Development of administrative practice in VAT treatment of fuel cards
The application of VAT on fuel cards has been a highly scrutinised topic. Fuel cards are often used by vehicle operators for refuelling. In September this year, the VAT Committee issued new guidance after re-visiting the EU Court of Justice's ruling in the Vega International case. The Czech tax administration is expected to follow up on this guidance early next year and issue its own information on the subject.
The most common business model applied to the sale of fuel using fuel cards is the buy/sell model: when refuelling, the vehicle operator purchases fuel from the service station operator on behalf and for the account of the fuel card provider. There are three parties involved in the transaction - the service station operator, the card issuer, and the vehicle operator. The fuel is physically withdrawn directly by the vehicle operator from the service station operator.
The VAT Committee has confirmed that the activities of fuel card issuers can generally be considered financial services exempt from VAT. However, if the model has been structured correctly, fuel card issuers can act as both buyers and sellers of fuel. The guidance specifically sets out the conditions under which refuelling is treated as two related supplies of goods (fuel) - the petrol station operator makes a supply to the fuel card issuer, and the fuel card issuer makes a supply to the vehicle operator, i.e., a situation de facto similar to current administrative practice in the Czech Republic. These are the following basic conditions:
- The legal ownership of the fuel is transferred to the fuel card issuer.
- The fuel supplies to the fuel card issuer and the vehicle operator are the same.
- There is a written contract between the fuel card issuer and the fuel card holder.
We will monitor the extent to which the Czech tax administration implements the VAT Committee's guidance. The tax administration has promised that if administrative practice changed, it would nonetheless allow the current practice to continue for some time.