European Court of Justice’s (ECJ) Decision on the interpretation of Article 135

European Court of Justice’s (ECJ) Decision on the interpretation of Article 135 (1)(b) of council directive 2006/112/EC “Member states shall exempt the following transactions: …. (b) the granting and the negotiation of credit and the management of credit by the person granting it”

On the 15th of May 2019, the Court of Justice of the European Union (“ECJ”) issued its judgement on the C-235/18 case – “Vega International” regarding the intragroup recharges made for fuel purchased through the use of fuel cards. The ECJ outlined that the concept of ‘supply of goods’ is not applied in the case. The provision of fuel cards is rather considered a VAT exempt service of granting credit.


1. Facts of the case


Vega International (Austria) is involved in the transport of commercial vehicles from the factories directly to the customers. The transportation service is provided via several subsidiaries of Vega International, including the subsidiary Vega Poland sp. z o.o., established in Poland.

Vega International supplies fuel cards issued by different fuel suppliers, to all its subsidiaries, receiving invoices from the fuel suppliers, and thereafter re-charges its subsidiaries (including Vega Poland) these costs, along with a surcharge of 2%.

Vega International recovered the Polish VAT it incurred on Vega Poland’s fuel expenses, however the Director of the Tax Chamber in Warsaw, Poland refused to reimburse Vega International the VAT relating to the fuel purchased through the use of fuel cards. More particularly, the Polish VAT authorities claimed that Vega International was providing an exempt service of granting credit, as specified in the article 135(1)(b) of the European VAT Directive.

Essentially, the questions that the Court of Justice had to address, was whether the provision of fuel cards is exempt under the Article 135(1)(b) of Directive 2006/112, or whether it is a complex transaction that falls under the “supply of goods” concept, and if VAT could be recovered by Vega International.


2. Summary of the ECJ decision


“No supply of goods (fuel) has been made”

The ECJ pointed out that Vega International does not dispose of the purchased fuel (in respect of which it seeks reimbursement of VAT) as if it was the owner. That fuel is purchased by Vega Poland directly instead, from the suppliers at its sole discretion. Vega Poland also decides on the fuel purchasing arrangements, including the quality, quantity and type of fuel, as well as when to purchase and how to use it.

Also, Vega Poland solely bears the costs connected with such refuelling, as Vega International passes on the costs of that fuel to Vega Poland.

The ECJ therefore ruled that since Vega International was not the recipient of goods (fuel), it could not be considered as the supplier of the fuel to its subsidiaries.

Consequently, since no supply of goods (fuel) has been made, Vega International cannot claim reimbursement of the Polish VAT.

The ECJ stated instead, that Vega International provides its Polish subsidiary fuel cards, being a simple instrument that enables the subsidiary to purchase fuel, therefore has only an intermediary role in the purchase transactions concerning the fuel.

The provision of fuel cards is considered a VAT exempt service granting of credit”

Under the circumstances of the case the ECJ also noted that pursuant to Article 24(1) of Directive 2006/112, any transaction which does not constitute a supply of goods must be regarded as being a “supply of services”.

The surcharge of 2% from Vega International to Vega Poland, is the payment of Vega International for the provision of a financial service to Vega Poland by financing in advance the purchase of fuel, acting thus in the same way as an ordinary financial institution.

The ECJ ascertained that such a supply of services was classified as granting of credit, which is exempt from VAT for the purposes of Article 135(1)(b) of Directive 2006/112.

The ECJ referring to past judgements, highlighted that the transactions exempted under the above article, are defined in terms of the nature of the services provided, and not in terms of the status of the entity providing those services.

As such, in this case, the subsidiaries were given a payment delay for fuel purchases, and the fact that “granting and negotiating of credit” was not provided as a loan by a banking or a financial institution, was irrelevant.


3. Implications of the decision


This ECJ judgment is crucial for businesses and intragroup companies who operate under special arrangements for the re-charging of costs.

Such businesses should carefully review their contractual arrangements, as the consequences of incorrect VAT treatment could be substantial, and VAT recovery could not be permitted.

Finally, the clarifications of the ECJ that the expression ‘the granting and the negotiation of credit’, must be interpreted broadly so that its scope cannot be limited only to loans and credit granted by banking and financial institutions, highlights the importance of the common system introduced by Directive 2006/112, which aims to protect and secure the equal treatment for taxable persons.


How KINANIS LLC can assist

  • VAT advice on identification of the VAT implications of intragroup arrangements
  • VAT Rulings for confirming VAT recovery
  • Assistance on the VAT recovery in co-operation with the VAT authorities



This publication has been prepared as a general guide and for information purposes only. It is not a substitution for professional advice. One must not rely on it without receiving independent advice based on the particular facts of his/her own case.  No responsibility can be accepted by the authors or the publishers for any loss occasioned by acting or refraining from acting on the basis of this publication.


Contact Persons:

Associate – Accounting Department & VAT Department



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