Fuel card market to change significantly?
The application of VAT on fuel cards is a much debated topic among the professional public, mainly due to the lack of relevant legislation. The EC's VAT Committee has issued a working paper which rather surprisingly does not entirely conform to the usual administrative practice.
According to existing practice, fuel card issuers in the most usual business models (‘buy/sell’ or ‘commissionaire’ model) carry out two transactions from a VAT viewpoint:
- purchase of goods (fuel) from the fuel station owner and
- delivery of goods (fuel) to the vehicle operator.
This was also the view expressed by the European Commission's VAT Expert Group in the spring, and according to the information available to us, this approach has so far also been respected by the domestic financial administration.
The VAT Committee has now responded to the Expert Group's views, adopting a relatively surprising position: for the standard buy/sell model it can be argued that the fuel card issuer does not at any moment acquire the right to dispose of the fuel as the owner. In line with CJEU Judgment C-235/18 Vega, the Committee concluded that the fuel card issuer merely finances the purchase of fuel on behalf of the vehicle operator, i.e., provides a financial service exempt from VAT.
On the other hand, for the commissionaire model the VAT Committee agrees with the existing interpretation, i.e., it recommends that the transactions carried out by fuel card issuers in a chain of transactions should continue to be viewed as the acquisition and subsequent supply of goods (fuel).
We do not yet know the response of the Czech financial administration to the Committee's stance. Since a broad interpretation of the Committee's conclusions may have an adverse impact on the fuel card market, we recommend preparing for this situation well in advance.