Comments on ECJ C-276/24: Joint and several liability for VAT in addition to refusal to deduct VAT not contrary to EU law

CJEU rules joint liability complements deduction denial in combating VAT fraud

CJEU Judgment Overview: On July 10, 2025, the Court of Justice of the European Union (CJEU) ruled in Case C-276/24 that member states can simultaneously deny input VAT deductions and impose joint liability for unpaid output VAT on purchasers who knew or should have known of fraud, provided the principle of proportionality is respected.
Complementary Measures Against Fraud: The court clarified that denying input VAT serves to penalize dishonest traders, while joint liability ensures efficient tax collection by holding others in the transaction accountable. This dual approach is seen as complementary and necessary to combat VAT fraud effectively without undermining the principles of neutrality and equal treatment.
Implications for Tax Compliance: The ruling emphasizes the importance of diligent supplier checks by businesses to avoid exposure to both loss of VAT deductions and liability for unpaid taxes. It provides tax authorities with flexible tools to combat fraud, ensuring the integrity of the EU VAT system while reinforcing the need for compliance among taxable persons.

Joint and Several Liability Upheld: The Court of Justice of the European Union (CJEU) confirmed that the Czech Republic did not violate EU law by holding FAU jointly and severally liable for the unpaid VAT of Verami International Company. This ruling was based on the involvement of both companies in a chain of trade linked to VAT fraud.
Irrelevance of Input VAT Deduction Denial: The CJEU determined that it was irrelevant to FAU’s liability that its right to deduct input VAT was refused due to the VAT fraud associated with Verami. The court emphasized that this refusal did not lead to unjust enrichment for the tax authorities.
Tax Authorities’ Measures Justified: The ruling clarified that the tax authorities’ actions aimed to ensure the collection of owed VAT amounts from both FAU and Verami, reinforcing the principle that tax compliance mechanisms are necessary to uphold tax obligations in cases of fraud.

Background of the Case: Konreo, the bankruptcy trustee of the Czech company FAU, faced a situation where FAU had purchased fuel from Verami, which committed VAT fraud and went bankrupt without paying the VAT. FAU was denied the right to deduct VAT due to its involvement in the fraud and was also held jointly liable for the VAT owed by Verami.
CJEU Ruling on Dual Measures: The Court of Justice of the European Union (CJEU) ruled that it is permissible to deny a taxpayer the right to deduct VAT while also holding them jointly liable for VAT that their supplier failed to pay. The court emphasized that these measures serve complementary purposes—preventing fraud and ensuring effective VAT collection.
Principle of Proportionality Upheld: The CJEU concluded that applying both measures simultaneously does not violate the principle of proportionality. It clarified that national tax authorities can employ a “dual approach” in cases of VAT fraud to enhance the effectiveness of fraud prevention without resulting in unjust enrichment for the tax authorities.