On 15 May 2019, the ECJ published its judgment in the Vega International case (C-235/18) confirming its previous judgment in Auto Lease Holland (C-185/01) relating to the VAT treatment of intercompany payments for the use of fuel cards.
The subsidiaries of Vega International transported commercial vehicles from the factories to the customer. The Austrian parent company (Vega International) provided fuel cards to its subsidiaries enabling them to refuel the vehicles they transported. Vega International received invoices from the fuel suppliers for the purchase of fuel with the applicable VAT. Subsequently, the parent company passed on those costs of the fuel supply with a surcharge of 2% to its subsidiaries.
The Polish tax authorities refused to refund the VAT to Vega International relating to the purchase of fuel in Poland arguing that the contract concluded with the Polish subsidiary did not constitute a supply of goods, but a contract to finance the fuel purchase, the latter of which does not allow for VAT reimbursement as financing activities are VAT exempt.
In the appeal proceedings, the Polish Supreme Administrative Court referred a question for preliminary ruling to the ECJ. It asked whether the concept of ‘service granting credit’ under Article 135(1)(b) of the VAT Directive (EU) 2016/112 includes transactions consisting in the provision of fuel cards by the parent company to its subsidiaries for the purchase of fuel or whether said provision of fuel cards should rather be qualified as a complex transaction the main objective of which is the supply of fuel and thus the supply of goods, in respect of which it is possible to recover VAT paid.
In its ruling, the ECJ confirmed its Auto Lease Holland decision of 2003 stating that the ‘supply of goods’ requires a transfer of the right to dispose of tangible property as its owner, meaning a right to decide how the goods will be used. The ECJ decided that Vega International does not own the purchased fuel as if it was the owner since the parent entity only acted as an intermediary providing the equipment (the fuel cards) to its subsidiary enabling it to purchase the fuel. Instead, the Polish subsidiary was considered to take all decisions regarding the purchase of fuel (quality, quantity, type of fuel) and bearing the costs connected thereto, rendering it the entity having the right to dispose of the fuel.
The surcharge of 2% imposed by Vega International was qualified as a payment for providing financing services entailing the advance payment of fuel for its Polish subsidiary, by which the parent acted as an ordinary credit institution. Intercompany payments for the use of fuel cards do thus not constitute a taxable supply of goods which would allow VAT reimbursement, but a financing service being VAT exempt.