VAT on Electric Vehicle (EV) Charging
EV charging classified as goods supply for VAT purposes
In the dynamic field of VAT, the classification of electric vehicle (EV) charging and the provision of charging networks for VAT purposes has been a topic of considerable discussion. The Court of Justice of the European Union (CJEU) provided a conclusive answer, ruling that EV charging constitutes a composite supply, predominantly viewed as a supply of goods.
This decision aligns with the perspective of the VAT Committee of the European Union, which in a 2019 Working Paper, also identified EV charging as a composite supply, leaning towards a goods supply.
CJEU rulling
The CJEU determined that electric vehicle charging is a single complex supply composed of:
- The provision of electricity, which is the central and most significant aspect of electric vehicle charging;
- Additional support services, including the access to charging equipment, technical assistance, and IT services. These services enhance or are essential for the electricity supply, thus being secondary to the primary electricity provision.
Given that the primary component in electric vehicle charging is the electricity provision, the entire transaction, encompassing the supplementary support services, is classified as a supply of goods and falls under a single VAT treatment applicable to supplies of goods.
Implications for businesses in the EV charging sector
This ruling from the CJEU is particularly impactful for entities within the EV charging ecosystem, including Charge Point Operators and E-mobility Service Providers who must now, navigate the VAT implications of this classification.
Primarily, this could mean that charging EVs in foreign jurisdictions might necessitate VAT registration in those countries. This scenario brings into play various invoicing requirements, such as the potential use of the reverse charge mechanism for electricity supplies, contingent on the customer’s capacity. Additionally, it’s crucial for these businesses to ensure their ERP systems are adept at handling such transactions accurately from a VAT standpoint.
It’s advisable for companies to review their VAT compliance, ensuring both incoming and outgoing transactions are correctly categorized and that their ERP systems are suitably configured.
Case study: A Polish perspective
The genesis of this ruling can be traced back to a case in Poland, where a company sought to establish and operate public EV charging stations. The service offered included not just the supply of electricity but also access to charging equipment, optimized charging speeds, technical support, and digital platforms for station reservations and transaction history.
The company sought clarity from the Polish tax authority on whether these activities constituted a service or a goods supply under VAT law. The CJEU, after deliberation, affirmed that the primary element of this composite supply is the transfer of electricity, thus categorizing it as a goods supply as per Article 14(1) of the VAT Directive. The CJEU noted that the charging fee, which considers electricity usage and downtime, does not alter this classification. The additional services provided are seen as ancillary to the principal supply of electricity.
Conclusion
This judgement by the CJEU marks a significant development in the VAT treatment of EV charging services. It underscores the need for businesses in this sector to reassess their VAT strategies and systems to align with this new understanding. As the EV market continues to evolve, staying abreast of such regulatory interpretations is crucial for VAT professionals and consultants, as well as EV goods and service providers.
Sources: Working Paper by VAT Committee of the European Union, Summary of the request for a preliminary ruling – Case C-282/22
NOTE: The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
