The Court of Justice of the European Union (CJEU), in judgment C-442/22 from January 30, 2024, ruled that an employee of a VAT taxpayer who issues a false invoice indicating VAT by using the identity of their employer as the taxpayer without their knowledge and consent, should be considered as the person indicating VAT within the meaning of Article 203, unless the taxpayer did not exercise due diligence reasonably required to control the actions of their employee.
Until now, Polish administrative courts have expressed that the employer is almost absolutely liable for false invoices, including those issued by dishonest employees.
The Company’s Case
The case concerned a company that was a VAT payer and conducted, among other things, the retail sale of fuel at a gas station. As a result of the inspection, tax authorities discovered that for several years the company had been issuing invoices to entities other than those which actually conducted the transactions, and which illegally deducted the VAT indicated on those invoices.
In relation to the dishonest employee who was behind the entire scheme, a tax-criminal proceeding was initiated. The tax authority instructed the company (as the employer) to settle the tax resulting from the invoices, stating that the company is responsible for the actions of its employees. The first-instance court upheld the tax authority’s decision, while the Supreme Administrative Court expressed doubts and submitted a question to the CJEU.
Court of Justice of the European Union’s judgement
According to the CJEU, the taxpayer’s liability for invoices issued using their data and instruments is not in line with the intention of the EU legislature. However, to exempt the taxpayer from liability, it is necessary to have good faith and to exercise the due diligence required to control the actions of subordinates.
According to the judgment, the significance for taxpayers lies in the proper organization, implementation, and application of appropriate internal procedures within their businesses, ensuring the adequate division of delegated responsibilities and supervision over employees authorized to issue invoices on behalf of the employer.
KR Group offers comprehensive support by preparing appropriate regulations and mechanisms to ensure that taxpayers maintain due diligence in VAT during their daily business operations.
