On 17 February 2021, the Polish Minister of Finance issued a general ruling regarding proper classification of transactions carried out with the use of fuel cards for VAT purposes (case file PT9.8101.3.2020). Fuel cards are a benefit frequently added to services offered by car leasing companies and fleet management entities.
A leasing company provides the user with a fuel card, by means of which they may purchase fuel and other commodities at gas stations enrolled in the fuel card program. Such a solution is very convenient for the users, since they receive a single invoice covering all purchases made by individuals using the fleet and are sometimes granted additional discounts. Moreover, discounts on the value of fuel purchased may constitute an additional source of earnings for fleet management companies.
Under the existing fuel card model, the fuel is sold by the supplier running the gas station (A) to the intermediary operator (B) and then re-sold to the recipient (C).
The question remained whether re-sale of fuel to the recipient by the intermediary operator actually takes place, given that it is the recipient who actually performs the transaction at the gas station. This issue was eventually brought before the Court of Justice of the European Union (CJEU). The first important judgment in this matter was issued by CJEU in the case Auto Lease Holland BV v Bundesamt für Finanzen (case file C-185/01), in which the authority stated that in situations where the fuel card user (C) purchases fuel directly from the supplier running the gas station (A), the supply of goods (i.e. of fuel) takes place directly between these entities and the fleet management company (B) provides solely a financing service of a kind.
However, it is not the only ruling in this context. In the case Vega International Car Transport and Logistic (case file C-235/18), CJEU, citing the judgment in the case of Auto Lease Holland, found that transactions intermediated by a fleet management company cover:
1) supply of goods (namely fuel) made between the supplier running a gas station (A) and the end user (C),
2) financing service rendered by the fleet management company (C), consisting in ensuring the possibility of payment and settlement of transactions.
Position of the Ministry of Finance
In this context, it must be kept in mind that Article 7(8) of the Polish VAT Act, which constituted a legal basis for individual rulings supporting the stance that transactions carried out with fuel cards should be classified as re-invoiced supply of goods, was repealed on 1 January 2021.
Thus, a large group of taxpayers ceased to be protected by individual rulings on settling fuel card transactions, issued under the revoked Article. Subsequently, the Ministry of Finance issued a general ruling instructing that the sale of fuel directly by the supplier running a gas station to the end user (excluding the intermediary operator being the fleet management company) takes place only if the following conditions are jointly met:
1) the goods are purchased by the recipient (the fuel card holder) directly from the suppliers;
2) the recipient (user), at their sole discretion, decides on the method of purchase of goods (the place of purchase), the amount and quality of goods purchased, as well as the moment of purchase and the way the goods will be further used;
3) the costs of the purchase of goods are wholly borne by the recipient (excluding the intermediary operator);
4) the role of the intermediary operator is limited to making the financial instrument enabling the purchase of goods available to the recipient.
Although the conditions specified above may seem unclear, they should be interpreted through the prism of the judgments issued by CJEU, specifying the framework within which taxpayers should operate.
Moreover, the very attempt at providing conditions under which a transaction can be treated as a supply of goods for VAT purposes is a move in the right direction and contributes to determining a unified approach to the issue. Nevertheless, it remains of key importance for entities participating in the fuel card scheme to determine whether under the contracts in force fuel card transactions may be treated as supply of goods.
Importantly, practice shows that fleet management contracts include various provisions (on making fuel cards available to users) which set forth various terms of cooperation between the entities involved. In fact, older contracts did not specifically outline the scope of cooperation between the entities involved in the chain transaction.
Implications for taxpayers
Loss of protection ensured by the rulings means that taxpayers, in particular fleet management companies and fuel card users, may now have to re-assess their VAT settlements.
Challenging the nature of transactions settled with the use of fuel cards (i.e. forcing the opinion that it is a financing service subject to VAT exemption and not a form of re-invoicing sale of fuel) may lead to a situation where VAT settlements of the user or the fleet management company are contested by the authority.
Moreover, it can give rise to business risk which should be immediately addressed, especially given the fact that customers of fleet management companies may now want to revise the contracts in force and, consequently, modify the way such services are rendered.
Firstly, companies should review their fleet management contracts and verify them against the requirements provided in point 3 and 4 of the general ruling. Importantly, in the context of point 4, the functions performed by the fleet management entity should be thoroughly analysed, since, in practice it may turn out (and it usually does) that they extend beyond being merely a passive agent.
Tomasz Dereszewski, Manager, Tax FS Department, KPMG in Poland