ECJ C-121/24 (Vaniz) – AG Opinion – Joint VAT liability requires existing debtor; no liability post-liquidation

On September 4, 2025, the ECJ issued the AG Opinion in the case C-121/24 (Vaniz).

Context: Reference for a preliminary ruling – Taxation – Value added tax (VAT) – Directive 2006/112/EC – Article 205 – Article 273 – Failure to pay declared VAT – Joint and several liability of a third party – Insolvency and deletion of a taxable person from the commercial register – Principle of legal certainty – Principle of proportionality

Summary

Facts of the Case: Vaniz EOOD, a Bulgarian transport company, engaged in transactions with Stars International EOOD, which declared but failed to pay VAT on supplies. Following Stars’ insolvency and deletion from the commercial register, Vaniz faced a tax audit and was held liable for the unpaid VAT under Bulgarian law, despite not being aware of Stars’ tax debts until the audit.
Questions to the Court: The Administrativen sad Veliko Tarnovo referred three questions concerning the compatibility of Bulgarian law with the VAT Directive, specifically whether joint and several liability can be imposed after the principal debtor’s deletion, if a claim can exist against a deleted debtor, and whether the tax authority’s practices align with the principle of legal certainty.
Decision: Advocate General Kokott proposed that Article 205 of the VAT Directive permits joint and several liability only when the tax debt exists and the principal debtor is still recognized as a legal entity. Therefore, liability cannot be imposed on a third party like Vaniz after the liquidation of the original debtor.
Justification of Decision: The opinion underscores the need for a clear ground for liability, which should not arise merely from knowledge of non-payment without evidence of fraud or abuse. Kokott emphasized the necessity of protecting taxpayers from disproportionate liabilities, reinforcing that joint and several liability should be ancillary to the existence of a tax debt.
Implications for Tax Law: The opinion suggests that tax authorities must adhere to principles of legal certainty and proportionality when imposing liabilities, ensuring that third parties are not held responsible for debts of entities that no longer exist. This could lead to a reevaluation of national practices surrounding VAT liability and insolvency in Bulgaria.

Articles in the EU VAT Directive

Articles 193, 205 and 207 of the EU VAT Directive 2006/112/EC

Article 193
VAT shall be payable by any taxable person carrying out a taxable supply of goods or services, except where it is payable by another person in the cases referred to in Articles 194 to 199b and Article 202.

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.

Article 207
Member States shall take the measures necessary to ensure that persons who are regarded as liable for payment of VAT in the stead of a taxable person not established in their respective territory, in accordance with Articles 194 to 197 and Articles 199 and 204, comply with the payment obligations set out in this Section.
Member States shall also take the measures necessary to ensure that those persons who, in accordance with Article 205, are held to be jointly and severally liable for payment of the VAT comply with these payment obligations.

Facts

The requesting party is the trading company ‘Vaniz’. The defendant is the ‘Disputes and daily management of taxes and social security’ directorate. Vaniz is active in the field of road and freight transport. The defendant carried out an audit at Vaniz, which showed that a supplier ‘Stars International’ had not paid its tax debts, even though these tax debts were stated in the tax return. As a result, the defendant has assessed an additional assessment for Vaniz, against which Vaniz has appealed.

Consideration:

The question is whether the additional tax assessment was lawful, because it appears that ‘Stars International’ had already been declared bankrupt before the tax audit and had been removed from the Trade Register. Because the legal entity has ceased to exist, the question is whether Vaniz can still be held jointly and severally liable for those debts.

Questions

Do the provisions of recital 44 and Article 205 of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax, as well as the principles of transparency and proportionality of liability, allow a procedure to be initiated to determine the status of joint and several debtor of VAT debts and the extent of joint and several liability after the principal debtor has ceased to exist as a legal subject?

Do these provisions – after the debtor has been struck off [from the commercial register], without a legal successor having taken over the rights and obligations – prevent a claim from being registered against that person for which a third party is subsequently held liable?

Is the administrative practice of national tax authorities described above consistent with the realization of the principle of legal certainty?

Source ecer.minbuza.nl

AG Opinion

(1) Article 205 of Directive 2006/112/EC on the common system of value added tax (the VAT Directive) must be interpreted as permitting no transfer of the tax debt to a third party but only ancillary liability for the tax debts of a person liable for payment of VAT where that tax debt has not been extinguished yet and that person still exists. Imposition of secondary liability following the conclusion of insolvency proceedings and the deletion of the taxable person from the commercial register is thus not covered by Article 205 of the VAT Directive.

(2) Article 205 of the VAT Directive, read in conjunction with Article 273 thereof, permits also the imposition of liability on the recipient of a supply where that recipient knew or should have known that the transaction would lead to that recipient being involved in the commission of fraud on the part of his or her or its contractual partner, or where the recipient’s conduct itself amounts to abuse. However, mere failure to pay the declared tax does not constitute VAT fraud. Provided that the recipient of the supply cannot be accused of abusive conduct, the mere fact that that recipient knew or should have known that his or her or its contractual party would not pay the declared tax is not sufficient to warrant that recipient being held liable.

Key Arguments and Facts:

Vaniz EOOD’s Situation: Vaniz, a transport company, received taxable supplies from Stars International EOOD in 2017. Vaniz paid the invoices and exercised its right to deduct input tax. Stars International declared the VAT but did not pay it. Stars International was declared insolvent in 2019 and was deleted from the commercial register in 2020. In 2022, the Bulgarian tax authorities initiated a tax audit on Vaniz to establish liability for Stars International’s unpaid VAT, arguing that Vaniz knew or should have known the VAT would not be paid, as per Article 177(2) of the ZDDS.
Bulgarian Law (ZDDS, Article 177): The Bulgarian law states that a registered person who is the recipient of a taxable supply (like Vaniz) is liable for unpaid tax due from another registered person (Stars International) if the recipient exercised the right to deduct input tax and “knew or should have known” that the tax would not be paid.
- “A registered person who is the recipient of a taxable supply shall be liable for unpaid tax due from another registered person in so far as that recipient has exercised the right to deduct input tax directly or indirectly connected with the tax due but not paid.” (ZDDS, Article 177(1))
- “Liability under paragraph 1 shall be incurred where the registered person knew or should have known that the tax would not be paid, and this is proved by the investigating authority in accordance with Articles 117 to 120 of [the DOPK].” (ZDDS, Article 177(2))
The VAT Directive, Article 205: Allows Member States to provide that a person other than the VAT liable party can be held jointly and severally liable for VAT payment. “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.” (VAT Directive, Article 205) However, AG Kokott argues this is not unlimited.
The VAT Directive, Article 273: Grants Member States the power to impose obligations they deem necessary to ensure the correct collection of VAT and to prevent evasion, provided they adhere to equal treatment principles and avoid creating trade barriers between Member States.
- “Member States may impose other obligations which they deem necessary to ensure the correct collection of VAT and to prevent evasion, subject to the requirement of equal treatment as between domestic transactions and transactions carried out between Member States by taxable persons and provided that such obligations do not, in trade between Member States, give rise to formalities connected with the crossing of frontiers.” (VAT Directive, Article 273)
Advocate General Kokott’s Opinion:Emphasizes the importance of proportionality and legal certainty. Imposing liability on a third party after the principal debtor’s dissolution raises concerns about fairness and the protection of the third party’s rights.
Distinguishes between “knowing” about a failure to pay VAT and “knowing” about participation in VAT fraud.
- “It is not clear why a situation where a person should have known of a non-fraudulent event (failure to discharge tax debt) can be equated to a situation where a person should have known of a fraudulent event (failure to declare tax) in terms of the legal consequences thereof (liability for a third-party tax debt or refusal of the right to deduct input tax).” (AG Opinion, Paragraph 3)
Argues that Article 205 requires a “justifiable ground for liability,” closely tied to a direct or indirect relationship between the third party and the VAT debt.
- “Exercise of the Member States’ power to designate a joint and several debtor other than the person liable for payment of the tax in order to ensure efficient collection of that tax must be justified by the factual and/or legal relationship between the two persons concerned in the light of the principles of legal certainty and of proportionality.” (AG Opinion, Paragraph 51)
Stresses that the liability is ancillary in nature to the original tax debt of the supplier.
- “The secondary liability of a third party under Article 205 of the VAT Directive is contingent on there being a ground for liability and is ancillary to the tax debt of the person liable for payment of VAT. If the tax debt is extinguished as a result of the liquidation of the person liable for payment of VAT without a legal successor, the same applies to secondary liability. Ancillary joint and several liability is also contingent on the continued existence of the person liable for payment of VAT at the time when secondary liability is imposed.” (AG Opinion, Paragraph 67)
The ALTI Judgment (C-4/20): The ALTI judgement confirms that Article 205 allows a Member State to hold a person jointly and severally liable for payment of VAT where that person should have known that the tax payable in respect of that supply would go unpaid, but does not justify strict liability. Kokott emphasizes that this should not create a system of strict liability.