ECJ Ruling on VAT for Electric Vehicle Recharging Stations (Case C-282/22)

With the increase in the number of electric vehicles (EVs), it was inevitable that services related to recharging these vehicles would also become a subject of discussion regarding the applicability of VAT. One such case occurred in Poland between the Director of the National Revenue Information and a Polish-based company, P. in W., that wanted to establish and operate public EV charging stations.

The main issue in this case was whether a complex supply that includes several services represents the supply of goods or services under the EU VAT rules.

Background of the Case 

P. in W. planned to build EV charging stations with multi-standard chargers, including direct quick-charge and alternating slow-charge connectors. The price that users would pay would depend on the duration of the recharging session. For direct quick-charge, recharging time would be expressed and charged in minutes, whereas for slow-charge connectors, recharging time would be expressed in hours. Users could pay the recharging fees after each recharging session or at the end of an agreed billing period.

The supply provided during each recharging session would include several services depending on users' needs. The first is access to recharging devices, including integration of the charger with the vehicle operating system. The second is the electricity supply, within duly adjusted parameters, to the vehicle's batteries, and the third includes necessary technical support.

In addition to these services provided to recharging station users, P. in W. wanted to develop a unique platform, website, and IT application to allow users to book particular connectors and access usage history and payments.

During the planning process, the P. in W. asked the Tax Authority to issue a tax ruling and confirm that the planned activities are subject to the supply of service defined under Article 8 of Polish VAT Law.

However, the Tax Authority had a different opinion regarding this matter. It stated that the electricity supply necessary to recharge an electric vehicle had to be regarded as the primary supply. In contrast, the other services offered by P. in W. had to be considered as ancillary or additional.

P. in W. disputed this decision, and the Regional Administrative Court in Warsaw overruled it, stating that users do not want to buy electricity from P. in W. but want to use technology that would recharge their EVs faster and more efficiently. Therefore, the primary service is access to recharging stations and connectors, not the purchase of electricity.

Moreover, the P. in W. would not charge for services based on how much electricity users used to recharge their EVS but on how long it took them to recharge.

The Tax Authority disagreed with this reasoning and decision and brought the case before the Supreme Administrative Court, holding that electricity supply is the primary supply. Due to the situation's complexity, the Supreme Administrative Court decided to pause the proceedings and request a preliminary ruling.

Main Questions from Request For Ruling

The Supreme Administrative Court referred a question to the ECJ to clarify the VAT classification of a complex supply provided to users at EV recharging stations. The main question is whether a supply involving several components should be treated as a supply of goods or services under the EU VAT Directive.

The complex supply in question consists of providing physical infrastructure for charging, including compatibility with different EV charging systems, delivery of electricity with appropriate parameters to charge EVs, technical support, and offering platform, website, or app for functionalities like booking connectors, transaction tracking, and payment through an e-wallet.

Applicable EU VAT Directive Articles

The applicable EU VAT articles that were in focus for this case were articles 2(1), 14(1), 15(1), and 24 (1). Article 2(1) defines the supply of goods and services provided on the territory of any EU Member State as subject to VAT.

While Article 14(1) defines the supply of goods as the transfer of the right to dispose of tangible property as if the recipient were the owner, Article 15(1) defines electricity as tangible property. As such, it qualifies as the supply of goods.

Article 24(1) defines the supply of services, stating that any supply other than goods is the supply of services.

Apart from the article from the EU VAT Directive, Article 4(8) of Directive 2014/94/EU on deploying alternative fuels infrastructure was also an integral part of this case. This article states that operators of publicly accessible recharging points can purchase electricity from any supplier within the EU. Furthermore, Article 4(8) ensures that operators can offer recharging services to EV users on a contractual basis, where they can also act on behalf of other service providers.

Poland National VAT Rules

Two articles from Polish VAT Law, Articles 7(1) and 8(1), were the most important for this case. These articles define the same matter as articles 14(1) and 15(1) of the EU VAT Directive, stating that the supply of goods is the transfer of the right to dispose of goods as an owner and that any supply not considered a supply of goods constitutes a supply of services. 

Importance of the Case for Taxable Persons

The ruling in this case is essential for all businesses operating in the EV charging ecosystem, including Charge Point Operators and E-mobility Service Providers. The ECJ decision clarifies the EU VAT rules for the supply of goods and services, applicable to complex services involving tangible and intangible elements. 

The case explains how complex transactions involving tangible goods and associated services should be treated under the EU VAT regulations. It further defines how VAT is applied, which rate is applicable, and other obligations for businesses involved in these transactions.

In addition, the case provides ECJ reasoning behind determining the primary element of a transaction when multiple components are involved.

Analysis of the Court Findings

Firstly, the ECJ stated that the main task in this case is to determine whether the bundled transactions trigger VAT for two or more supplies or a single supply. If they trigger VAT for only one supply, it must be determined whether it is a supply of goods or services.

The ECJ clarified that although the EU VAT Directive states that transactions should typically be considered distinct and independent for VAT purposes, they form a single transaction if two or more elements are closely linked. This single transaction should be balanced since doing so could positively affect VAT's proper functioning.

Therefore, a complex transaction could have one or more elements that constitute the primary supply. In contrast, other components are considered ancillary or additional supplies that must be treated from a tax point of view, such as the primary supply.

Regarding the complex supply that was the subject of this case, the ECJ determined that it constitutes a single supply and that there are no grounds to split it into several artificially. Moreover, doing that would be opposite to the purpose of the EU VAT Directive.

Furthermore, the ECJ highlighted that although Directive 2014/94/EU mentions electric vehicle recharging services, it does not determine VAT treatment of related transactions. Its purpose is to regulate infrastructure for alternative fuels without affecting the VAT rules and regulations.

The ECJ also stated that the transaction's primary element, electricity supply to EV batteries, qualifies as a supply of goods and requires suitable recharging devices. Using these devices is considered a minimal service inherently tied to the supply of electricity and, as such, does not alter the nature of the transaction as a supply of goods. Providing technical support to users is an additional service that enhances users' ability to consume electricity, but it does not constitute a separate or primary supply. The same applies to providing IT applications for booking connectors and overviewing payments and purchase credits.

The ECJ added that the transfer of electricity is the predominant element of a single complex supply and that additional services aim to make electricity use more efficient and easier.

The way the prices are calculated, whether on the quantity of electricity used, duration of the session, or charging speed, does not affect the primary supply, which in this case is the electricity supply. 

Courts Final Decision

In the end, the ECJ ruled that the single complex supply that includes access to charging infrastructure, electricity supply, technical support, and IT services for EVs must be treated as a supply of goods under the EU VAT Directive.

The predominant supply, electricity, defines the classification for all associated services. Under this decision, ancillary or additional services must be treated like the primary supply. This means that all additional services are treated as a supply of goods since the predominant element of the transaction is the supply of electricity, which falls under the supply of goods.

Conclusion

Companies operating in the EV industry, specifically EV recharging stations, must consider the ECJ's clarifications and decisions before engaging in those activities. Engaging in these activities in multiple EU Member States may require VAT registration in each country.

The ruling represents a significant development in the applicable VAT rules for EV charging, which will become increasingly important in the upcoming years. The VAT treatment of EV-related goods and services will only further evolve. That is why a ruling like this one should be used as a compass for businesses and other professionals and consultants involved in the industry. Moreover, any future disputes with a similar issue will be ruled based on the conclusion stated by the ECJ in this case.

Source: Case C‑282/22 - Dyrektor Krajowej Informacji Skarbowej v P. w W., EU VAT Directive, Directive 2014/94/EU on the deployment of alternative fuels infrastructure Text with EEA relevance