In the interpretative decision No. 4/2022 of the Supreme Administrative Court (SAC), the SAC decided that the scope of the joint and several liability under art. 177 of the Value Added Tax Act (VAT act) also includes the liability for interest for late payment on the tax due and not paid by another person.
The controversial case law concerned the interpretation of Art. 177 of the VAT Act, which states that a VAT-registered recipient of a taxable supply is liable for unpaid tax by another person to the extent that he has enjoyed the right to deduct a tax credit directly or indirectly related to the tax due.
The following paragraphs of Art. 177 of the VAT Act clarify when this joint and several liability takes place.
In the first place, the recipient must have known or should have known that the tax would not be paid. This must be proved by an audit certificate issued by the audit authority. In art. 177, para. 3 of the VAT Act provides for a rebuttable presumption that the person should have known, stating the conditions necessary for this presumption.
According to the judges of the Supreme Administrative Court, art. 177 of the VAT Act provides for a special type of joint and several liability of persons registered under the VAT Act.
In the judgment it is explicitly stated that the subject of the joint and several liability under art. 177 of the VAT Act are third parties who are liable for the obligation of another person, who is the bearer of the obligation to pay the tax. Therefore, according to the majority of judges in the SAC, on the basis of art. 16 para. 1 of the Tax Procedure Code (TPC), they are liable persons under Art. 14, p. 3 of the TPC. Consequently , the joint and several liability includes the liability for interest for late payment on the tax due and not paid by another person.
This decision was signed with a dissenting opinion by 14 Supreme court justices.
According to them, “ The scope of liability under art. 177 of the VAT Act doesn’t include liabilities for interest and late payment on the tax due and unpaid by another person”.
They consider that the liability under art. 177 of the VAT Act is not joint and several. Maintaining that the tax laws are to be strictly construed and that Art. 177 of the VAT Act is not a special provision in relation to Art. 16, para 3 of the TPC.
The dissenting opinion also discusses the arguments concerning the reliance on ECJ case-law, emphasizing that, according to the Luxembourg court, EU Member States may extend the scope of liability, but according to the dissenting opinion, Art. 177 of the VAT Act is quite clear that interest is not included in that liability.
