Do not hesitate to object if you disagree with an Acts for establishing administrative violations, a Penalty decree, or an Order for a compulsory administrative measure (often the sealing/closure of premises) issued to your company for a tax violation.

There is no doubt that fiscal control is important to protect the legal order. The problem arises when the drive for revenue collection turns into “mechanical” sanctioning without an individual assessment of the case.

En masse, Bulgarian businesses, regardless of the scale, choose to pay the initial sanction even when they consider it unjust. While large corporations view payment as a “pragmatic” way to save administrative resources, small businesses often perceive it as a “cheaper” alternative to investing in specialized legal defense.

In both cases, however, this apparent peace is a strategic illusion.

Payment constitutes an admission of a committed violation, which places you in a hypothesis of “repeated violation”. This means that during a subsequent check or audit, the risk of an exponentially higher sanction is significantly increased, and the sealing of the business premises becomes justified. Appealing an unfairly imposed first sanction is an investment in the security of your business tomorrow.

More importantly, your defense is supported by three rulings of the Court of Justice of the European Union (CJEU), issued on Bulgarian cases:

• Case C-97/21 (MV-98) – establishes the principle of proportionality and the impermissibility of accumulating a sanction (fine) and the sealing of premises as it creates an excessive burden for the business.
• Case C-733/23 (“Beach and Bar Management” EOOD) – confirms that specific facts for the case must be considered upon determining a sanction. It establishes that even the minimum statutory penalty is excessively high if the damage to the state is insignificant – in this case, 85 sanctions of 500 BGN each (totaling 42,500 BGN or approximately €21,250) were imposed for unissued receipts, while the total VAT due on them was only 268.02 BGN (approximately €134).
• Case C-605/23 (“Ati-19” EOOD) – reaffirms the primacy of EU law, empowering national courts, on their own initiative, to set aside any active national provision that contradicts it.

These three rulings are a clear signal from the CJEU against administrative arbitrariness in our country. With them, the CJEU confirms that national revenue authorities cannot impose sanctions mechanically but must strictly observe the balance between the violation and the penalty. The fiscal interest of the state cannot justify measures that lead to an excessive financial burden or a punitive effect beyond reasonable limits.

At the beginning of 2026, the Euro is already a reality, and audits from the National Revenues for potential abuses are likely to intensify. Nevertheless, supranational standards for justice and predictability must be actively upheld.

Do not allow administrative pressure to jeopardize the stability of your business.

The law is on your side – use it strategically!

I will remember the end of this year for the extremely aggressive control activity by the revenue authorities. In the name of increasing collection rates, Acts for establishing administrative violations (Acts) were issued en masse, immediately followed by Penal Decrees. The goal seems not to be prevention, but sanctioning at any cost, mainly small and medium-sized local businesses.

What we are witnessing is a mechanical application of pecuniary sanctions, without in-depth factual and legal assessment of the specific case and with total disregard for the principles of proportionality and fairness.

The Penal Decrees are often combined with the harshest coercive administrative measure – “sealing of a business premise” which comes at the busiest business period of the year.

It is exactly in such moments that one feels the immense value of the jurisprudence of the Court of Justice of the European Union (CJEU) as a safeguard against abusive practices of local administration.

The case law of the CJEU is the instrument that sets clear boundaries for the national administration.

The CJEU Judgment in Case C-97/21 (MV-98), delivered regarding a Bulgarian case, categorically establishes that:

• Sanctions and coercive measures must be strictly proportional;
• The accumulation of pecuniary sanctions (fine plus sealing) cannot lead to an excessive burden for the trader;
• Fiscal interest cannot justify measures that lead to substantial financial losses or a punitive effect beyond reasonable limits.

This judgment provides a strong legal basis for successfully challenging:

• Orders for the sealing of commercial premises;
• Acts and Penal Decrees issued in violation of the principle of proportionality;
• Systemic practices that contradict EU law.

A Wish for 2026

Tomorrow, we wake up in a new reality – the Euro becomes our country’s currency. I wish for this change not to be merely monetary, but to mark the beginning of a truly European, predictable, and fair tax administration!

Background

Case C-277/24 (M.B. – Adjak) of 27 February 2025

A former manager seeks to participate in tax proceedings regarding the obligations of a company he managed, in order to protect his rights in potential proceedings against him personally. However, this is not permitted by Polish law.

Case C-278/24 (P.K.) of 30 April 2025

The chairman of the management board of a company was held jointly and severally liable after unsuccessful collection of the company’s VAT debts. He objects that even if he acted in good faith, Polish law does not allow him to be released from liability.

Question referred to the court

• Is it permissible to engage joint and several liability without proving fault or bad faith on the part of the manager?
• Is the right of defense violated if the manager cannot participate in the proceedings against the company whose debt may be transferred to him?

CJEU conclusion

It is not mandatory for the manager to participate in the tax proceedings against the company, as long as, in the proceedings against the manager himself, he has an effective opportunity to challenge the facts and obligations of the first proceedings.

There are no obstacles to legislation providing for criteria, the non-fulfilment of which entails joint and several liability of the manager, insofar as his right of defense is guaranteed.

Practical significance

These decisions reinforce the CJEU’s position that the liability of managers can be engaged under clear and predictable conditions, ensuring effective protection of their rights. The question of the balance between the state’s interest in collecting taxes and the protection of bona fide managers remains key for national jurisprudence.

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Recently, ECJ issued its Order C-377/23 on the case of DC.

Background

DC is a Portuguese seller of second-hand motor vehicles who mistakenly applied a 0% VAT in the invoices issued to final consumers. The tax administration determined that DC should have charged 23% standard VAT rate on the entire price shown on the sales invoices.

Challenging the approach of the tax audit, DC argued that the due VAT should be calculated as being included in the sales price mentioned on the invoice.

DC contended that the consideration of the tax authorities to charge 23% VAT on top of the sales price is incorrect and maintained that the due VAT should be deemed included in the invoiced amounts. Furthermore, DC asserted that the calculation method of the tax authorities, which would entail increasing the invoiced sale price, violates the principle of fiscal neutrality also due to the lack of mechanism to pass on VAT to final consumers.

Question referred to the court

Is the price/amount indicated on the already issued invoices inclusive of VAT, or should VAT be added?

Key Points of the Case

The sought interpretation can be clearly inferred from the ECJ judgments on cases C-249/12 and C-250/12 (Tulică and Plavoşin) and C-521/19 (Tribunal Económico Administrativo Regional de Galicia) according to which:

• the general rule of Article 73 of the VAT Directive 2006/112 is clear that the taxable amount is the consideration actually received by the taxable person;
• this rule must align with fundamental principle of the directive that the VAT system is intended to impose a burden solely on the final consumer;
• in cases where sales are made without any mention of VAT to final consumers, and consequently, the VAT required by the tax authorities cannot be reclaimed from them, imposing VAT on top of the invoiced amounts would conflict with the principle that VAT must be borne by the final consumer;
• such calculation would furthermore conflict with the rule preventing the tax authorities from collecting VAT in excess of the amount received by the taxable person.

Court’s Conclusion

Following the interpretation of Article 73, Article 78(a) and Article 2(2)(b) of Directive 2006/112, if a taxable person by mistake applies a lower VAT rate on invoices to final consumers, the invoiced price must be considered as including VAT unless national law allows the taxable person to pass on and recover the adjusted VAT rate from final consumers.

Significance

The Order clarifies the treatment in cases of incorrect VAT rates applied on issued invoices. It highlights the importance of accurately determining the VAT in the invoiced amounts and underscores the fundamental principle that VAT burden should ultimately fall on the final consumer.

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The Polish tax authorities found that, between January 2010 and April 2014, Company P had issued 1 679 invoices for the sale of fuel in a petrol station without paying the corresponding VAT to the state budget. It appeared that all of these invoices were falsely issued by the employee P.K. with no consent or knowledge of the employer, Company P.

The invoices were accompanied by authentic receipts, that were collected by other employees and delivered to P.K. against financial benefit. P.K sold the invoices to entities that fraudulently obtain VAT refunds.

The false invoices were recorded on the petrol station’s computer in a different format to that of the normal invoices of Company P and could not be consulted without unlocking that computer. The Polish tax authorities claimed that the responsibility for the payment of the VAT charged by these invoices was entirely on the employer Company P due to its lack of supervision of its employee.

Questions referred to the ECJ

Within the meaning of Article 203 of the VAT Directive that provides that VAT shall be payable by any person who enters the VAT on an invoice, in the particular case:

• Who needs to be considered liable for the VAT fraudulently shown in the invoices – the employer or the employee?
• Does the potential failure of the employer to exercise due diligence in supervising its employee affect this liability?

Key Points of the Case

• The VAT entered on an invoice is payable by the issuer of the invoice even in the absence of an actual taxable transaction.
• Liable for the VAT shown on the invoice may be taxable person but also a non-taxable person.
• In any case when there is a risk of loss of tax revenue, the issuer of the invoice is liable for the VAT indicated in the invoice irrespective of any fault. By contrast, if there is no such risk, Article 203 of the VAT Directive does not apply.
• An employer who failed to exercise the due diligence reasonably required to monitor the conduct of its employee must be considered the issuer who entered the VAT on the invoices and who is liable for the VAT.

Court’s Conclusion

Article 203 of the VAT Directive must be interpreted as follows: If an employee of a taxable person for VAT purposes has issued a fake invoice showing VAT using the employer’s identity without the employer’s knowledge or consent, that employee must be considered the person who enters the VAT. However, this responsibility shifts to the taxable person if it is determined that this taxable person did not exercise the due diligence reasonably required to monitor the conduct of its employee.

Significance

This ruling clarifies the interpretation of Article 203 of the VAT Directive in cases of fraudulent VAT invoices issued without the knowledge or consent of the person identified as an issuer. It emphasizes the importance of due diligence by taxable persons to prevent VAT fraud.

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Consequently, in 1958, under the presidency of René Coty and with the support of Maurice Lauré, а Minister of Economy at that time, France experimented with introducing VAT in Côte d’Ivoire. The experiment was highly successful leading to the replacement of the consumption tax with VAT in France by 1967. Since then, VAT has been adopted by almost all European countries (except for Andorra and the Vatican).

As the tax consultant role is increasingly expanding beyond the national borders, understanding VAT in different jurisdictions is important. Our experience shows that navigating this landscape is much smoother when you are armed with the local terms of VAT.

Background

Global Ink Trade, a Hungarian wholesale company, faced VAT recovery denial over alleged passive tax evasion. Despite item delivery confirmation, tax authorities accused Global Ink Trade of lacking due care. The case mainly raised questions about conflicting interpretations of EU law by Hungarian courts and the primacy of EU law.

Key Points of the Case

• Office Builder Kft, the supplier, was found to have not engaged in economic activity or fulfilled tax obligations.
• Global Ink Trade’s VAT deduction was denied by tax authorities, alleging passive tax evasion due to perceived negligence.
• The case involved interpretations of EU law by Hungarian courts, leading to questions about the primacy of EU law.

Court’s Clarifications

• The ECJ emphasized the primacy of EU law, directing national courts to follow its interpretations, even if conflicting with prior national court practice.
• The right to deduct VAT may be denied based on the taxpayer negligence, provided certain conditions are met, and this does not burden the taxpayer excessively.
• The tax administration must prove the elements of VAT evasion and the taxpayer’s active involvement, without necessarily identifying all actors involved in the evasion.

Significance

In conclusion, the ECJ ruling in the case of Global Ink Trade vs. Office Builder Kft has implications for the interpretation and application of EU tax law. The court’s emphasis on the primacy of EU law over national court practices, its clarification on the conditions for denying VAT deduction, and the burden of proof required from the tax administrations in cases of alleged tax evasion, all serve to provide much-needed clarity in this complex area of law.

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Context: A Polish company intends to install and operate public electric vehicle charging stations. Part of the charging cycle is the provision of auxiliary services such as provision of charging equipment (including integration of the charger with the vehicle’s operating system); supply of electricity, within duly adjusted parameters, to the batteries of the electric vehicle; necessary technical support for vehicle users, and the provision of a special platform, website or application whereby users may reserve a particular connector and view their transaction and payment history, and of the option to use an “e-wallet” to pay the balance due for individual recharging sessions.

Question: Whether in the case there is a supply of goods (Article 14(1) of Directive 2006/112) or a supply of services (Article 24(1)) is the question brought for a preliminary ruling before the ECJ.

Decision: ECJ establishes that Directive 2006/112 must be interpreted as meaning that a single complex supply that encompasses the mentioned supplies constitutes a ‘supply of goods’ within the meaning of Article 14(1) of that directive.

Arguments: ECJ concludes that in principle, the transfer of electricity constitutes the characteristic and predominant element of the single complex supply in the case because:

• first, the transaction consisting of the supply of electricity to the batteries of an electric vehicle constitutes a supply of goods, in so far as that transaction enables the user of the recharging station to consume, in order to propel his or her vehicle, the electricity transferred, which, under Article 15(1) of Directive 2006/112, is to be treated as tangible property;
• secondly, such a supply of electricity to the batteries of an electric vehicle requires the use of suitable recharging devices, which may include a charger which is to be integrated with the vehicle operating system. Consequently, granting access to those devices constitutes a minimal supply of services which necessarily accompanies the supply of electricity and may not, accordingly, be taken into account for the purpose of assessing the part played by the supply of services within the whole of a complex transaction which also involves that supply of electricity; and
• thirdly, the technical support, including the IT applications, which may be necessary for the users concerned constitutes a means of better enjoying the supply of the electricity necessary to propel the electric vehicle and is therefore a supply ancillary to the supply of electricity.