European Court whether charging the vehicle at a charging point constitutes a supply of goods – and the answer is yes, as the court previously ruled. The second question is whether the supply of goods constitutes each link of the transaction chain, where there is an agreement in each link, but only the user of the electric vehicle can decide on the quantity and time of purchase, the charging location and the way in which the electricity is used.

The AG believes that there is no question of lending, such as with the fuel card, because the business model for charging EVs differs from that of refueling and because the cards or apps for charging EVs are not payment instruments.

Rather, there is a commission agent model, whereby a person who acts in the name and on behalf of another person in the delivery of a good is deemed to have received and delivered that good himself. Then there is a transaction in which the card supplier involves a commission agent who acts as an intermediary between the charging point supplier and the card or app user. According to the AG, this model is more in line with the contractual arrangements and the role of the parties involved. It must be the case, among other things, that the deliveries of goods purchased by the commission agent are identical to the deliveries that have been sold or transferred to the client.

It now remains to be seen what the Court will rule. “However, should it follow the AG’s considerations, this could be a pleasant outcome for entrepreneurs who provide such cards in the EV chain, as this is in line with current market practice,” PwC said.