VAT fraud: limits to joint and several liability for tax debt

Article 205 of the VAT Directive empowers Member States, in the situations referred to in Articles 193 to 200 and Articles 202, 203 and 204, to 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 205 of the VAT Directive does not transfer the tax debt to another person, as is the case with Article 196 of the VAT Directive for example. It provides for a further person who is liable to pay tax, in addition to the taxable person. That payment obligation is imposed jointly and severally. However, it is linked to another person’s existing tax debt and is therefore ancillary in nature. It thus effectively establishes the liability of a third party for tax owed by another person. This issue has been addressed a few times by the Court (among others, ALTI, C-4/20).

If the purpose of Article 205 of the VAT Directive is to protect the rights of the public exchequer as effectively as possible by making another person liable on an ancillary basis for the taxable person’s tax debt, then that depends on the tax debt (principal debt) being established and therefore capable of being assessed. That condition is not satisfied in the present case, with the result that Article 205 of the VAT Directive cannot be applied. By contrast, Article 203 of the VAT Directive expressly provides that a tax debt is payable in respect of the VAT entered on false invoices...