Fuel cards

On 15 February 2021, the Polish Ministry of Finance issued a general tax ruling n^o. PT9.8101.3.2020 regarding the fuel cards.

The general tax ruling relates to the so-called tripartite model where:

• there are 3 entities - a supplier (e.g., a fuel station), an intermediary operator (an intermediary that makes fuel cards available to the recipient, e.g. a lessor, a parent company) and a recipient (an entity that uses fuel cards to purchase fuel from the supplier, e.g. a lessee, a subsidiary) and
• the intermediary entity is not an issuer of fuel cards.

In the case of this type of transaction, in order to determine the correct method of taxation (i.e. whether the transaction is a chain supply of goods subject to VAT or a financial service transaction exempt from VAT) it is necessary to analyze whether it meets the criteria indicated in the general tax ruling:

1. the fuel is purchased by the recipient (the cardholder) directly from suppliers operating petrol stations;
2. solely the recipient decides on the means of fuel purchase (the choice of the place of purchase), the quantity and quality of fuel, the time of purchase and the manner of fuel use;
3. the customer (except for the intermediary entity) bears the entire fuel purchase cost;
4. the role of the intermediary operator is limited to providing the customer with a financial instrument (the fuel card) enabling the purchase of goods.

In a situation where the above-mentioned 4 criteria are jointly met, transaction involving fuel cards executed in the model involving three parties should be qualified as a service transaction as a rule exempt from VAT (this means that in such a situation the recipient is not entitled to deduct VAT if the intermediary operator incorrectly issues an invoice with the added VAT amount). On the other hand, if at least one of the conditions specified in the general tax ruling is not met, then tripartite transactions using fuel cards should, as a rule, continue to be treated as chain supplies of goods.

Other models than the one indicated in the general tax ruling, e.g. those in which there are more than 3 entities in the chain (a fuel station which is a franchisee, a fuel concern, a lessor, a lessee) or those in which an intermediary entity issues fuel cards, are not covered by the scope of the general tax ruling. Therefore, the principles of VAT taxation of such transactions should be determined individually on the basis of applicable regulations and current tax practice. In the case of transactions of this type, there is also a chance to secure VAT settlements with an individual tax ruling.

We also draw attention to the fact that on the occasion of the publication of the general tax ruling, the Ministry of Finance posted a release in which it informed that individual tax rulings issued pursuant to Article 7 section 8 of the VAT Act, which was repealed as of 1 January 2021, are no longer valid.

The position taken by the Ministry of Finance is controversial, as in the explanatory memorandum to the amendment act introducing the SLIM VAT package it was indicated that Article 7section 8 of the VAT Act was an "over-regulation with respect to EU law" and its removal was of an "ordering" and not "amending" nature. On the other hand, it is to be expected that as a result of the repeal of Article 7 section 8 of the VAT Act, tax offices may now refuse to give effect to individual tax rulings issued in respect of this Article.

Most individual tax rulings on fuel card transactions were based on Article 7 section 8 of the VAT Act. Therefore, they may be considered invalid after 1 January 2021. We would like to draw your attention to the fact that when the model in which you operate corresponds to the tripartite model indicated in the general tax ruling, the Director of the National Tax Information (pol: DyrektorKrajowej Informacji Skarbowej) may refuse to issue a new individual tax ruling.

Incorrect classification of fuel card transactions may lead to VAT arrears as well as additional tax liabilities and default interest. Therefore, if you make purchases with the use of fuel cards or act as an entity providing fuel cards, we recommend that you analyze your settlements in this respect by taking the following steps:

1. if you have an individual tax ruling concerning fuel card settlements, you should verify whether it is valid after 1 January 2021;
2. you should examine in which transaction model you operate - if you are subject to the general tax ruling, complying with it provides comparable protection to complying with the individual tax ruling; on the other hand, if you are not subject to the general tax ruling, you should establish taxation rules based on the current legal status; in this case, you may also consider applying for an individual tax ruling, if the previously issued individual tax ruling is no longer valid or you have not applied for an individual tax ruling so far.

Should you be interested in our support in analyzing fuel card transactions, please contact Mazars Tax Advisory Department.