Close
An overview by Flick Gocke Schaumburg, Taxand Germany
The German Federal Ministry of Finance has recently incorporated the European Court of Justice (ECJ)’s 2019 Vega International ruling into its administrative guidelines, clarifying the VAT treatment of fuel card transactions.
Following principles set in Auto Lease Holland (2003), the ruling confirms that fuel card arrangements typically represent a financing service rather than a chain transaction, unless specific conditions are met. The new guidance, effective since 21 January 2025, provides legal certainty in Germany but leaves questions on its applicability to EV charging and international cases.
Rainald Vobbe and San Kim from our German member firm Flick Gocke Schaumburg have analysed this move and its implications in further detail below:
Update on VAT treatment of fuel card transactions
Do fuel card transactions constitute a supply of goods in a chain, or are they merely a form of credit? When it comes to the VAT treatment of fuel card transactions, this has been the perennial question since a 2019 decision by the ECJ. In its circular of 21 January 2025, the Federal Ministry of Finance adopted the principles laid down by the ECJ almost six years previously in Vega International into its administrative instructions.
As a result, the administrative guidelines on the assessment of fuel card agreements between lessor and lessee should now apply to all unresolved cases concerning the issue of fuel cards. The criteria for distinguishing between chain transactions and financial services in the vehicle leasing sector were originally laid down by the Federal Ministry of Finance in its circular of 15 June 2004, based on the ECJ judgment in Auto Lease Holland.
ECJ judgment of 6 February 2003 in Auto Lease Holland
The Auto Lease Holland case dealt with a vehicle lessee who was permitted to fill up with fuel in the name and on behalf of the lessor on the basis of an agreement with the lessor. For this purpose, the lessee received a fuel credit card that was charged to the lessor. Each month, the lessee paid the lessor one-twelfth of the likely annual fuel costs. The account was then settled at the end of the year according to the actual consumption. A supplementary charge was due for fuel management.
In this case, the ECJ rejected the interpretation that the supply of fuel passed first from the oil companies to the lessor and then from the lessor to the lessee. The Court held that it was the lessee – exclusively and directly – that had the right to dispose of the fuel as its owner. At no time did the lessor have the right to decide in what way the fuel must be used or to what end. The monthly payments to the lessor constituted only an advance. The actual consumption, established at the end of the year, was the financial responsibility of the lessee who, consequently, bore the entire costs of the supply of fuel. Accordingly, the fuel management agreement was a contract between the lessee and the lessor to finance the purchase of fuel, with the lessor acting as the lender.
ECJ judgment of 15 May 2019 in Vega International
In Vega International, on which the new Federal Ministry of Finance circular is based, a parent company provided fuel cards to the employees of its subsidiary who transported vehicles from the factory to the customer. The costs of the fuel were later charged to the subsidiaries with a surcharge of 2%. Here, too, the parties had assumed a chain of supply (oil company to Vega International, then Vega International to the local subsidiary, e.g. Vega Poland) and that the recipient was entitled to an input tax deduction.
However, the ECJ rejected this assumption and held instead that the parent supplied a service in the form of credit granted to its subsidiaries. According to the Court, the principles of the Auto Lease Holland judgment are transferable. The parent did not have the right to dispose of the fuel. Rather, the fuel was purchased by the subsidiaries at their own discretion, and the subsidiaries were free to decide on the quality, quantity and type of fuel, as well as when to purchase and how to use it. In addition, the subsidiaries ultimately bore the costs of the purchase.
Federal Ministry of Finance circulars of 15 June 2004 and 21 January 2025
The principles of the German tax authorities, which are based on the Auto Lease Holland judgment and, following the Vega International case, are now applicable to all transactions in the fuel card business, are therefore as follows:
A chain transaction of fuel supplies from the oil company to the issuer of the fuel card and from the latter to the user of the fuel card, i.e. the person who actually refuels, can be assumed only under certain conditions. In particular, there must be no separate agreement on fuel management or the granting of credit. The vehicle must be refuelled clearly in the name and for the account of the fuel card issuer, and the fuel card issuer must not have exercised its right to prohibit refuelling in its name and for its account. The payment for the transaction must be agreed separately between the parties involved at each supply stage, with each party bearing its own risk of default. Claims for default must be asserted in the relevant contractual relationship.
If one of these conditions is not met, the administrative opinion is that a financing transaction must instead be assumed. This means that fuel is supplied only by the oil company to the user of the fuel card. The fuel card issuer merely pre-finances the purchase of the fuel. Strong indications of a financing transaction include agreements on fuel management or the granting of credit, and fuel card users refuelling the vehicle in their own name.
Conclusion
The Federal Ministry of Finance circular of 21 January 2025 creates legal certainty, at least within Germany, for fuel card arrangements. However, it remains unclear whether the principles can also be applied to the treatment of service chains for charging electric vehicles.
Neither does the Federal Ministry of Finance address the comments of the EU Commission’s VAT Expert Group (VEG) on the ECJ judgment Vega International from September 2023. For foreign cases, the VEG guidelines for the fuel card sector can at least provide an indication, even if they are not binding. Under the guidelines, a supply chain can be assumed only if the fuel card system is structured as a commissionaire model. However, since German administrative practice has not yet examined this requirement, we recommend a case-by-case view.
For similar content to our Global Guide, subscribe to our mailing list and keep up to date.