Poland: Employer not liable for VAT based on fraudulent invoices prepared by employee (CJEU judgment)

Employer exercised reasonable due diligence in monitoring the conduct of the employee

Employer exercised reasonable due diligence in monitoring the conduct of the employee

The Court of Justice of the European Union (CJEU) on 30 January 2024 held that an employer was not liable for value added tax (VAT) based on fraudulent invoices prepared by an employee because the employer exercised reasonable due diligence in monitoring the conduct of the employee.

The case identifying information is: Dyrektor Izby Administracji Skarbowej v. Lublinie (C-442/22)


As explained in a CJEU release [PDF 118 KB], between January 2010 and April 2014, the employee of a Polish company operating a petrol station issued 1,679 invoices that did not reflect actual sales of goods for a total amount (expressed in Polish zlotys) of approximately €320,000. The employee used the details of her employer, a taxable person for VAT purposes, without its knowledge or consent. The fake invoices were not recorded in the company’s tax returns, but were used by those who received them to obtain an undue refund of VAT.

Following an audit, the tax authority assessed the amount of VAT payable by the company on the grounds that the fraudulent conduct was made possible by the lack of adequate supervision and organization within the company. The company challenged that decision before the national court which, in turn, referred the matter to the CJEU.

The CJEU today held that VAT cannot be payable by the apparent issuer of a fake invoice when it is acting in good faith and the tax authority is aware of the identity of the person who actually issued the invoice. In such a situation, it is that person who is liable for payment of the VAT. A different interpretation would be contrary to the objective of the VAT Directive, which is to prevent fraud and to stop individuals from fraudulently relying on the rules of EU law. 



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