On 30th January 2024, the Court of Justice of the European Union issued a judgment in case C-442/22 in which the Court explained how the Article 203 of VAT Directive i.e.: „VAT shall be payable by any person who enters the VAT on an invoice”, must be interpreted.
The case concerned a Polish Company in which, tax audit found that the Company issued a lot of VAT invoices that did not match to actual sales. The VAT from these invoices was deducted by the purchasers, but the invoices were not recorded in the Company’s ledgers – so the VAT was not included in the VAT returns and thus not paid to the tax office.
It appeared that false invoices with the Company’s data, based on fiscal receipts that corresponded to real transactions with other clients, were issued for four years by an employee of the Company. The employee issued these invoices without the consent or knowledge of the Company’s management. The entities that received these invoices used them to obtain unjustified VAT deduction and refunds.
The Polish tax authorities determined the amount of VAT due on the false invoices and ordered it to be paid by the Company. The authorities argued that the Company had failed to exercise due diligence in relation to the duties of its employee and its IT system. Ultimately, the case went to the Supreme Administrative Court, which, referred preliminary questions to the CJEU.
The CJEU with the meaning of Article 203 concluded that, the employee who issued a false invoice using the employer’s data without the employer’s knowledge and consent is liable for the tax. Unless the employer failed to exercise the due diligence required to control the employee’s activities – then the employer is liable for the tax.
The CJEU states that the Polish tax authorities must carry out an analysis to assess whether the Company (employer) has exercised due diligence in the case in question.
The judgement of the Court of Justice of the European Union is available here.
The information contained in the alert are general and do not represent the tax opinion and do not cover all changes resulting from the proposed regulation. Before making any decision or action, as well as in case of any questions or concerns, please contact our tax advisers, tel.+48 22 250 31 00.
