Case decided on European EV-charging supply chain rules
In October 2024, the Court of Justice of the European Union (CJEU) clarified the new rules regarding VAT treatment of electricity supplied through charging points and whether charging constitutes a supply of goods. The C-60/23 ruling (Digital Charging Solutions GmbH) concluded that an e-mobility network provider of charging stations is part of the electricity supply chain, and is therefore able to deduct VAT.
Tax experts Oliver Lohmar and Marcel Grove from CLA Global member firm dhpg explore the implications of this pivotal ruling and how these transactions should be classified within the EU VAT framework domestically, and in other countries.
The case backstory
It is common practice for e-mobility service providers (e-MSPs) to offer users of electric vehicles access to a network of charging points. Rather than users registering with each charging point operator (CPO), instead they assume contractual relationships with an e-MSP.
For this service, the e-MSP issues users with information about the locations, prices and availability of the charging points. This is usually via an app, or the e-MSP may issue users with a card for authentication at each charging point.
Digital Charging Solutions GmbH is an example of this e-mobility service provider (e-MSP) model. They invoice users monthly for the amount of electricity supplied to the user via charging points, as well as a fixed fee for access to specific network features, e.g. the app, route planner and additional roaming services. This service feature fee is invoiced to users regardless of whether any electricity has been supplied to the user in any given month.
A referral from the Swedish tax authorities sought clarification from the CJEU on whether the charging activity should be treated as a supply of goods or as a service within the current EU VAT directive.
The CJEU determined that EV charging constitutes a supply of tangible goods (electricity) rather than a service.
Determining the delivery provider
Additionally, the inquiry sought confirmation on whether it is the e-MSP or the CPO who is the supplier to the user. Specifically, if electricity is supplied by the CPO to the e-MSP, who in turn supplies electricity to the user, as it is the user who decides on the quantity, time and place of charging, this would constitute a supply chain.
The CJEU clarified that two conditions must be met for this to apply. Firstly, the e-MSP must act under a commission contract in its own name, but on behalf of the user account. Secondly, what the e-MSP supplies in electricity to the users must not differ from the electricity that the grid operator supplies to the e-MSP.
The CJEU also affirmed this in its ruling. This was surprising, as the e-mobility operator clearly incorporates service elements into the supply from the network operator. Nonetheless, the CJEU confirmed the similarity between the two supplies.
With regard to the service elements supplied by the e-MSP, the CJEU has left it to the referring court to determine whether this constitutes independent services or dependent ancillary services. However, the CJEU did clarify that both supplies in the supply chain would be similar even if the e-mobility operator's services were independent supplies.
Practical implications
The CJEU clearly differentiates this case from its previous rulings (Auto Lease Holland - C-185/01 and Vega International - C-235/18) and unequivocally establishes the existence of a supply chain. However, this clarification may complicate matters for e-MSP.
The location of the electricity supply will generally be determined by the location of the charging station, potentially leading to VAT registration obligations. Additionally, the VAT implications of the service elements must be assessed, especially if they constitute an independent supply (which could involve the reverse charge mechanism, if applicable).
If the e-MSP acts solely as a reseller of electricity without providing any additional services, there may also be implications for the supply from the grid operator to the e-MSP.
The CJEU issued their final judgement on 17 October 2024.
For further information
Oliver Lohmar
Senior Partner
dhpg
https://www.linkedin.com/in/oliver-lohmar-579648213/
Marcel Grove
Tax consultant
dhpg
https://www.linkedin.com/in/marcel-grove-856065245/
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