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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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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