Charging stations for electric vehicles - ECJ judgement "P. w W." (C-282/22)

How supplies related to charging stations for electric vehicles should be treated has long been a matter of dispute. Although the VAT Committee has long favoured treating it as a supply of goods, this is not binding on the EU Member States. Now the ECJ has issued a ruling confirming this view.

The facts

The plaintiff intended to set up and operate charging stations for electric vehicles. The charging stations were to be made available to the users, and electricity was to be provided aligned with parameters adapted to the electric vehicle’s batteries. Users would also receive technical support. In addition, they would be provided with an IT application that allowed them to reserve a connection, view their transaction history, and purchase and use credits.

The plaintiff applied to the tax office for an advance tax ruling confirming that all these supplies, including the transmission of electricity, would be treated as supplies of services. The tax office rejected this, stating that there was only a supply of goods: - the electricity. The Polish Court of Cassation then referred the case to the ECJ on the premise that all of the aforementioned elements form a single supply.

ECJ decision: Delivery

Because electricity is treated the same as tangible goods, the transmission of electricity is, in itself, considered a supply of goods. However, the other elements mentioned, when considered separately, are supplies of services.

In its decision of 20 April 2023, the ECJ first clarifies that it is up to the national court to determine whether this should be considered a single supply. There was no objection to the Polish court’s classification. Accordingly, the next step was to determine, from the perspective of an average user of charging stations, which of the elements supplied was the main element. Minimal service elements, which are simply part of the marketing, were not considered. This led the ECJ to the following conclusion:

The supply of electricity requires the use of a charging station, which prevents the supply of goods from being treated as a supply of service. The aforementioned technical support is only of value to the user in that it enables the user to obtain electricity under optimal conditions. It has no other value in, and of, itself. It is therefore simply an ancillary service to the electricity supply and is to be treated in exactly that way for VAT purposes.

The same applies to the provision of the IT application.

Thus, the plaintiff's supply as a whole is a supply of goods.

In the proceedings, it was argued that the fact that the charge was not based on the kilowatt hours delivered, but on the duration of the charging, implied that the supply is a supply of service. The same applied to the fact that fast charging was more expensive than slow charging. This indicates that the user’s focus is not so much on the purchase of electricity itself, but on the fact that the use of a charging station is faster and more convenient than charging at home. However, the ECJ disagreed.

Practical implications

At its 113th meeting on 3 June 2019, the VAT Committee had already come out in favour of treating supplies at charging stations uniformly as supplies of goods. However, the results of the VAT Committee are not binding on the Member States, and in Germany, the tax authorities have not yet taken an official position on the matter. However, the ECJ ruling must be observed by the Member States, which means that there is clarity now.

Whether the sales at the charging station are deemed supplies of goods or supplies of services makes a big difference. Supplies of electricity to users who are not resellers are taxable at the place where the user uses or consumes the electricity, § 3g para. 2 sentence 1 UStG (German VAT Code). This place is where the charging station is located. If the supplier is a foreign taxpayer, the reverse charge procedure would be applicable, § 13b para. 2 no. 5 in conjunction with para. 5 sentence 1 UStG, if the user is a taxable person. In the case of services, however, a differentiation would have to be made: If the user is not a taxable person, the place of supply is where the service provider operates its business, § 3a para. 1 UStG. If, on the other hand, the user is a taxable person, the place of supply according to § 3a para. 2 UStG is at the recipient's location and would be subject to the reverse charge procedure there, § 13b para. 1 UStG.

Determining the recipient's location would be extremely difficult for the operator of a charging station. Classifying it as a single supply therefore considerably simplifies how VAT is handled and is therefore a welcome decision. However, due to the reverse charge procedure for supplies to domestic taxpayers, it remains open as to how they can prove their status as a taxable person.

Dated: 02 June 2023