No right to deduct VAT for the purchase of fuel cards if the transaction is considered a financial service

Entities who initially purchase fuel cards used for cashless supplying of fuel to companies do not buy and resell fuel, but they provide a financial service involving crediting the purchase of this fuel. Therefore, they are not subject to VAT, and their users do not have the right to deduct input tax on the fuel purchased with the use of this card (a judgement of the Court of Justice of the European Union (hereinafter the CJEU) of 15 May 2019 (C-235/18).

The actual status:
The judgement was issued in the case regarding a company supplying all its subsidiaries with fuel cards issued by various fuel suppliers. Vehicles transported by a subsidiary of this company are refuelled with the use of fuel cards bearing the names of drivers. For organisational reasons and due to the costs amounts, all transactions made with the use of fuel cards are executed centrally by the company who receives invoices from fuel suppliers indicating in particular the purchase of fuel together with VAT. Then, at the end of each month, the company re-invoices to its subsidiaries the costs of fuel made available for providing vehicle transport services, and charges them with an additional margin at 2%.

Resolution:
In the court’s opinion in the described situation the company does not supply goods to its subsidiaries (namely fuel, in this case). This is because the entity issuing the card does not dispose of the fuel as its owner. The goods are purchased not by the card issuer but by the card user directly from fuel companies. The user decides on the selection of a fuel supplier, its amount and the moment of using the card. The card only enables the payment for this fuel.

The court decided that by applying the margin of 2% the company received the remuneration for a service provided to its subsidiary. Therefore, the company provides a financial service by financing the purchase of fuel in advance, therefore it operates in this regard as a regular finance or credit institution.

The consequences of the resolution adopted by the court may be of major significance. This is because financial institutions are exempt of VAT, which limits the right to deduct input VAT in connection with its purchase. Considering a fuel card a VAT exempt finance service may therefore result in no possibility to deduct the input VAT.
Source: Tax Advisors Group

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