From the case-law: Guarantee for VAT in case of received taxable performance from an unreliable payer does not apply automatically

23. March 2021
  • Richard Knobloch

In judgment no. 3 Afs 114/2018 – 87, the Supreme Administrative Court (“SAC”) rejected the attitude of the Tax Administration, which automatically considers a taxpayer, who receives taxable performance from an unreliable payer, to be a person guaranteeing unpaid VAT under article 109 paragraph 3 of the VAT act. According to the SAC, such automatically created guarantee would not give the recipient of taxable performance the “statutory space for refuting the assumption presumed by law that he attended a fraudulent operation, i.e. that at the time the performance took place, he knew or should have known that the supplier intended not the pay the tax.” In case of trading with an unreliable payer, greater caution is advisable, according to the SAC, nevertheless for guarantee to arise, there must always “be additional circumstances, from which it would be obvious that the recipient of taxable performance knew or should have known that tax would not be paid. Such circumstances should, moreover, always be proven by the tax administrator.  

In the case that was being examined, the tax administrator confirmed reception of payment from the unreliable payer, provider of the taxable performance, on the contrary, and transferred this payment to previous tax underpayments in compliance with article 152 of the code of tax procedures. The payment of tax for the specific performance, for which the customer was to provide guarantee, therefore did take place and the obligation to pay tax on grounds of guarantee therefore could not arise at all. According to the SAC, the key is “the fact, if the unreliable payer paid the tax for the specific performance, which was to be guaranteed by the customer, or he did not.”

The option stated in article 109a of the VAT act, when the payer – customer pays tax directly to the tax administrator instead of the supplier, does not have any impact on the above, either. According to the SAC, it is not possible to “force taxpayers to enter into a private law relation for payment of a tax liability, i.e. to voluntarily collect tax instead of the tax administrator”.

With this decision, the SAC thus followed up on the previous decision no. 5 Afs 78/2017 – 33, when it rejected automatic creation of guarantee in case of payment to a foreign bank account.

Author: Richard Knobloch