The VAT treatment of charging electric cars: guidance from the EU VAT Committee

Electric cars are gaining ground, which also raises questions about the tax treatment of services and products used in their operation. Today's newsletter summarises the current principles of EU case law on this issue.

The VAT Committee of the European Commission acts as an advisory body to promote the uniform application of the provisions of the EU VAT Directive. Although the VAT Committee does not have legislative powers, its guidelines on the application of the VAT Directive play a useful role in shaping Member States' practice. The VAT Committee issued guidelines on the VAT treatment of transactions involving the charging of electric cars in 2019 and 2021.

The VAT Committee's opinion on charging electric vehicles was initiated by the French delegation in 2019. The Commission's discussions on the subject led to the following conclusions (among others):

• the provision of the charging of electric vehicles by an electric charging point operator (hereafter: “e-operator”), constitutes a sale of goods, given that electricity is a tangible good.

In 2021, the Italian delegation questioned the above guidelines and proposed a re-negotiation of the VAT treatment of transactions related to the charging of electric vehicles, because according to their interpretation:

• the VAT treatment of the activity of an electricity supplier (hereinafter: "e-supplier"), which normally participates in the distribution chain of the charging of electric vehicles (e-operator - electricity supplier - end-user), was disregarded during the previous negotiation;
• in their view, the e-supplier does not sell goods to the end user, but provides a service.

In April 2021, the VAT Committee issued the following guidance on the VAT treatment of transactions involving the charging of electric cars:

• in a distribution chain where the e-operator sells electricity to the e-service provider, who then sells this electricity to the end-user (the driver of the electric car), both actors (e-operator and e-service provider) are selling the same goods (electricity);
• in this case, the e-supplier is a re-seller within the meaning of the VAT Directive, whereby the sale of electricity by the e-supplier to the e-supplier is deemed to have been supplied where the e-supplier, as a reselling customer, has its place of business or a fixed establishment;
• the place of supply of electricity sold by the e-service provider as a reseller to the end-user is where the end-user driver actually uses or consumes the energy, i.e., practically, in the country where the terminal is located.

Due to the growing relevance of the subject, different standpoints have recently emerged, which may result in completely different VAT treatments. The VAT Committee has clarified its position on this issue by confirming and appropriately complementing its previous guidance. Although the above position is not binding on Member States, it can serve as a reference for the development of Hungarian taxpayers' practice and in the event of an audit by the tax authorities.

March 1., 2022.

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This newsletter provides general information and does not constitute tax advice