ECJ C-276/24 (KONREO) – Questions – Should the customer be liable to pay VAT in case of fraud?

The ECJ has released the preliminary ruling C-276/24 (KONREO).

Article in the EU VAT Directive

Article 205 of the EU VAT 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 (Summary)

The applicant, as the insolvency administrator of FAU, challenges the liability for VAT payments issued by the Financial Administration of the Czech Republic.
FAU was involved in a chain of trade connected to tax fraud, and the Financial Administration denied its right to a tax deduction. However, the liability imposed on FAU would result in double taxation for the same commercial transaction.
The defendant argues that denial of the tax deduction and liability are both applicable in cases of tax fraud, as they serve to prevent unjust enrichment. The simultaneous application of both rules is logical and does not breach the principle of tax neutrality or equal treatment of taxpayers. The applicant argues that applying only one of these rules would be sufficient to protect the public treasury without imposing triple taxation on the same transaction. The principle of proportionality should override the literal interpretation of the law.

Questions

Does Article 205 of Council Directive 2006/112/EC on the common system of value added tax, in conjunction with the proportionality principle, preclude a
national practice whereby the liability for the payment of value added tax by a supplier of a taxable transaction may be applied to the recipient of that transaction, even though the recipient of the taxable transaction has already been denied a right to a tax deduction due to its involvement in tax fraud?

Source