Charging electric vehicles is a supply of goods

Over the last few years, activities related to the charging of electric vehicles have given raise to many interpretative doubts whether they should be classified as a supply of goods or a supply of services on the grounds of VAT. These doubts were finally resolved before the Court of Justice of the EU.

Facts

The judgment of the CJEU C-282/22 P. in W was made in the case of a Polish taxpayer intending to provide charging stations for electric vehicles for a fee. The stations, depending on the power of a connector, were to offer the possibility of quick (20-30 minutes) or slow (4-6 hours) charging sessions. As part of a charging session, the taxpayer intended to provide the following activities:

• the provision of recharging devices (including integration of the charger with the vehicle operating system),
• the supply of electricity, within duly adjusted parameters to the batteries of individual electric vehicles,
• the necessary technical support for vehicle users,
• the provision of a special platform, website or application whereby users may reserve a particular connector and view their transaction and payment history, and the option to use an ‘e-wallet’ to pay the balance due for individual recharging sessions.

For the above-mentioned services, a payment collected from vehicle user was  calculated solely on the basis of duration of individual charging sessions.

In view of the facts, the taxpayer pointed out that the entirety of the services provided by him to users of vehicle charging stations constitute one taxable activity, i.e., the provision of services for a fee. The taxpayer’s stance was not confirmed by the Director of The National Tax and Customs Information (Dyrektor Krajowej Informacji Skarbowej). The case went to the Supreme Administrative Court, which referred a question for a preliminary ruling to the CJEU.

CJEU judgement

The CJEU decided that it is the supply of electricity (goods) that is the principal supply that determines the rules of taxation of the transaction, while additional services provided by the taxpayer should constitute an ancillary supply taxed according to the rules applicable to the principal supply.

According to the CJEU, when classifying vehicle charging for VAT purposes, it is necessary to take into account what, considering the average use of the charging station, constitutes the dominant element. According to the CJEU, it is the flow of electricity that should be regarded as a predominant supply, as it entitles the user of the charging station to purchase electricity (goods) in order to propel a vehicle.

In turn, in the opinion of the CJEU, granting the user access to recharging devices enabling the integration of the charger with the vehicle’s operating system constitutes the minimal supply inseparably linked to the supply of electricity.

The CJEU pointed out that also the technical support, which may be necessary for the users, is not an end in itself, but a means of better enjoying the supply of electricity necessary to propel an electric vehicle. It therefore constitutes a service ancillary to the supply of electricity.

Furthermore, the provision of IT applications enabling users to reserve a connector, view their transaction history and deposit funds to pay the balance due for their charging sessions should also be regarded as a service ancillary to the supply of electricity. Such services offer their users certain additional practical facilities, the sole purpose of which is to improve the transfer of electricity needed to recharge a vehicle.

The CJEU stressed that the reference to “electric vehicle charging services” contained in the Directive 2014/94/EU on the deployment of alternative fuels infrastructure should not determine the classification of vehicle charging transactions as “supply of services” within the meaning of the VAT Directive. The purpose of the EU regulations on the deployment of alternative fuels infrastructure is to establish minimum requirements for the development of infrastructure for electric vehicles charging points, and not to establish a rule regarding the treatment, from a VAT perspective, for alternative fuel supplies.

VAT Committee guidelines

The position consistent with the cited CJEU judgment was also presented by the VAT Committee, which is an advisory body formed by representatives of the Member States and the European Commission.

The VAT Committee, considering both the Italian and French question on VAT classification, unanimously concluded that the charging of electric vehicles should be treated as a supply of goods.

For instance, with regard to the French question, the VAT Committee pointed out that in a transaction carried out by an infrastructure operator who provides, among others, remote booking, the provision of information on the availability of terminals, their location, type of sockets and available parking space, and finally the actual charging of electric vehicle batteries, it is the charging of the battery that should be considered as the principal supply, while the other supplies are ancillary to the charging service.

Conclusions

Deciding whether the provision of charging services should be qualified as a supply of goods or a supply of services on the grounds of VAT is important for both domestic charging point operators and foreign taxpayers, i.e., in terms of determining the place of supply for these activities. Many taxpayers can therefore breathe a sigh of relief today.

Nevertheless, apart from settling the VAT issue, it is also necessary to analyze this issue in other tax and legal areas, e.g., in the field of excise duty, where a taxpayer supplying electricity as an excise product should review excise and regulatory obligations, among others, in the scope of obtaining a concession related to the sale of electricity.