Today's "Tax This and That," like last week, will be electricity-related. This time, however, we'll be focusing on the taxation of electricity consumption. Have you ever wondered whether charging an electric car constitutes a service or the delivery of goods? I suspect that if you don't deal with electromobility on a daily basis, it probably isn't. Even the electromobility industry itself has faced dilemmas on this matter. However, these dilemmas have been resolved by the Court of Justice of the European Union.
The case concerned a company that intended to operate publicly accessible electric vehicle charging stations. It sought confirmation from the Director of the National Tax Information Service that such activity constituted the provision of services. The interpretative body found that the supply of electricity was the principal service, while the provision of infrastructure necessary for charging the vehicle, as well as an application enabling tracking charging progress and costs, constituted an ancillary service. Therefore, the entire activity should be classified as the provision of services.
The Provincial Administrative Court in Warsaw, however, took the opposite view, overturning the company's challenged interpretation. It found that the purpose of the business was to provide users with technologically advanced charging devices, including those enabling fast charging. If the primary service were energy supply, the user could charge their car using their home or workplace network. Furthermore, the price of the service depends on the duration of use of the charging devices, not the amount of energy consumed.
This time, the Director of the National Tax Information Office filed a cassation appeal against the above judgment. The Supreme Administrative Court questioned whether electric vehicle charging services provided by charging point operators should be classified as a single supply of goods or services within the meaning of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax. Therefore, it referred this matter to the CJEU.
The Court recalled that the sale of goods is always accompanied by a minimum level of services provided, and therefore only services distinct from those inextricably linked to the sale of goods can be taken into account in determining the proportion of the supply of services in a complex supply that also includes the supply of those goods. A transaction consisting in the flow of electricity to an electric vehicle battery constitutes a supply of goods, since that transaction authorizes the user of a charging station to consume, for the purpose of propelling the vehicle, the transferred electricity, which, under Article 15(1) of Directive 2006/112, is treated as a thing. Such a supply of electricity to an electric vehicle battery presupposes the use of appropriate charging equipment, which may include a charger that can be integrated into the vehicle's operating system. Consequently, granting access to those equipment constitutes a minimum supply of services that is inextricably linked to the supply of electricity and therefore cannot be taken into account in assessing the proportion that the supply of services constitutes in the overall complex transaction that also includes that supply of electricity.
Providing an app for reserving charging stations, allowing users to track charging progress and costs, is not an end in itself, but rather a means to maximize the use of the electricity supply necessary to power an electric vehicle. It is therefore an ancillary service to that electricity supply. The fact that the price for the service depends on the duration of use of the charging devices, not the amount of electricity consumed, does not prevent this. The amount of electricity supplied depends on the power transferred during this transfer. This calculation therefore reflects the unit price of electricity.
While the issue itself may seem trivial and insignificant, the way a service is classified has specific consequences. It's worth noting that between February 1, 2022, and December 31, 2022, the VAT rate on electricity supplies was reduced to 5%. During the same period, businesses qualifying a service as a service paid 23% VAT. This classification is crucial for transactions with businesses based abroad. The provision of services is taxed in the recipient's country, while the supply of goods is taxed in the country where the goods are located at the time of delivery.
There's also a difference in the invoice issuance deadline. While the standard maximum invoice issuance deadline is the 15th day of the month following the month in which the goods were delivered or the service was performed, in the case of electricity supplies, an invoice can be issued no later than the payment due date.
The timing of tax liability will also vary. In the case of providing an electric car charging service, the tax liability arises upon completion of the service. In the case of the supply of electricity, the tax liability arises upon issuance of an invoice.
The judgment in question therefore has practical implications for both current and future owners of electric car charging stations. The clear ruling that charging electric cars constitutes a supply of goods resolves interpretational doubts in this regard.
This article is for informational purposes only and does not constitute legal advice.
Legal status as of August 3, 2023
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