The CJEU judgment: Fuel cards do not entitle to VAT deduction
The Court of Justice of the European Union (CJEU) in its judgment of 15 May 2019 with regard to the Vega International Car Transport and Logistic – Trading GmbH against Director of Tax Chamber in Warsaw (docket no. C-235/18) decided that provision of fuels cards constitutes a financial service similar to providing credit. It implies that issuers of fuel cards and their clients have no rights to deduct the VAT resulting from expenses for the purchase of fuel.
The case concerned Vega International, an Austrian company, which provided its subsidiary companies – among others the Polish company Vega Poland – with fuel cards issued by various fuel suppliers. The Austrian company received invoices from fuel suppliers together showing applicable VAT and at the end of every month re-invoiced the fuel to entities from the group, adding a 2% margin. Then Vega International filed motions for tax refund. The Polish tax authorities, however, denied the tax refund, indicating that the company did not sell fuel to subsidiaries, but provided service of financing fuel purchasing, which is exempt from VAT.
The issue was referred to the Supreme Administrative Court, which sought a preliminary ruling from the CJEU, aksing whether activities consisting in provision of fuel cards and negotiating, financing and settling fuel purchases using those cards should be deemed as a financial service or chain transactions whose purpose is to supply fuel.
According to the CJEU, Vega International does not deliver goods, because it doesn’t own fuel itself. Subsidiary companies acquire it directly from sellers at their discretion and make decisions regarding the terms of the transactions, such as quantity, time and place of purchasing fuel. It cannot therefore be presumed that the parent company purchases fuel and then re-sells it. The CJEU emphasizes that providing fuel cards to a subsidiary company constitutes a financial transaction similar to granting credit. Such a service is exempt from VAT, thus neither issuers of fuel cards nor their clients can deduct the tax included in the price of fuel.
The CJEU judgment may result in the tax authorities questioning current settlements between fuel card issuers and those using them. However, it should also be noted that there are various models of fuel cards, and a proper assessment of the influence the judgment will have on the settlements of fuel purchases by means of fuel cards will be dependent on the circumstances of each particular case. Agreements between of the parties to the relevant transactions are decisive rather than the mere fact of fuel card use. It is useful then to verify the provisions of already existing agreements in view of the conclusions from the verdict.
Anna Skórska, Tax Consultant, ATA Tax Sp. z o.o.
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