CJEU: Electricity is commodity
The Court of Justice of the EU (CJEU) has ruled that a German company must charge Swedish VAT on supplies of electricity at charging stations in Sweden. The judgement provides clear rules for the taxation of electricity and highlights differences from the well-known Vega International case. The company must now apply commissionaire structure rules and reassess its tax obligations.
A German firm had initially assumed that its role consisted of the provision of network access services and not the supplies of goods. This interpretation led it to not charge Swedish VAT. However, the court's decision changed this practice.
The company acted as an intermediary (commission agent), buying electricity from charging point operators and then supplying it to end users. The court held that this was a commission contract. Although the company was acting in its own name, it was in fact doing so on behalf of the operators of the charging points. This created the legal fiction of two separate supplies: first from the operators to the German firm, and then from the German firm to customers.
Apart from the supply of electricity itself, the company also provided services of access to the network of charging points via cards and apps, offered users information on the prices, availability, and location of charging stations, as well as other features including route planning. For these services, the company charged a fixed fee independent of the amount of electricity consumed. The referring court, i.e. the Swedish court, has yet to assess whether this service was an independent supply or part of the electricity supply.
The court's decision clarified the tax treatment of charging electric vehicles. In this context, electricity is considered tangible goods. Unlike in the Vega case where the court concluded that the supply was a credit service, here the supply of electricity is clearly defined as a physical supply subject to VAT at the place of consumption.
The Vega International case dealt with a parent company providing fuel cards to its subsidiaries. The court at the time determined that this was a financial service and not subject to VAT on the grounds that it was the case of fuel financing rather than a direct fuel supply. Contrariwise, the German company had physically supplied the electricity, and the transactions had been subject to VAT in Sweden where the consumption had taken place.
The difference between the two cases lies in the nature of the provided supply. The CJEU emphasised that if the German company was responsible for the physical supply of electricity, it could not be regarded as a provider of financial services. It must therefore charge Swedish VAT and at the same time comply with the commissionaire structure rules.
What does the decision mean for the German company? It will have to adapt its business model and ensure compliance with VAT rules. At the same time, the judgment sets the standard for other providers of electromobility services in the EU.