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Development in administrative practice for fuel cards

The VAT treatment of fuel cards is a closely watched topic. Although the cards are frequently used by vehicle operators to refuel, the VAT Act does not offer any detailed guidance on the correct application of the tax: the VAT treatment of these transactions has always been based on general principles and on interpretations of international case law. Recently, the European Commission's VAT Expert Group has commented on this topic.

The most used business model is the ‘Buy/Sell’ model: when getting fuel, the vehicle operator purchases fuel from the service station operator in the name and for the account of the fuel card issuer. The transaction thus includes three parties: the service station operator, the card issuer, and the vehicle operator. From a VAT perspective, purchasing fuel is regarded as two consecutive supplies of goods (fuel) — the service station operator supplies it to the card issuer, and the card issuer supplies it to the vehicle operator. Physically, the vehicle operator takes the fuel from the service station operator. In practice, the ‘Commissionaire’ model is also used, which involves the same VAT treatment as the ‘Buy/Sell’ model.

This VAT treatment has so far been accepted by the financial administration. An alternative approach was formulated by the Court of Justice of the European Union in judgement No. C-235/18 Vega. However, the judgment concerned a rather less common situation, where the owner of the fuel card (a parent company) provided the card to their subsidiary acting as a subcontractor for the parent company. The court regarded the transaction between the parent company and the subsidiary to be a financial service exempt from VAT (not a supply of goods — fuel).

Following the CJEU judgment, the VAT Expert Group carried out a detailed analysis, considering the specificities of the fuel card market. According to their conclusions, the Vega case must be viewed solely in the context of the very specific situation, and the related conclusions of the court must be interpreted narrowly. The VAT Expert Group is of the opinion that adopting a wider application of the judgment would have an adverse impact on the fuel card sector.

The Expert Group's comments have now been submitted to the European Commission's VAT Committee. According to the information available to us, the Committee’s standpoint will be of essential importance also for Czech financial administration, as it will most likely respect the conclusions issued.