VAT fraud: Employee using her employer’s details to issue fake invoices is liable for the amount of the taxes entered on them (ECJ)

According to the Judgment (30.1.2024) of the Court of Justice in Case C-442/22 [1] , an employee using her employer’s details to issue fake invoices is liable for the amount of the taxes entered on them.

That is the case provided that the employer, who is a taxable person for VAT purposes, has exercised the due diligence reasonably required to monitor the conduct of its employee.

Between January 2010 and April 2014, the employee of a company established in Poland operating a petrol station issued 1,679 invoices that did not reflect actual sales of goods, for a total amount (expressed in Polish zlotys) of approximately €320,000. To that end, she used the details of her employer, a taxable person for value added tax (VAT) purposes, without its knowledge or consent.

The fake invoices were not recorded in that company’s tax returns. They were used by those who received them to obtain an undue refund of VAT, without the corresponding tax having been paid into the State budget. Following an audit, the competent authorities issued a decision determining the amount of VAT payable by the company.

According to the tax authorities, the fraudulent conduct was made possible by the lack of adequate supervision and organisation within the company that hired the employee. The company is challenging that decision before the national court which, in turn, has referred the matter to the Court of Justice.

The national court wishes to establish who, out of the company whose details were unlawfully used on the invoice and the employee who made use of those details in order to issue fake invoices, is the person who enters VAT on the invoice within the meaning of the VAT Directive (Article 203 of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax) and who is therefore liable to pay that VAT.

The Court holds that VAT cannot be payable by the apparent issuer of a fake invoice where it is acting in good faith and the tax authority is aware of the identity of the person who actually issued the invoice. In such a situation, it is that person who is liable for payment of the VAT. A different interpretation would be contrary to the objective of the VAT Directive, which is to prevent fraud and to stop individuals from fraudulently relying on the rules of EU law.

In order to be regarded as having acted in good faith, the employer is required to prove that it has exercised the due diligence reasonably required to monitor the conduct of its employee and, in so doing, to prevent its details from being used to issue fake invoices. In the absence of such proof, the employer must be regarded as having the obligation to pay the VAT indicated on the fake invoices. It is for the tax authority or the national court to assess, in the light of all the relevant factors, whether the employer has exercised such due diligence. (curia.europa.eu/ photo:freepik.com)

Full text of the judgment is available here

[1] Dyrektor Izby Administracji Skarbowej w Lublinie

Comments

Post a Comment

Editorial

Editorial
George Kazoleas, Lawyer

Top Stories

Ombudsman inquiry on Commission President’s text messages is a wake-up call for EU

Image
The European Ombudsman inquiry into the Commission’s handling of a request for text messages between its President and the CEO of a pharmaceutical company is a wake-up call for all EU institutions about ensuring accountability in an era of instant messaging. One year after the initial request by a journalist, the Commission has still not clarified whether messages reported to concern major vaccine procurement deals exist and whether the public is entitled to see them. The Ombudsman had asked the Commission, in a finding of maladministration in January, to conduct a more thorough search for the text messages. The Commission’s recent response failed to say whether it had looked directly and correctly for the text messages and if not, why not. While the response recognised that work-related text messages can be EU documents, it reiterated that the Commission’s internal policy is, in effect, not to register text messages. The Ombudsman has closed  the inquiry  and upheld...
Read more

Daily Mail publisher wins case against ‘success fees’ paid to lawyers (ECtHR)

Image
Obligation on publisher of the Daily Mail to pay substantial “success fees" in defamation and breach of privacy cases was excessive. The case Associated Newspapers Limited v. the United Kingdom (application no. 37398/21) concerned the fact that Associated Newspapers Limited the publisher of the Daily Mail and the Mail on Sunday had been obliged to pay extensive costs incurred by claimants who had successfully sued it in privacy and/or defamation proceedings following articles it had published in print or online in 2017 and 2019.  Since one of the claimants had entered into a conditional fee arrangement (CFA) with his legal representative, and both had taken out “after-the-event” (ATE) insurance, Associated Newspapers Limited had been liable not only for their base costs, but also for fee uplifts including the “success fee” in the CFA and for their ATE insurance premiums.  In Chamber judgment (12.11.2024) in the case, the European Court of Human Rights held, unanimously, that t...
Read more

ECtHR elects a new Vice-President of the Court and two new Section Presidents

Image
The European Court of Human Rights has elected on 23.9.2024 a new Vice-President of the Court – Judge Ivana Jelić (elected in respect of Montenegro). She will take up her duties on 1 November 2024.  The Court has also elected at the same date two new Section Presidents – Judges Lado Chanturia (elected in respect of Georgia) and Ioannis Ktistakis (elected in respect of Greece). They will also take up their duties on 1 November 2024. Ivana Jelić was born on 17 March 1975 in Podgorica, Montenegro and was elected Judge of the European Court of Human Rights on 12 July 2018. Lado Chanturia was born on 14 April 1963 in Tsalenjikha, Georgia, was elected Judge of the European Court of Human Rights on 8 January 2018 and is Vice-President of Section since 18 May 2023. Ioannis Ktistakis was born on 3 January 1971 in Thebes, Greece and was elected Judge of the European Court of Human Rights on 8 March 2021. (source/photo: echr.coe.int) Read more here
Read more

Intellectual property: the figurative sign consisting of the phrase ‘RUSSIAN WARSHIP, GO F* *K yourself’ in Russian and English cannot be registered as an EU trade mark

Image
In its Judgment in Case T-82/24 (Administration of the State Border Guard Service of Ukraine v EUIPO) (RUSSIAN WARSHIP, GO F**K YOURSELF) the General Court ruled that the figurative sign consisting of the phrase ‘RUSSIAN WARSHIP, GO F* *K yourself’ in Russian and English cannot be registered as an EU trade mark. That phrase, which has become a symbol of Ukraine’s fight against Russian aggression, is not perceived as an indication of a commercial origin.  The Administration of the State Border Guard Service of Ukraine (Kyiv, Ukraine) requests the General Court of the European Union to annul the decision of the European Union Intellectual Property Office (EUIPO) of 1 st December 2023, which refused registration of the following figurative sign as an EU trade mark: ‘RUSSIAN WARSHIP, GO F* *K yourself’ That mark is a war cry uttered by the Ukrainian border guard on Snake Island on 24th February 2022, the first day of the full-scale Russian invasion of Ukraine. Registration was sou...
Read more

The banks Crédit agricole and Credit Suisse participated in a cartel in the sector for suprasovereign bonds, sovereign bonds and public agency bonds denominated in US dollars

Image
According to the Judgment of the General Court in Cases T-386/21 (Crédit agricole and Crédit agricole Corporate and Investment Bank v Commission) and T-406/21 (UBS Group and Credit Suisse Securities (Europe) v Commission), the banks Crédit agricole and Credit Suisse participated in a cartel in the sector for suprasovereign bonds, sovereign bonds and public agency bonds denominated in US dollars (‘SSA Bonds’).  The General Court of the European Union confirms the Commission’s finding of an infringement and maintains the amount of the fines imposed in 2021. In 2018, the European Commission initiated proceedings for infringement of the competition rules involving Deutsche Bank, Bank of America, Crédit agricole and Credit Suisse (now UBS Group [1] ).  In 2021, the Commission found that those banks had entered into an agreement on the secondary market for suprasovereign, sovereign and agency bonds denominated in dollars (SSA bonds). According to the Commission, traders employed by ...
Read more

European Ombudsman asks Commission to publish details of its handling of senior staff move to law firm

Image
The European Ombudsman has asked the European Commission to publish details about how it has handled the planned move by a former director in its competition department to the Brussels office of a US corporate law firm as a partner. Any restrictions that have been placed on the activities of the former director to mitigate potential conflicts of interest should be made public without delay, said the Ombudsman. She noted that public information about the move came from the law firm and gives the impression that the Commission has allowed a senior official to work for a company that anticipates major benefits from their inside knowledge.  The Ombudsman also noted that the Commission declined to give details about the individual’s professional experience despite the fact that the law firm itself has put out a press release detailing it. The Ombudsman has previously criticised a tendency in the EU administration to underestimate the potential negative effects of staff moves to th...
Read more

A national court is not required to apply a decision of its constitutional court that infringes EU law (ECJ)

Image
In its Judgment of 26.9.2024 in Case C-792/22 (Energotehnica) the Court of Justice ruled as regards the right to an effective remedy that a national court is not required to apply a decision of its constitutional court that infringes EU law. In such a case, the national court may not be penalised.  Following the death of an electrician by electrocution during a maintenance operation, an administrative procedure was initiated against his employer. At the same time, criminal proceedings for negligence and manslaughter were initiated against the supervisor. The victim’s next of kin also became civil parties to the criminal proceedings.  The administrative court hearing the dispute concluded that the present case did not involve an ‘accident at work’. It annulled the administrative penalties imposed on the employer. According to national legislation, as interpreted by the Romanian Constitutional Court, that administrative decision prevents the criminal court from reconsidering whe...
Read more