- The EU Court of Justice issued a significant ruling on July 10, 2025, regarding the simultaneous application of two measures against a taxpayer involved in VAT fraud: denial of the right to deduct tax and joint liability for unpaid VAT by the supplier.
- The case involved Czech company FAU s.r.o., which purchased fuel from Verami International Company s.r.o. Both companies were VAT payers.
- Tax authorities found that a tax fraud occurred in the supply chain involving these companies.
- FAU and Verami were aware of the fraud but did not take action to avoid participation.
- Verami lost the right to deduct VAT and was required to pay the overdue tax.
- FAU also lost the right to deduct VAT from invoices issued by Verami and was held jointly liable for the unpaid VAT.
- FAU was triple burdened: paid VAT in fuel price, lost deduction right, and was liable for the same VAT.
- FAU challenged the tax authorities’ decisions, arguing it violated VAT neutrality and proportionality.
- The Czech Supreme Administrative Court referred a question to the EU Court of Justice.
- The question was whether VAT Directive Article 205 allows a taxpayer denied VAT deduction due to fraud to be held jointly liable for unpaid VAT by the supplier.
- The EU Court of Justice ruled that the VAT Directive does not prevent such national practices.
- Article 205 allows member states to introduce joint liability mechanisms for VAT payment, subject to legal certainty and proportionality.
- National measures for effective VAT collection must not exceed what is necessary to achieve this goal.
Source: crido.pl
Note that this post was (partially) written with the help of AI. It is always useful to review the original source material, and where needed to obtain (local) advice from a specialist.
