Globally, the emphasis on sustainability and reducing the ecological footprint is intensifying. The European Green Deal envisions a future with only climate-neutral vehicles to reduce CO2 emissions, driving significant growth in the electric vehicle (‘EV’) sector and related charging infrastructure. The transition from gasoline to electricity as fuel for vehicles is resulting in the emergence of new business models and VAT-related issues, including in the automotive sector. These VAT-related issues are the result of EU VAT legislation that cannot keep pace with all new technologies. This article provides insight into the supply chain for charging electric vehicles involving the Charge Point Operator (‘CPO’), e-Mobility Service Provider (‘eMSP’), and the EV driver. It outlines the potential VAT treatments applicable to the performances conducted by the eMSP, based on the recently published opinion of Advocate General Ćapeta in the Swedish case Digital Charging Solutions (C-60/23).

This article is written by Cem Adiyaman ([email protected]) and Isa van Dijk ([email protected]). Cem is part of RSM Netherlands Business Consulting services with a focus on Strategy consulting & mobility and Isa is part of RSM Netherlands VAT services.

Supply chain for charging electric vehicles

To clarify the parties involved in the supply chain of charging electric vehicles, we briefly outline each party’s roles and responsibilities. The process starts with the Charge Point Operator (‘CPO’). The CPO receives electricity from an electricity supplier, which is then distributed through the CPO’s charging stations. The CPO is responsible for the management and maintenance of these stations, ensuring they are operational and reliable for EV drivers.  

The e-Mobility Service Provider (‘eMSP’) enables EV drivers to utilize the charging points of the CPO. Through the provision of charging subscriptions that include charging cards and/or an app, the eMSP supplies the EV drivers with access to a network of charging points and provides them with real time information on prices, location and availability of the charging points and route planning. The EV driver can initiate the charging process with their charging card, as the eMSP enters into so-called roaming agreements with the CPO’s. These agreements stipulate that all EV-drivers, who authenticate with a charging card from such an eMSP, can charge their electric vehicle through accessible charging stations of the CPO. When the charging card is used, the charging session is registered with the CPO, which then invoices the eMSP for that session. The eMSP bills the EV driver for the quantity of electricity supplied and for access to the network and adjacent services. Perhaps superfluously, the EV driver is the user of the electric vehicle who will charge their vehicle at a charging station of a CPO by using a charging card of the eMSP in order to drive electrically. 

Potential VAT treatments of providing a card and authentication app for charging electric vehicles

There has been ongoing uncertainty regarding the qualification of the services provided by the eMSP to the EV driver. The discussion focusses on whether the complex transaction consisting of the supply of electricity and necessary technical and IT support constitutes a supply of goods and whether such supply is taking place across all stages of the supply chain. Firstly, the CJEU previously ruled that the charging electric vehicles should be qualified as a supply of goods (C-282/22). 

Based on three models, the relationship between the CPO and eMSP and the relationship between the eMSP and the EV driver can be qualified. We will elaborate on these models below.

Model l - VAT exempt financial service

Before the rise of electric vehicles, the Court of Justice of the European Union (‘CJEU’) made several rulings regarding the VAT treatment of the use of fuel cards. The intermediary does not have the right at any time to decide on the quality, quantity, timing, or usage of the fuel. According to the CJEU, fuel is therefore deemed to be supplied directly from the gasoline pump holder to the fuel card user, and the fuel card issuer provides a credit granting service to the fuel card user that is exempt from VAT. 

When transposing the findings of the case law to the supply chain of charging electric vehicles, unpleasant VAT issues arise in respect of the transaction between the eMSP and the EV driver, and is therefore not desirable. Since the eMSP provides a VAT-exempt service to the EV driver, the right to deduct input VAT on the costs incurred by the eMSP gets limited. In addition, Advocate General Ćapeta finds this model unsuitable, as the circumstances in the case of charging an electric vehicle are quite different from those of using a fuel card for a non-electric vehicle. Unlike fueling non-electric vehicles with fuel cards, other cards, or cash at any station, electric vehicles require specific charging systems and designated charging points within the network from the eMSP. Access to these charging points necessitates a card or an app of the eMSP, which are acknowledged not to be payment instruments. 

Model ll – Buy-sell

The buy-sell model considers transactions as sales within a single supply chain. The eMSP purchases the electricity from the CPO and then supplies the same electricity to the EV driver. At first glance, this seems to be an appropriate approach, as the eMSP will contain its right to deduct the input VAT, since it provides a VAT taxable supply of goods to the EV driver.

However, adverse consequences arise for the eMSP if it is classified as a reseller. 

According to EU VAT legislation, the electricity supply is taxable in the country where the eMSP is established. This could, therefore, also be another country where the electricity is actually supplied to the EV driver. This could lead to administrative burdens, accumulation of VAT and refund claims, as the supply of electricity from the CPO to the eMSP occurs in the country where the eMSP is established, while the supply of the identical electricity from the eMSP to the EV driver occurs in the country where the charging station is located. Subsequently, the disparities with the economic and commercial reality of the transactions and complexities in ascertaining the transfer of the ownership of the electricity, make Advocate General Ćapeta question whether the application of an alternative model would be more optimal. 

Model lll – Commissionaire

In the (purchase) commissionaire model, the eMSP purchases electricity from the CPO in its own name but on behalf of the EV driver. The eMSP acts as a commissionaire and as a result of EU legislation and case law, the eMSP shall be deemed to have purchased the electricity from the CPO and supplied the electricity to the EV driver itself. 

Applying this model is the most preferable for the VAT practice and the local EU tax authorities. This model effectively mitigates the risk of administrative burdens, accumulation of VAT and refund claims. 

Advocate General Ćapeta also expresses a preference for the application of this model, since it corresponds with the economic and commercial reality. However, the following two requirements must be fulfilled to apply the commissionaire model: (1) the eMSP must be authorized to act on behalf of the EV driver in the supply of the electricity and (2) the purchased supply of goods by the eMSP from the CPO should be identical to the supply of goods that is supplied by the eMSP to the EV driver.

Forward thinking: determine VAT position

We recommend eMSP’s to ascertain their VAT position within the charging electric vehicles’ supply chain. Please note that despite Advocate General Ćapeta’s preference for the application of the commissionaire model, it remains uncertain whether the CJEU will align with Advocate General Ćapeta’s views. 

We anticipate that future VAT issues will increase, particularly in the automotive sector, due to emerging technologies and the lagging EU VAT legislation. 

If you are a reader more broadly interested in sustainable automobility, we recommend reading RSM Netherlands' Sustainable Automobility report. It will give you a broader picture of the state of affairs in each European member state.

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