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ECJ C-4/20 (ALTI)- AG Opinion – Does the joint liability of a customer for unpaid VAT by the supplier also include default interest?

On January 14, 2021, the ECJ issued the AG Opinion on the case C-4/20 (ALTI), see below.


Article in the EU VAT Directive

Article 205 of Council Directive 2006/112/EC

Article 205
In the situations referred to in Articles 193 to 200 and Articles 202, 203 and 204, Member States may provide that a person other than the person liable for payment of VAT is to be held jointly and severally liable for payment of VAT.


Facts

The applicant, Alti OOD, is a Bulgarian limited liability company. In 2004, the applicant (customer) purchased from the Bulgarian one-person limited liability company, Fotomag EOOD, (supplier), a combine harvester, a tractor and a wagon. The applicant transferred the amounts for this to a bank account of the supplier and made use of the right to deduct input tax. According to an invoice dated April 2014, the supplier in turn bought the mentioned agricultural machinery from SJB Traktors Ltd. After a tax inspection at the supplier, an additional assessment was issued against her on 27-06-2016, finding that the company had declared the intra-Community acquisitions during the tax period April 2014 and had charged the VAT on the first two invoices drawn up for the applicant. All in all, for this period VAT of BGN 86 680 had to be paid, of which the supplier still owed BGN 86 211.82 on the date of the additional assessment. However, this VAT was not paid. A tax check was also carried out at the customer. On 23-02-2018, the competent income tax authorities issued an additional assessment against the applicant, in which she was obliged under Article 177 of the ZDDS, as a joint and several debtor, to pay the VAT included in the three invoices drawn up by the supplier but not paid. meet. The applicant has objected to the additional assessment. Since she did not agree with the outcome of the administrative procedure, she lodged an appeal against the administrative act with the administrative court of first instance. It is disputed between the parties whether the applicant knew or should have known that its supplier would not pay the VAT. The administrative court in first instance ruled that joint and several liability also includes the payment of default interest. The applicant submits that the knowledge that the supplier will not pay VAT has not been demonstrated and that, by analogy with liability for third-party debts, no default interest is due for the period from the payment of the VAT debt to the establishment of the additional assessment. . As she did not agree with the outcome of the administrative procedure, she lodged an appeal against the administrative act with the administrative court of first instance. It is disputed between the parties whether the applicant knew or should have known that its supplier would not pay the VAT. The administrative judge in first instance ruled that joint and several liability also includes the payment of default interest. The applicant argues that the knowledge that the supplier will not pay VAT has not been demonstrated and that, by analogy with liability for third-party debts, no default interest is due for the period from the payment of the VAT debt to the establishment of the additional assessment. . Since she did not agree with the outcome of the administrative procedure, she lodged an appeal against the administrative act with the administrative court of first instance. It is disputed between the parties whether the applicant knew or should have known that its supplier would not pay the VAT. The administrative judge in first instance ruled that joint and several liability also includes the payment of default interest. The applicant argues that the knowledge that the supplier will not pay VAT has not been demonstrated and that, by analogy with liability for third-party debts, no default interest is due for the period from the payment of the VAT debt to the establishment of the additional assessment. . she lodged an appeal against the administrative act with the administrative court of first instance. It is disputed between the parties whether the applicant knew or should have known that its supplier would not pay the VAT. The administrative court in first instance ruled that joint and several liability also includes the payment of default interest. The applicant argues that the knowledge that the supplier will not pay VAT has not been demonstrated and that, by analogy with liability for third-party debts, no default interest is due for the period from the payment of the VAT debt to the establishment of the additional assessment. . she has lodged an appeal against the administrative act with the administrative court of first instance. It is disputed between the parties whether the applicant knew or should have known that its supplier would not pay the VAT. The administrative judge in first instance ruled that joint and several liability also includes the payment of default interest. The applicant argues that the knowledge that the supplier will not pay VAT has not been demonstrated and that, by analogy with liability for third-party debts, no default interest is due for the period from the payment of the VAT debt to the establishment of the additional assessment. . The administrative court in first instance ruled that joint and several liability also includes the payment of default interest. The applicant argues that the knowledge that the supplier will not pay VAT has not been demonstrated and that, by analogy with liability for third-party debts, no default interest is due for the period from the payment of the VAT debt to the establishment of the additional assessment. . The administrative judge in first instance ruled that joint and several liability also includes the payment of default interest. The applicant argues that the knowledge that the supplier will not pay VAT has not been demonstrated and that, by analogy with liability for third-party debts, no default interest is due for the period from the payment of the VAT debt to the establishment of the additional assessment. .

Consideration:

In the main proceedings, the referring court seeks an answer to the question of the applicability of the customer’s joint and several liability under Article 177 of the ZDDS and the extent of that liability. Under that provision, the person registered for VAT purposes who is a customer of the taxable supply or service is liable for the tax payable and unpaid by another registered person, to the extent that the right to deduct input tax directly or indirectly related to tax due and unpaid. The referring court considers that, subject to the case-law of the Court, this provision of the Bulgarian ZDDS is compatible with EU law, in particular with Article 205 of the VAT Directive. It follows from the nature of joint and several liability as referred to in Article 205 of that directive that each debtor is obliged to pay the full amount of the debt and that the creditor in principle retains the freedom to require payment of that debt from a debtor or multiple debtors of your choice. However, the relevant judgments of the Court do not answer the question whether, in view of the nature of joint and several liability and with due regard for the principle of proportionality, a national rule such as Article 16 (3) DOPK, default interest is permissible. For that reason, the referring court considers it necessary to interpret the requirements of the VAT Directive, in particular Article 205 of that directive.


Questions

1. Are Article 205 of Council Directive 2006/112/EC and the principle of proportionality to be interpreted as meaning that the joint and several liability of a registered person, which is the recipient of a taxable supply, for the value added tax not paid by its supplier in addition to the supplier’s principal debt (the value added tax debt) also includes the accessory obligation to pay compensation for late payment in the amount of the statutory interest on the principal debt from the beginning of the debtor’s default until the issuance of the tax assessment notice by which the joint and several liability is established or until the discharge of the debt?

2. Are Article 205 of Directive 2006/112 and the principle of proportionality to be interpreted as precluding a national provision such as Article 16(3) of the Danachno-osiguritelen protsesualen kodeks (Tax and Insurance Procedure Code) according to which a third party’s liability for unpaid taxes of a taxable person includes the taxes and the interest?


AG Opinion

Article 205 of Directive 2006/112/EC on the common system of value added tax is to be interpreted as precluding the inclusion of default interest which is owed by the person liable for payment of VAT by reason of late payment of VAT in the secondary liability of a third party.


Decision


Source


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