The Final Verdict: EU VAT Treatment of Fuel Cards

On October 21, 2022, the EU Commission Services reached new conclusions regarding the VAT treatment of fuel cards. This discussion was prompted after issues arose from the 2019 ruling by the Court of Justice of the European Union (CJEU) concerning the C-235/18 Vega International case. 

Here’s what businesses need to know about the latest discussions regarding VAT on fuel cards and how it impacts their business. 

The Vega International Case and Its Relevance

This case has been continuously brought to the EU Commission Services’ attention, as the ruling has had a direct impact on whether or not the provision of fuel cards constitutes a ‘financial activity’ or not, which is the ultimate deciding factor on whether or not it is exempt from VAT. Consequently, the ruling directly impacted the VAT treatment of businesses that provide fuel cards to their employees in the EU and, subsequently, on the deductibility of fuel purchased by employees using the fuel card. 

Thus, multiple parties have been trying to establish whether a fuel card scheme supply should be treated as a VAT-taxable supply of fuel or as a VAT-exempt supply of pre-financing services. 

The VEGA ruling introduced a high uncertainty around the proper VAT treatment on fuel cards around the EU, impacting the fuel card sector. This has also led to increasing VAT neutrality issues and rising compliance costs for the trading parties involved. 

The parties involved

To fully grasp the result of the recent discussions and how the conclusions affect your business, it’s essential to understand the role of the key players in the process. 

The VAT Expert Group and the EU Commission Services

What followed between 2019 and the latest meeting has been a long string of discussions concerning the VAT treatment on fuel cards to clear up any contrasting rulings, ambiguity, or confusion. The most recent conference included comments on Working Paper 1046. These comments were elaborated on and presented to the EU Commission Services by the VAT Expert Group. The presentation had their findings, concerns and recommendations regarding fuel card rulings from the Court of Justice of the European Union. 

Most recent conclusions regarding the VAT treatment of fuel cards

The core findings and conclusions touched on two opposing models; the buy/sell vs the commissionaire model. The meeting concluded with the following key takeaways and final thoughts: 

The original ruling from the CJEU stated that to confirm the character of supply during a fuel card transaction (and whether or not it constitutes as a good or service), one has to consider who owns the fuel at the point of transaction. If the right to hold and dispose of the fuel is transferred to the issuer or supplier of the fuel card, then they (the issuer) can be considered as supplying the good (fuel). 

This transfer of ownership is not currently happening under the buy/sell model for fuel cards. This is because the fuel cards are merely an instrument used to purchase fuel from the manufacturer. Therefore the issuer does not qualify as the fuel supplier under the buy/sell model.

However, within the commissionaire model, whereby the commissionaire acts in its own name but on behalf of a principal, the fuel received and delivered by the commissionaire should, in principle, be classified as a supply of goods. Therefore, the issuer qualifies as the supplier. 

To summarise the EU Commission services' input on the matter, establishing where the right of ownership has been transferred to the fuel card issuer is vital in understanding whether or not they qualify as supplying the goods. This does not happen within a buy/sell model but does occur within the commissionaire model regarding fuel card transactions. 

Confirm your VAT on fuel cards

Do you provide your employees with fuel cards in the EU? Do you want to know whether VAT on fuel can be reclaimed when using fuel cards? Get much-needed clarity on the VAT treatment for your business activities within the EU. Contact experts in the field who will guide you through the process with ease and ensure that you're fully compliant.