In one of its recent judgements, the European Court of Justice (“ECJ”) has created uncertainty for a number of VAT payers. Those affected are taxable persons who use various fuel and similar cards to purchase fuel and naturally treat such transactions as a supply of goods (fuel) between a petrol station, a card provider/administrator and the end consumer (such a subsidiary and a leasing company’s client). If you use such fuel cards or you conduct systemically identical transactions, we recommend that you should reflect the conclusions of the judgment in your VAT assessments of relevant transactions before the tax authorities do so.
In its judgement in Case No. C-235/18, the ECJ considered VAT issues arising from a dispute between Polish tax authorities and Vega International Car Transport and Logistic (“Company”) concerning the refusal to reimburse the value added tax (VAT) relating to fuel purchase transactions carried out by means of fuel cards.
Situation in question
The Company is engaged in the transport of commercial vehicles from factories directly to the customers. That service is provided via several subsidiaries, including the Polish subsidiary. The company organises and manages the supply of fuel cards, issued by different fuel suppliers, to all its subsidiaries. The vehicles transported by the Polish subsidiary are refuelled using personal fuel cards issued to drivers.
For organisational reasons and also in view of the level of costs, all the transactions carried out by means of fuel cards are centralised by the Company in Austria. The COmpany receives invoices from the fuel suppliers establishing, in particular, the purchase of fuel including VAT that is then claimed from the tax authorities. Next, at the end of each month, the Company recharges the costs of the fuel made available for the purpose of the supply of the vehicle transportation service, together with a surcharge of 2%, to its subsidiaries, including the Polish one.
Question referred to the ECJ
In this context, a question was referred to the ECJ for a preliminary ruling whether the activity consisting in the provision of fuel cards and in negotiating, financing and accounting for the purchase of fuel using those cards can be considered:
- a financial service under Article 135(1)(b) of the VAT Directive (the granting, negotiation and management of credit), or
- chain transactions (a supply of goods), the primary purpose of which is the supply of fuel.
ECJ’s argumentation and conclusion
At the beginning of its assessment, the ECJ referred to its previous judgment in a case deemed comparable by the ECJ, C-185/01 Auto Lease Holland. The leasing company provided its clients (lessees) with a possibility to refuel their vehicles in the name and on behalf of the leasing company, which then requested the national tax authorities to reimburse the VAT levied on that fuel. In the case, the ECJ already stated that the supplies had been effected at the leasing company’s expense only ostensibly (the final financial burden was borne by the lessees) and, in addition, the economic ownership of the assets did not pass on to the leasing company at all. As a result, the ECJ did not consider the transaction concerned as a supply of goods but as the provision of a service (financing of purchase).
In the case in hand, the ECJ relied on the following circumstances:
- The company does not dispose of the fuel as its owner;
- The fuel is purchased by the Polish subsidiary directly from the suppliers and at its sole discretion (decides the terms of the purchase – place, type, quantity, time and method of use of the fuel); and
- The Polish subsidiary bears all costs of obtaining the fuel (based on recharge from the Company).
Under such circumstances, the ECJ believes that it cannot be the supply of goods between a petrol station – the Company – and the Polish subsidiary. In the case in hand, the ECJ is convinced that the Company only provides its Polish subsidiary, by means of fuel cards, with a simple instrument enabling it to purchase that fuel, thereby playing de facto no more than an intermediary role in the purchase transaction concerning that product (fuel). As a result, the Company does not have the right to deduct the VAT paid on invoices for fuel.
Nevertheless, if it is not the supply of goods among the three companies, the ECJ is convinced that it must be a supply of services (that is defined in the negative – any transaction which does not constitute a supply of goods must be regarded as being a supply of services). When considering the nature of the service, the ECJ has come to the conclusion that it is the financial service of granting and negotiation of credit exempt from VAT within the meaning of Article 135(1)(b) of the VAT Directive. The 2% surcharge referred to above (the surcharge on the value of the fuel recharged from the company to the Polish subsidiary) is the payment for the service.
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