C-331/23 Dranken Van Eetvelde

Provisional text

JUDGMENT OF THE COURT (Ninth Chamber)

12 December 2024 (*)

( Reference for a preliminary ruling – Taxation – Common system of value added tax (VAT) – Directive 2006/112/EC – Article 205 – Joint and several liability for tax debts owed by a third party – Conditions and scope of liability – Fight against VAT fraud – Joint and several liability for the payment of VAT which does not allow an assessment to be made on the basis of the contribution of each taxable person in the tax evasion – Principle of proportionality – Article 50 of the Charter of Fundamental Rights of the European Union – Principle non bis in idem – Criteria for application – Facts relating to different tax years against which administrative or criminal proceedings are brought – Continuing offence with unity of purpose – Facts not identical )

In Case C‑331/23,

REQUEST for a preliminary ruling under Article 267 TFEU from the rechtbank van eerste aanleg Oost-Vlaanderen, afdeling Gent (Court of First Instance, East Flanders, Ghent Division, Belgium), made by decision of 22 May 2023, received at the Court on 25 May 2023, in the proceedings

Dranken Van Eetvelde NV

v

Belgische Staat,

THE COURT (Ninth Chamber),

composed of C. Lycourgos (Rapporteur), President of the Third Chamber, acting as President of the Ninth Chamber, S. Rodin and O. Spineanu-Matei, Judges,

Advocate General: J. Kokott,

Registrar: A. Calot Escobar,

having regard to the written procedure,

after considering the observations submitted on behalf of:

– Dranken Van Eetvelde NV, by H. Vandebergh, advocaat,

– the Belgian Government, by P. Cottin, A. De Brouwer and C. Pochet, acting as Agents,

– the European Commission, by N. Cambien and M. Herold, acting as Agents,

after hearing the Opinion of the Advocate General at the sitting on 5 September 2024,

gives the following

Judgment

Legal context and the dispute

1This request for a preliminary ruling concerns the interpretation of Article 205 of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax (OJ 2006 L 347, p. 1; ‘the VAT Directive’), the principles of proportionality and fiscal neutrality and Article 50 of the Charter of Fundamental Rights of the European Union (‘the Charter’).

2The request has been made in proceedings between Dranken Van Eetvelde NV and Belgische Staat, Federale Overheidsdienst Financiën (Federal Public Finance Service, Belgium) (‘SPF Finances’), concerning the joint and several liability of Dranken Van Eetvelde for the payment of value added tax (VAT).

Legal context

European Union law

3Article 193 of the VAT Directive states:

‘VAT shall be payable by any taxable person carrying out a taxable supply of goods or services, except where it is payable by another person in the cases referred to in Articles 194 to 199b and Article 202.’

4Articles 194 to 200 and 202 to 204 of that directive provide, in essence, that persons other than a taxable person carrying out a taxable supply of goods or services may or shall be regarded as liable for VAT.

5Under Article 205 of that directive, ‘[i]n the situations referred to in Articles 193 to 200 and Articles 202, 203 and 204, Member States may provide that a person other than the person liable for payment of VAT is to be held jointly and severally liable for payment of VAT’.

Belgian law

6Article 51bis(4) of the wet tot invoering van het Wetboek van de belasting over de toegevoegde waarde (Law establishing the Value Added Tax Code) of 3 July 1969 (Belgisch Staatsblad, 17 July 1969, p. 7046), in the version applicable to the dispute in the main proceedings (‘the VAT Code’), provides:

‘4. Taxable persons shall be jointly and severally liable, with the person who owes the tax on the basis of Article 51(1) and (2), for the payment of the tax if, at the time when they effected a transaction, they knew or should have known that non-payment of the tax with the intention of evading the tax was occurring or would occur in the chain of transactions.’

7Article 70(1) and (2) of the Consumer Code provides:

‘1. In respect of any infringement of the obligation to pay the tax, a fine equal to twice the tax evaded or paid late shall be incurred.

That fine shall be owed individually by each person with an obligation to pay the tax on the basis of Article 51(1), (2) and (4), Articles 51bis, 52, 53, 53ter, 53nonies, 54, 55 and 58 or the decrees implementing those articles.

…

2. If the invoice or equivalent document required under Articles 53, 53decies and 54 or the decrees implementing those articles was not issued or contains incorrect information regarding the identification number, name or address of any of the parties to the transaction, regarding the nature or quantity of the goods supplied or services provided, or regarding the price or ancillary costs, a fine shall be incurred amounting to twice the tax due on that transaction or EUR 50, whichever is higher.

That fine shall be payable individually by the supplier or service provider and by the other party to the contract. However, it shall not be applied if the irregularities are to be considered purely accidental, in particular by reason of the number and scale of the transactions for which no proper document was issued compared with the number and scale of the transactions which were the subject of proper documents, or where the supplier or service provider has no serious reasons to doubt the other party’s status as a non-taxable person.

Where a person incurs both the fine provided for in paragraph 1 and the fine provided for in paragraph 2 in respect of the same infringement, only the latter shall be applicable.’

The dispute in the main proceedings and the questions referred for a preliminary ruling

8The Belgian tax authorities carried out a tax investigation at Dranken Van Eetvelde, a company governed by Belgian law active in the wholesale and retail trade in beverages, concerning the application of VAT for the period from 1 January to 31 December 2011. They found a number of infringements of VAT legislation and regulations, which were notified to that company on 3 December 2018.

9Dranken Van Eetvelde was then the subject of a demand for payment, issued on 10 December 2018 and declared enforceable on 11 December 2018, by which it was ordered to pay an additional VAT assessment of EUR 173 512.56 (that is to say, EUR 141 665.30 in respect of joint and several liability and EUR 31 847.26 for the refund of VAT on the basis of improperly issued credit notes), a fine of EUR 347 000 (that is to say, EUR 173 512.56 x 200%) in respect of false information on the invoices issued, and a fine of EUR 283 320 (that is to say, 141 665.30 x 200%) for non-payment of VAT.

10In the report drawn up by the enforcement officer in the course of that investigation, it was stated that Dranken Van Eetvelde had already been the subject of previous audits, taxation and court sentences in respect of the same infringements relating to the periods from 1 January 2000 to 31 December 2002 and from 1 January 2003 to 31 December 2004. In that regard, by judgments of 10 April and 17 November 2008, it was recognised that that company had organised a system of issuing false invoices under which the goods mentioned on those invoices were delivered not to the customers mentioned on those invoices, but to taxable customers, who were operators of cafés, hotels or restaurants. Those proceedings led to the imposition of fines on that company, which have become final.

11On 21 December 2018, Dranken Van Eetvelde lodged an objection to the demand for payment of 10 December 2018 before the rechtbank van eerste aanleg Oost-Vlaanderen, afdeling Gent (Court of First Instance, East Flanders, Ghent Division, Belgium), which is the referring court.

12In parallel, criminal proceedings were brought against that company for offences committed in the years 2012 to 2014. By judgment of 18 June 2019, the rechtbank van eerste aanleg Oost-Vlaanderen, afdeling (Court of First Instance, East Flanders, Dendermonde Division, Belgium), sitting in proceedings relating to criminal matters, ordered that company to pay a fine of EUR 20 000 for tax forgery and use of false documents during the years 2012 to 2014 in relation to VAT and income tax, as well as for failure to declare income for corporation tax and failure to declare sales and the VAT due on those sales, all with fraudulent or deliberate intent to cause damage. That deliberate element was found to exist on the ground that Dranken Van Eetvelde had made a substantial and essential contribution to a fraud scheme, which had enabled its business customers to sell beverages ‘on the black market’.

13In the case before the referring court, first, Dranken Van Eetvelde submits that, in accordance with the case-law of the Court, no one can be held unconditionally liable for someone else’s fraud. Such strict liability exceeds the limits of what is necessary to preserve the rights of the public exchequer and combat tax evasion. This results in a breach of the principle of proportionality.

14However, the referring court states that Article 51bis(4) of the VAT Code does provide for such strict liability, which is unconditional in nature, and may therefore be contrary to the principle of proportionality and/or VAT neutrality. Thus, the answer to the question whether that provision is contrary to Article 205 of the VAT Directive, read in the light of those principles, is important for assessing whether or not Dranken Van Eetvelde is required to pay the VAT evaded.

15Second, the referring court observes that the application of the principle non bis in idem would differ depending on whether that principle concerns income tax or VAT. The question of the duplication of administrative and criminal penalties in connection with a unity of purpose requires an examination in the light of that principle, which is given concrete expression by Article 50 of the Charter.

16In those circumstances, the rechtbank van eerste aanleg Oost-Vlaanderen, afdeling Gent (Court of First Instance, East Flanders, Ghent Division) decided to stay the proceedings and to refer the following questions to the Court of Justice for a preliminary ruling:

‘(1) Does Article 51bis(4) of the [VAT Code] infringe Article 205 of [the VAT Directive], in conjunction with the principle of proportionality, in so far as that provision provides for unconditional overall liability and does not allow the court to assess liability on the basis of each person’s contribution to the tax fraud?

(2) Does Article 51bis(4) of the [VAT Code] infringe Article 205 of the [VAT Directive] on the common system of VAT, read in conjunction with the principle of VAT neutrality, if that provision is to be interpreted as meaning that a person is jointly and severally liable to pay VAT in the place of the legal debtor, without any account having to be taken of the deduction of VAT that can be claimed by the legal debtor?

(3) Must Article 50 of [the Charter] be interpreted as not precluding national legislation which allows (administrative and criminal) penalties of a criminal nature, resulting from different proceedings, to be combined in respect of offences which are materially identical yet occurred over consecutive years (but which, in criminal law, would be regarded as a continuing offence with unity of purpose), and where the offences are subject to administrative prosecution in respect of one year and criminal prosecution in respect of another year? Are those offences not regarded as inseparable because they occurred over consecutive years?

(4) Must Article 50 of [the Charter] be interpreted as not precluding national legislation under which proceedings may be brought against a person for the imposition of an administrative fine of a criminal nature in respect of an offence for which he or she has already been finally convicted under criminal law, the two sets of proceedings being conducted entirely independently of one another and the only guarantee that the gravity of the entirety of the penalties imposed is commensurate with the gravity of the offence in question consisting in the fact that the tax court may carry out a substantive review of proportionality, even though the national legislation does not lay down any rules in that regard, nor does it lay down any rules allowing the administrative authority to take account of the criminal penalty already imposed?’

Consideration of the questions referred

The first question

17By its first question, the referring court asks, in essence, whether Article 205 of the VAT Directive, read in the light of the principle of proportionality, must be interpreted as precluding a national provision which, in order to ensure the collection of VAT, provides for the strict joint and several liability of a taxable person other than the person who would normally be liable for that tax without, however, the court having jurisdiction being able to exercise a discretion on the basis of the contribution of the various persons involved in tax evasion.

18As set out in Article 205 of the VAT Directive, in the situations referred to in Articles 193 to 200 and 202 to 204 of that directive, Member States may provide that a person other than the person liable for payment of VAT is to be held jointly and severally liable for payment of VAT.

19Articles 193 to 200 and 202 to 204 of the VAT Directive form part of Section 1 of Chapter 1 of Title XI of that directive, entitled ‘Persons liable for payment of VAT to the tax authorities’. Those articles determine the persons liable for payment of VAT. Although Article 193 of that directive provides, as the basic rule, that VAT is payable by any taxable person carrying out a taxable supply of goods or services, it states however that other persons may or shall be liable for payment of VAT in the situations referred to in Articles 194 to 199b and 202 of that directive.

20The provisions of Section 1 of Chapter 1 of Title XI of the VAT Directive, which include Article 205 of that directive, are aimed at identifying the person liable for payment of VAT in various situations. Those provisions thereby seek to ensure for the public exchequer the efficient collection of VAT from the most appropriate person in the light of the specific situation (see, to that effect, judgment of 20 May 2021, ALTI, C‑4/20, EU:C:2021:397, paragraph 28).

21In principle, Article 205 of the VAT Directive allows Member States to adopt, for the efficient collection of VAT, measures pursuant to which a person other than the person normally liable for that tax under Articles 193 to 200 and 202 to 204 of that directive is jointly and severally liable for payment of that tax (judgment of 20 May 2021, ALTI, C‑4/20, EU:C:2021:397, paragraph 29).

22However, since that Article 205 specifies neither the persons that Member States may designate as joint and several debtors nor the situations in which such designation may be made, it is for the Member States to determine the conditions and arrangements under which the joint and several liability provided for in that article will be incurred in compliance, in particular, with the principles of legal certainty and of proportionality (judgment of 20 May 2021, ALTI, C‑4/20, EU:C:2021:397, paragraphs 31 and 32 and the case-law cited).

23As regards the latter principle, in the light of which the referring court seeks the Court’s guidance as to the interpretation of Article 205 of the VAT Directive, while it is legitimate for the measures adopted by the Member States to seek to preserve the rights of the public exchequer as effectively as possible, they must not go further than is necessary for that purpose (see, to that effect, judgment of 20 May 2021, ALTI, C‑4/20, EU:C:2021:397, paragraph 33 and the case-law cited).

24In that context, exercise of the power conferred on Member States to designate a joint and several debtor other than the person liable for payment of the tax in order to ensure efficient collection of that tax must be justified by the factual and/or legal relationship between the two persons concerned in the light of the principles of legal certainty and of proportionality. It is for Member States to specify the particular circumstances in which a person such as the recipient of a taxable supply is to be held jointly and severally liable for payment of the tax owed by the other party to the contract (judgment of 20 May 2021, ALTI, C‑4/20, EU:C:2021:397, paragraph 34).

25In that context, it should be recalled that preventing possible tax evasion, avoidance and abuse is an objective recognised and encouraged by EU legislation on the common system of VAT and that the effect of the principle that the abuse of rights is prohibited is to bar wholly artificial arrangements which do not reflect economic reality and are set up with the sole aim of obtaining a tax advantage (judgment of 20 May 2021, ALTI, C‑4/20, EU:C:2021:397, paragraph 35 and the case-law cited).

26The Court has thus ruled that Article 205 of the VAT Directive allows a Member State to hold a person jointly and severally liable for payment of VAT where, at the time of the supply to it, that person knew or ought to have known that the tax payable in respect of that supply, or of any previous or subsequent supply, would go unpaid, and to rely on presumptions in that regard, provided that such presumptions are not formulated in such a way as to make it practically impossible or excessively difficult for the taxable person to rebut them with evidence to the contrary, thereby creating a system of strict liability going beyond what is necessary to preserve the public exchequer’s rights. Traders who take every precaution which could reasonably be required of them to ensure that their transactions do not form part of a chain that is fraudulent or amounts to an abuse must be able to rely on the legality of those transactions without the risk of being made jointly and severally liable to pay the VAT due from another taxable person (judgment of 20 May 2021, ALTI, C‑4/20, EU:C:2021:397, paragraph 36 and the case-law cited).

27In the present case, first, the referring court starts from the premiss that Article 51bis(4) of the VAT Code, at issue in the dispute in the main proceedings, provides for ‘strict’ liability, which could, on that ground, be contrary to the principle of proportionality. That court alone has jurisdiction to find and assess the facts in that dispute and to interpret and apply national law (judgment of 29 July 2024, protectus, C‑185/23, EU:C:2024:657, paragraph 36 and the case-law cited).

28However, the Court of Justice, which is called on to provide answers of use to that court in the context of the cooperation procedure established in Article 267 TFEU, may provide guidance to the latter based on the documents relating to the main proceedings and on the written observations which have been submitted to it, in order to enable the court in question to give judgment (see, to that effect, judgment of 5 December 2023, Nordic Info, C‑128/22, EU:C:2023:951, paragraph 81 and the case-law cited).

29It is apparent from the documents before the Court that, under Article 51bis(4) of the VAT Code, taxable persons are to be jointly and severally liable, with the person who owes the tax for the payment of the tax if, at the time when they effected a transaction, ‘they knew or should have known that non-payment of the tax with the intention of evading the tax was occurring or would occur in the chain of transactions’.

30In that regard, and subject to the checks to be carried out by the referring court, it must be observed that, as the Belgian Government and the European Commission state in their written observations, that provision does not impose ‘strict’ joint and several liability, which would be contrary to the principle of proportionality, within the meaning of the case-law cited in paragraph 26 of the present judgment, since the taxable person concerned becomes jointly and severally liable for payment of the VAT payable with the person who is liable for that VAT only if he or she knew or should have known that he or she was participating in VAT fraud.

31However, it should be noted that Article 205 of the VAT Directive, read in the light of the principle of proportionality, requires that the presumption on which Article 51bis(4) of the VAT Code relies, in order to consider a taxable person jointly and severally liable for payment of the VAT due with the person who is liable for that VAT, may be rebuttable, in the sense that it is not practically impossible or excessively difficult for that taxable person to rebut that presumption with evidence to the contrary.

32In order to rebut that presumption, the taxable person concerned must have the option of establishing that he or she took every measure which could reasonably be required of him or her to ensure that the transactions which he or she carries out are not part of the fraudulent scheme of false invoices.

33Second, as regards the fact that Article 51bis(4) of the VAT Code requires the taxable person who is jointly and severally liable to pay the full amount of the VAT due, without allowing the court to exercise discretion on the basis of the contribution of the various persons involved in the tax evasion, it should be noted, on the one hand, that it follows from the very nature of ‘joint and several liability’, such as that provided for in Article 205 of the VAT Directive, that each person jointly and severally liable is held liable for payment of the total amount of VAT due (see, by analogy, judgment of 18 May 2017, Latvijas Dzelzceļš, C‑154/16, EU:C:2017:392, paragraph 85).

34On the other hand, that interpretation of the concept of ‘joint and several liability’ is consistent with the objective pursued by Article 205 of the VAT Directive, which, as noted in paragraphs 20 and 21 of the present judgment, seeks to ensure for the public exchequer the efficient collection of VAT from the most appropriate person in the light of the specific situation.

35To require an adjustment of the obligation, for the person jointly and severally liable, to pay the VAT due, which depends on its share of liability, would mean, in particular in the event of fraud, that the public exchequer and, where applicable, the court with jurisdiction to review the action brought by that person would determine in advance the respective contributions of all the persons involved in that fraud. Apart from the fact that that approach would be contrary to the very principle of joint and several liability laid down in Article 205 of the VAT Directive, such a determination could prove particularly challenging in the case of complex fraudulent tax arrangements, characterised by a high degree of opacity.

36It follows that Article 205 of the VAT Directive requires that the taxable person jointly and severally liable for the payment of VAT may be held liable to pay on its own the full amount of the VAT irrespective of the degree of participation of that taxable person in the tax evasion.

37As the Belgian Government states, in essence, that interpretation is without prejudice to the possible application of the national civil law rules governing the relationship between the taxable person jointly and severally liable for payment of VAT, within the meaning of Article 51bis(4) of the VAT Code, and the taxable person normally liable for that tax, which, where relevant, would allow that first taxable person to bring proceedings against that second taxable person in order to have the total economic burden apportioned according to each person’s contribution to the tax debt.

38In the light of the foregoing considerations, the answer to the first question is that Article 205 of the VAT Directive, read in the light of the principle of proportionality, must be interpreted as not precluding a national provision which, in order to ensure the collection of VAT, provides for the strict joint and several liability of a taxable person other than the person who would normally be liable for that tax without, however, the court having jurisdiction being able to exercise a discretion on the basis of the contribution of the various persons involved in tax evasion, provided that that taxable person has the option of establishing that he or she took every measure which could reasonably be required of him or her to ensure that the transactions which he or she carried out were not part of that evasion.

The second question

39By its second question, the referring court asks, in essence, whether Article 205 of the VAT Directive, read in the light of the principle of fiscal neutrality, must be interpreted as precluding a national provision which imposes a joint and several obligation to pay VAT on a taxable person other than the person who would normally be liable for that tax, without account being taken of the latter’s right to deduct input VAT due or paid.

40The right of taxable persons to deduct the VAT due or already paid on goods purchased and services received as inputs and used for the purposes of a taxable activity from the VAT which they are liable to pay is a fundamental principle of the common system of VAT. The right to deduct provided for in Article 167 et seq. of the VAT Directive is therefore an integral part of the VAT scheme and in principle may not be limited if the material and formal requirements or conditions to which this right is subject are respected by taxable persons wishing to exercise it (judgment of 24 November 2022, Finanzamt M (Scope of the right to deduct VAT), C‑596/21, EU:C:2022:921, paragraph 21).

41In particular, the deduction system is intended to relieve the trader entirely of the burden of VAT due or paid in the course of all his or her economic activities. The common system of VAT consequently ensures neutrality of taxation of all economic activities, whatever the purpose or results of those activities, provided that they are themselves subject in principle to VAT (judgment of 24 November 2022, Finanzamt M (Scope of the right to deduct VAT), C‑596/21, EU:C:2022:921, paragraph 22 and the case-law cited).

42That being so, the prevention of possible tax evasion, tax avoidance and abuse is an objective recognised and encouraged by the VAT Directive, with the result that individuals cannot fraudulently or improperly avail themselves of the rules of EU law. It is therefore for national authorities and courts to refuse the right to deduct if it is established, on the basis of objective elements, that this right is being relied on for fraudulent or abusive ends (judgment of 24 November 2022, Finanzamt M (Scope of the right to deduct VAT), C‑596/21, EU:C:2022:921, paragraph 24 and the case-law cited).

43Thus, a taxable person is to be refused the right to deduct not only where fraud is committed by the taxable person him or herself, but also where it is established that that taxable person, to whom goods or services which served as the basis on which to substantiate the right to deduct were supplied, knew or ought to have known that, through the purchase of those goods or services, he or she was taking part in, or at least facilitated, a transaction connected with VAT fraud. Indeed such a taxable person must, for the purposes of the VAT Directive, be regarded as a participant in such fraud, whether or not he or she profits from the resale of the goods or the use of the services in the context of the taxable transactions subsequently carried out by him or her, since that taxable person, in such a situation, aids the perpetrators of that fraud and becomes their accomplice (see, to that effect, judgment of 24 November 2022, Finanzamt M (Scope of the right to deduct VAT), C‑596/21, EU:C:2022:921, paragraph 35 and the case-law cited).

44In the present case, it should be noted that the second question referred for a preliminary ruling concerns whether the taxable person, who is jointly and severally liable for payment of VAT in place of the person liable for that tax, pursuant to a national provision implementing Article 205 of the VAT Directive, is entitled to take into account, for the VAT which he or she must pay, the right to deduct the VAT which that person liable for the VAT may make. Furthermore, that question relates only to cases where joint and several liability for the payment of VAT stems from Article 51bis(4) of the VAT Code, which concern, by definition, cases of VAT fraud.

45In such cases of fraud, in accordance with the case-law referred to in paragraphs 42 and 43 of the present judgment, the taxable person who is liable to pay VAT must be refused the right to deduct VAT. Consequently, in so far as that taxable person cannot claim any right to deduct that tax, such a right to deduct cannot, a fortiori, be transferred to the taxable person who is jointly and severally liable for payment of that tax under the national provision transposing Article 205 of the VAT Directive.

46That is all the more so since, according to the wording of Article 51bis(4) of the VAT Code, the joint and several liability of a taxable person other than the person liable for the VAT is provided for only where the taxable person jointly and severally liable also knew or should have known that non-payment of the tax with the intention of evading the tax was occurring or would occur in the chain of transactions.

47In the light of the foregoing considerations, the answer to the second question is that Article 205 of the VAT Directive, read in the light of the principle of fiscal neutrality, must be interpreted as not precluding a national provision which imposes a joint and several obligation to pay VAT on a taxable person other than the person who would normally be liable for that tax, without account being taken of the latter’s right to deduct input VAT due or paid.

The third question

48By its third question, the referring court asks, in essence, whether Article 50 of the Charter must be interpreted as precluding national legislation which allows criminal penalties and administrative penalties of a criminal nature, resulting from different proceedings, to be combined in respect of offences which are of the same nature yet occurred over consecutive tax years, which are the subject of administrative proceedings of a criminal nature for one tax year and criminal proceedings for another tax year.

49Article 50 of the Charter provides that ‘no one shall be liable to be tried or punished again in criminal proceedings for an offence for which he or she has already been finally acquitted or convicted within the [European] Union in accordance with the law’. Therefore, the principle non bis in idem prohibits a duplication both of proceedings and of penalties of a criminal nature for the purposes of that article for the same acts and against the same person (judgments of 20 March 2018, Menci, C‑524/15, EU:C:2018:197, paragraph 25, and of 22 March 2022, bpost, C‑117/20, EU:C:2022:202, paragraph 24).

50The application of the principle non bis in idem is subject to a twofold condition, namely, first, that there must be a prior final decision (the ‘bis’ condition) and, second, that the prior decision and the subsequent proceedings or decisions must concern the same facts (the ‘idem’ condition) (judgment of 22 March 2022, bpost, C‑117/20, EU:C:2022:202, paragraph 28).

51As regards the ‘idem’ condition, according to the Court’s settled case-law, the relevant criterion for the purposes of assessing the existence of the same offence is identity of the material facts, understood as the existence of a set of concrete circumstances which are inextricably linked together and which have resulted in the final acquittal or conviction of the person concerned. Therefore, Article 50 of the Charter prohibits the imposition, with respect to identical facts, of several criminal penalties as a result of different proceedings brought for those purposes (judgments of 20 March 2018, Menci, C‑524/15, EU:C:2018:197, paragraph 35, and of 22 March 2022, bpost, C‑117/20, EU:C:2022:202, paragraph 33).

52Moreover, the legal classification under national law of the facts and the legal interest protected are not relevant for the purposes of establishing the existence of the same offence, in so far as the scope of the protection conferred by Article 50 of the Charter cannot vary from one Member State to another (judgments of 20 March 2018, Menci, C‑524/15, EU:C:2018:197, paragraph 36, and of 22 March 2022, bpost, C‑117/20, EU:C:2022:202, paragraph 34).

53The Court has observed that the ‘idem’ condition requires the material facts to be identical. By contrast, the principle non bis in idem is not intended to be applied where the facts in question are not identical but merely similar. Identity of the material facts must be understood to mean a set of concrete circumstances stemming from events which are, in essence, the same, in that they involve the same perpetrator and are inextricably linked together in time and space (judgment of 22 March 2022, bpost, C‑117/20, EU:C:2022:202, paragraphs 36 and 37).

54In the present case, it is apparent from the request for a preliminary ruling that the criminal penalty imposed on Dranken Van Eetvelde, which followed its conviction in the criminal proceedings closed by the judgment of the rechtbank van eerste aanleg Oost-Vlaanderen, afdeling Dendermonde (Court of First Instance, East Flanders, Dendermonde Division) of 18 June 2019, concerned VAT fraud committed during the 2012 to 2014 tax years. However, the referring court states that the administrative proceedings at issue in the main proceedings, even if they should be regarded as criminal in nature, concern VAT fraud committed during the 2011 tax year. Thus, even if it were to be considered that, during all those tax years, that company participated in the establishment of a single VAT fraud scheme, the fact remains that the criminal proceedings and the administrative proceedings concern different tax periods.

55Furthermore, the information provided by the referring court that, under national criminal law, the material facts established during the years 2011 to 2014 may be regarded as constituting a continuing offence with unity of purpose is irrelevant for the purposes of examining compliance with the ‘idem’ condition under EU law.

56It follows that the facts relating to the administrative proceedings at issue in the main proceedings and those which were the subject of the criminal proceedings are not identical, with the result that the ‘idem’ condition is not satisfied. Consequently, the principle non bis in idem is not intended to apply in the present case.

57In the light of the foregoing considerations, the answer to the third question is that Article 50 of the Charter must be interpreted as precluding national legislation which allows criminal penalties and administrative penalties of a criminal nature, resulting from different proceedings, to be combined in respect of offences which are of the same nature yet occurred over consecutive tax years, which are the subject of administrative proceedings of a criminal nature for one tax year and criminal proceedings for another tax year.

The fourth question

58In view of the answer to the third question, it is unnecessary to reply to the fourth question.

Costs

59Since these proceedings are, for the parties to the main proceedings, a step in the action pending before the national court, the decision on costs is a matter for that court. Costs incurred in submitting observations to the Court, other than the costs of those parties, are not recoverable.

Operative part

On those grounds, the Court (Ninth Chamber) hereby rules:

1. Article 205 of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax, read in the light of the principle of proportionality,

must be interpreted as not precluding a national provision which, in order to ensure the collection of value added tax, provides for the strict joint and several liability of a taxable person other than the person who would normally be liable for that tax without, however, the court having jurisdiction being able to exercise a discretion on the basis of the contribution of the various persons involved in tax evasion, provided that that taxable person has the option of establishing that he or she took every measure which could reasonably be required of him or her to ensure that the transactions which he or she carried out were not part of that evasion.

2. Article 205 of Directive 2006/112, read in the light of the principle of fiscal neutrality,

must be interpreted as not precluding a national provision which imposes a joint and several obligation to pay value added tax (VAT) on a taxable person other than the person who would normally be liable for that tax, without account being taken of the latter’s right to deduct input VAT due or paid.

3. Article 50 of the Charter of Fundamental Rights of the European Union must be interpreted as not precluding national legislation which allows criminal penalties and administrative penalties of a criminal nature, resulting from different proceedings, to be combined in respect of offences which are of the same nature yet occurred over consecutive tax years, which are the subject of administrative proceedings of a criminal nature for one tax year and criminal proceedings for another tax year.

Signatures

[Signatures]

Notes

* Language of the case: Dutch.

OPINION OF ADVOCATE GENERAL

KOKOTT

delivered on 5 September 2024 ¹

(Reference for a preliminary ruling – Tax law – Value added tax (VAT) – Directive 2006/112/EC – Articles 205 and 273 – Joint and several liability for the tax debts owed by a third party – Conditions and scope of liability – Strict liability without consideration of the actual contribution to the offence – Extension of liability to include tax debt without consideration of input tax deduction – Extended liability with a view to the effective combating of VAT fraud – Proportionality of such liability – Principle of neutrality – Principle ne bis in idem)

I. Introduction

1Countering the idea that the end justifies the means, Karl Marx (German philosopher, 1818-1883) wrote, ‘but an end which requires unjustified means is no justifiable end …’ ²

2The Court is once again called upon to rule on what limitations within VAT law must circumscribe the effective combating of fraud so that we can still speak of a proportionate approach.

3The issue, in essence, is the fight against the ‘black market’ in Belgium where the vendor deliberately does not specify the actual purchaser of goods on otherwise correct invoices, so that the purchaser can subsequently resell the goods on the ‘black market’ (that is to say, without invoices and untaxed). However, the VAT owed by the vendor has been properly paid by the vendor. Belgium penalises that ‘collusive’ collaboration between the vendor and purchaser on income tax and VAT fraud committed by the purchaser using the resources of criminal law (tax evasion on the part of the purchaser and, depending on the vendor’s contribution to the offence, complicity or joint participation on the part of the vendor).

4Secondly, VAT law provides for the vendor to be liable for the purchaser’s VAT debt arising from the subsequent ‘black market’ sales. In addition, a fine of 200% of the amount subject to joint and several liability is imposed because the invoice was not issued correctly. In numerical terms, that enables Belgium, even if the purchaser cannot be identified, to levy on the vendor, additionally, the tax owed by the purchaser, and indeed to levy the threefold amount.

5The situation is somewhat similar to the very first constellation in which the Court developed its still controversial ³ case-law on fraud. ⁴ At that time, a vendor of cars in Germany helped car dealers in Portugal to commit Portuguese income tax and VAT fraud by issuing, in his accounts, false invoices with fictitious purchasers as the recipients of the supplies. The Court ‘penalised’ the vendor for that by refusing the tax exemption of the intra-Community supply which had objectively occurred. That, in turn, prompted the referring criminal court to convict the vendor of tax evasion on his own account. In effect, complicity in tax fraud committed by a third party in Portugal was thus converted into tax fraud on the vendor’s own part in Germany, with the special feature that – unlike what is normally the case in criminal law – the primary perpetrator did not need to be specifically identified. That approach raised numerous follow-up questions and gave rise to many more requests for preliminary rulings.

6It now needs to be clarified whether that case-law relating to the interpretation of the VAT Directive permits a Member State to order not only that the tax exemption of a person’s own supplies be refused but also that he or she be made liable in respect of the estimated tax debt of a possibly unknown third party for an amount three times the estimated tax debt of that third party. If that is combined with the case-law of the Court relating to refusal of the right to deduct input tax, tax revenue in Belgium may also be increased by the additional refusal of the vendor’s right to deduct input tax.

7Should another tax debt be established on the basis of the false invoices, the amount of VAT owed by the vendor could moreover be increased by the VAT entered on them. The effect of that would be that the (single) tax fraud committed by the purchaser would permit almost the fivefold amount of additional tax to be levied on the vendor. That is sure to have a deterrent effect and should significantly reduce the incentive to participate in a third party’s tax fraud.

8The only question is whether that task really belongs to EU VAT law and not rather to national criminal law, which, to determine the severity of the penalty, can take into account the perpetrator’s (subjective) fault and his or her contribution to the offence. The question also arises whether taxation which ends up being almost five times as high as the intended taxation can be considered proportionate taxation (or proportionate punishment outside the sphere of criminal law).

9In that regard, the Court has the opportunity here to delineate somewhat the legal limits of its case-law on fraud, which has become almost boundless. In any event, the combating of fraud should not be pursued at all costs under VAT law. Ultimately, within an EU founded on the rule of law (see Article 2 TEU), the ends do not justify all means.

II. Legal framework

A. European Union law

10The EU legal framework is formed by the principle ne bis in idem enshrined in Article 50 of the Charter of Fundamental Rights (‘the Charter’) and Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax ⁵ (‘the VAT Directive’).

11Recital 44 of that directive states:

‘Member States should be able to provide that someone other than the person liable for payment of VAT is to be held jointly and severally liable for its payment.’

12Article 203 of the VAT Directive governs the tax debt resulting from the entering of VAT on an invoice:

‘VAT shall be payable by any person who enters the VAT on an invoice.’

13Article 205 of the VAT Directive includes the possibility of providing for a further person, in addition to the person liable for payment of VAT, to be held jointly and severally liable for payment of VAT:

‘In the situations referred to in Articles 193 to 200 and Articles 202, 203 and 204, Member States may provide that a person other than the person liable for payment of VAT is to be held jointly and severally liable for payment of VAT.’

14The first paragraph of Article 273 of the VAT Directive provides for options for the Member States, inter alia, to combat evasion:

‘Member States may impose other obligations which they deem necessary to ensure the correct collection of VAT and to prevent evasion, subject to the requirement of equal treatment as between domestic transactions and transactions carried out between Member States by taxable persons and provided that such obligations do not, in trade between Member States, give rise to formalities connected with the crossing of frontiers.’

B. Belgian law

15Belgium transposed the VAT Directive by means of the Btw-wetboek (VAT Code; ‘the WBTW’ ⁶). Article 51(1) and (2) of the WBTW governs the ‘normal’ tax debt of a taxable person as the provider or recipient of a service or supply. In contrast, Article51bis(4) of the WBTW concerns joint and several liability for VAT and reads as follows:

‘Taxable persons shall be jointly and severally liable, with the person who owes the tax on the basis of Article 51(1) and (2), for the payment of the tax if, at the time when they effected a transaction, they knew or should have known that non-payment of the tax with the intention of evading the tax was occurring or would occur in the chain of transactions.’

16In Section 1 (tax fines), Article 70(1) and (2) of the WBTW provides as follows:

‘1. In respect of any infringement of the obligation to pay the tax, a fine equal to twice the tax evaded or paid late shall be incurred.

That fine shall be owed individually by each person with an obligation to pay the tax on the basis of Article 51(1), (2) and (4), Articles 51bis, 52, 53, 53ter, 53nonies, 54, 55 and 58 or the decrees implementing those articles.

…

2. If the invoice or equivalent document required under Articles 53, 53decies and 54 or the decrees implementing those articles was not issued or contains incorrect information regarding the identification number, name or address of any of the parties to the transaction, regarding the nature or quantity of the goods supplied or services provided, or regarding the price or ancillary costs, a fine shall be incurred amounting to twice the tax due on that transaction or EUR 50, whichever is higher.

That fine shall be payable individually by the supplier or service provider and by the other party to the contract. However, it shall not be applied if the irregularities are to be considered purely accidental, in particular by reason of the number and scale of the transactions for which no proper document was issued compared with the number and scale of the transactions which were the subject of proper documents, or where the supplier or service provider has no serious reasons to doubt the other party’s status as a non-taxable person.

Where a person incurs both the fine provided for in paragraph 1 and the fine provided for in paragraph 2 in respect of the same infringement, only the latter shall be applicable.’

III. The dispute in the main proceedings

17Dranken Van Eetvelde NV (‘the applicant’) is a drinks merchant which has been registered for VAT purposes since 1 January 2000. The Belgian public exchequer audited its VAT returns for the 2011 financial year. Irregularities were found of which the applicant was notified on 3 December 2018. It is alleged to have issued false invoices for the supply of drinks to private individuals. In reality, the drinks were allegedly supplied to business customers (hotel and restaurant operators) who resold them on the ‘black market’ but whose identity appears to be unknown.

18The tax authorities described those infringements in a record dated 6 December 2018 and then issued an order for payment, which was declared enforceable on 11 December 2018 and served on the applicant on 13 December 2018. The order for payment (‘the tax assessment’) concerned the VAT and fines owed.

19On 21 December 2018, the applicant lodged an objection to the tax assessment with the referring court, which is now required to rule on that appeal. By an interlocutory judgment which has since become final, the referring court ruled on 4 June 2019 that the evidence had been obtained lawfully. However, it now faces the question whether the combined fines ordered in the tax assessment and the joint and several liability are compatible with the VAT Directive.

20The following items were ‘established’ in the tax assessment:

EUR 173 512.56 (EUR 141 665.30 resulting from joint and several liability under Article 51bis(4) of the WBTW plus EUR 31 847.26 resulting from the refund of turnover tax on the basis of improperly issued credit notes);

a fine under Article 70(2) of the WBTW (false information on invoices) of EUR 347 000.00 (that is to say, EUR 173 512.56 x 200%);

a fine under Article 70(1) of the WBTW (non-payment of VAT) of EUR 283 320.00 (that is to say, EUR 141 665.30 x 200%).

21The referring court points out that the two previous tax audits (concerning the 2001-2002 and 2004 financial years) had already found similar infringements. For those infringements, fines were likewise set in accordance with the first subparagraph of Article 70(2) of the WBTW (at the legal maximum of 200% of the tax due in respect of the transaction).

22It appears that those fines were confirmed by judgments of 10 April 2008 and 17 November 2008, though reduced in amount. The judgments held that the applicant had organised a system of falsified invoices under which the goods specified on an invoice were supplied not to the customer named on the invoice (a private individual) but to a business customer, the operator of a café/hotel/restaurant, whose identity it was no longer possible to trace. That system provided the option of conducting sales with the drinks purchased which were not entered into the accounts as revenue and therefore not subject to VAT and income tax.

23Criminal proceedings were also initiated against the applicant and its managers on the basis of those allegations. The criminal proceedings relate to the years 2012, 2013 and 2014. By the judgment of the Rechtbank van eerste aanleg Oost-Vlaanderen, afdeling Dendermonde (Court of First Instance, East Flanders, Dendermonde Division, Belgium) of 18 June 2019, the applicant was ordered, inter alia, to pay a fine of EUR 20000. That ruling was concerned with tax evasion in relation to VAT and income tax, failure to declare income for the purposes of corporation tax and failure to declare the sales and the VAT due on them in accordance with the laws and regulations on VAT, all with fraudulent intent or with intent to cause damage. The evidence given of the applicant’s intent was that it had made a significant contribution to a fraud scheme which enabled its business customers to sell the purchased goods on the ‘black market’.

24In the proceedings contesting the tax assessment which are pending before the referring court, the applicant argues that, in accordance with the case-law of the Court of Justice, no one can be held unconditionally liable for someone else’s fraud. That strict liability, it argues, exceeds the limits of what is required to safeguard the rights of the public exchequer and combat tax evasion and is contrary to the principle of proportionality. The referring court also raises additional concerns with regard to the combined administrative and criminal penalties and the principle ne bis in idem enshrined in Article 50 of the Charter.

IV. The request for a preliminary ruling and the procedure before the Court

25In those circumstances, the Rechtbank van eerste aanleg Oost-Vlaanderen Afdeling Gent (Court of First Instance, East Flanders, Ghent Division, Belgium) stayed the proceedings and referred the following four questions to the Court of Justice:

Does Article 51bis(4) of the WBTW infringe Article 205 of Directive 2006/112 in conjunction with the principle of proportionality in so far as that provision provides for unconditional overall liability and does not allow the court to assess liability on the basis of each person’s contribution to the tax fraud?

Does Article 51bis(4) of the WBTW infringe Article 205 of Directive 2006/112 on the common system of VAT, read in conjunction with the principle of VAT neutrality, if that provision is to be interpreted as meaning that a person is jointly and severally liable to pay VAT in the place of the legal debtor, without any account having to be taken of the deduction of VAT that can be claimed by the legal debtor?

Must Article 50 of [the Charter] be interpreted as not precluding national legislation which allows (administrative and criminal) penalties of a criminal nature, resulting from different proceedings, to be combined in respect of offences which are materially identical yet occurred over consecutive years (but which, in criminal law, would be regarded as a continuing offence with unity of purpose), and where the offences are subject to administrative prosecution in respect of one year and criminal prosecution in respect of another year? Are those offences not regarded as inseparable because they occurred over consecutive years?

Must Article 50 of [the Charter] be interpreted as not precluding national legislation under which proceedings may be brought against a person for the imposition of an administrative fine of a criminal nature in respect of an offence for which he or she has already been finally convicted under criminal law, the two sets of proceedings being conducted entirely independently of one another and the only guarantee that the gravity of the entirety of the penalties imposed is commensurate with the gravity of the offence in question consisting in the fact that the tax court may carry out a substantive review of proportionality, even though the national legislation does not lay down any rules in that regard, nor does it lay down any rules allowing the administrative authority to take account of the criminal penalty already imposed?’

26In the proceedings before the Court, the applicant, the Kingdom of Belgium and the European Commission have submitted written observations. In accordance with Article 76(2) of its Rules of Procedure, the Court did not deem it necessary to hold a hearing.

V. Legal assessment

27The four questions submitted by the referring national court can be divided into two issues. First, the referring court is concerned with the scope of the principle ne bis in idem, which, however, is not relevant to the present case (see A). Secondly, clarification is sought as to the scope of the option provided for in Article 205 of the VAT Directive to provide for joint and several liability (see B). In the event that it does not cover liability for the tax debts of an unknown third party, the amount of which is merely presumed, a decision is required as to whether Articles 203 and 273 of the VAT Directive, read in conjunction with the principle of proportionality, permit an additional penalty of 300% of the actual tax debt (see C).

A. The principle ne bis in idem enshrined in Article 50 of the Charter

28By its third and fourth questions, which can be answered together, the referring court seeks an interpretation of Article 50 of the Charter. Under that provision, ‘no one shall be liable to be tried or punished again in criminal proceedings for an offence for which he or she has already been finally acquitted or convicted within the Union in accordance with the law.’

29Therefore, the principle ne bis in idem prohibits a duplication both of proceedings and of penalties of a criminal nature for the purposes of that article for the same acts and against the same person. ⁷ However, those conditions are not satisfied in the present case, even if the administrative penalties under Article 70(1) and (2) of the WBTW were to be classified as criminal penalties.

30That is because the tax assessment at issue concerns fines imposed in respect of misconduct in 2011. According to the referring court, however, the criminal conviction was handed down in connection with tax evasion committed (by the taxable person or by a third party) in respect of 2012, 2013 and 2014. That, per se, rules out the duplication of proceedings and penalties against the same person for the same offence in the present case. Only if criminal proceedings were to be brought against the applicant for tax evasion in 2011 would that question arise. The questions relating to the interpretation of Article 50 of the Charter are therefore not relevant to the present case; in any event, that provision is not applicable to the contested tax assessment.

B. The scope of the joint and several payment obligation under Article 205 of the VAT Directive, in principle and in terms of the amount

1. General remarks

31The first two questions seek clarification as to the scope of the option provided for in Article 205 of the VAT Directive to provide for joint and several liability. To date, the Court has had little opportunity ⁸ to make a statement on the scope of an extension of VAT obligations to a third party which is made possible under that provision.

32Article 205 of the VAT Directive empowers Member States, in the situations referred to in Articles 193 to 200 and Articles 202, 203 and 204, to provide that a person other than the person liable for payment of VAT is to be held jointly and severally liable for payment of VAT.

33Article 205 of the VAT Directive does not transfer the tax debt to another person, as is the case with Article 196 of the VAT Directive for example. It provides for a further person who is liable to pay tax, in addition to the taxable person. That payment obligation is imposed jointly and severally. However, it is linked to another person’s existing tax debt and is therefore ancillary in nature. It thus effectively establishes the liability of a third party for tax owed by another person. In order to draw a conceptual distinction between that liability and the liability for the original tax debt (principal debt), it will be referred to hereinafter as secondary liability.

2. Condition of secondary liability under Article 205 of the VAT Directive

34The wording of Article 205 of the VAT Directive refers to a person other than the person liable for payment of VAT being held jointly and severally liable for ‘payment of VAT’. A crucial point, however, is what is meant by the expression ‘payment of VAT’, for which another person can be held liable. Does it refer to a specific amount of tax owed by a taxable person (and if so, what amount), or does a third party’s probable but as yet unquantified and only presumed tax debt suffice?

35With regard to the scope of a specific ‘liability rule’ in the law on excise duties, the Court has already ruled that the guarantee provided by a warehousekeeper under EU law to cover the risks inherent in intra-Community movement does not include liability for penalties imposed on a third party. ⁹ It has also ruled that Article 205 of the VAT Directive permits a joint and several obligation for ‘payment of VAT’. However, other obligations, such as the provision of a security, as a kind of ancillary obligation, can be based only on Article 207 of the VAT Directive. ¹⁰ All of that argued in favour of limiting secondary liability, in numerical terms, to the amount of the taxable person’s tax debt (principal debt).

36The Court recently found, however, that although, according to the wording of Article 205 of the VAT Directive, ‘the joint and several liability provided for in that article relates only to the payment of VAT, that wording does not preclude Member States from being able to impose on the joint and several debtor all the elements relating to that tax’. ¹¹ Irrespective of whether that is possible where the conditions of Article 273 of the VAT Directive are not also satisfied, ¹² that case-law is not applicable in the present case, because it is not concerned with elements relating to the tax (such as default interest).

37‘The tax’ or ‘the VAT’ is that which is owed by the taxable person (in the present case, the purchaser) and for which the applicant is liable under Article 205 of the VAT Directive. It can only be calculated if it is known on what terms the purchaser resold the goods. That, in turn, involves knowing who resold those goods to whom and at what price. Consequently, Article 205 refers to ‘the person liable for payment of VAT’ rather than a (or any) person liable for payment of VAT. Accordingly, from a schematic point of view, Article 205 appears in Chapter 1 (‘Obligation to pay’), in Section 1, (‘Persons liable for payment of VAT to the tax authorities’). The applicant is thus liable for (only) the VAT which the purchaser specifically owes in respect of his or her output transactions.

38Accordingly, Article 205 of the VAT Directive cannot be applied where, as in the present case, the possible ‘taxable person’ and the amount of his or her tax debt are unknown, because the resale that would constitute the basis of assessment and the place of resale are unclear. After all, it is not even established in such a case whether national (in the present case, Belgian) VAT has even been incurred and, if it has, what the amount is. What is at issue is only a presumed tax debt which is, at best, roughly estimated.

39That is confirmed to the applicant by the tax assessment. The secondary liability established does not correspond to a specific third-party tax debt but to the VAT entered on the false invoices issued by the applicant.

40The secondary liability determined by the Belgian tax authorities therefore appears, at most, to relate to the presumed tax debt of the purchaser. The basis for the presumption would be the turnover tax entered by the applicant on the false invoices. That is a rather improbable presumption. The amount taken from the applicant’s false invoices would only correspond to the purchaser’s tax debt if the purchaser had resold the goods in Belgium at the same price. A normal taxable person, however, would operate with a profit mark-up. A fraudulent taxable person would possibly offer a more favourable price, as he or she would be ‘saving’ him or herself the income tax and his or her customers the VAT.

41Provided that Belgium has transposed Article 203 of the VAT Directive, however, the applicant’s tax debt would arise from Article 203, or its transposition. The applicant’s tax debt at issue cannot, in contrast, be based on Article 205. On the contrary, Article 205 of the VAT Directive specifies that, in a situation falling under Article 203 of the VAT Directive, ‘a person other than the person liable for payment of VAT’ is to be held liable for payment of VAT. The above makes it clear that Article 203 of the VAT Directive establishes the applicant’s own tax debt in respect of the VAT entered on the false invoices, while Article 205 of the VAT Directive concerns liability for the tax debt of a third party (principal debt). A tax debt in respect of the VAT entered on the false invoices under Article 203 of the VAT Directive and a concurrent secondary liability for the same amount under Article 205 of the VAT Directive are therefore mutually exclusive.

42On the contrary, the applicant is liable, in accordance with Article 203 of the VAT Directive, for the VAT improperly entered on the false invoices, notwithstanding the fact that it has already correctly paid VAT on the transaction. That would correspond exactly to the amount determined in the present case as secondary liability for a third party’s tax debt under Article 51bis(4) of the WBTW.

43If the purpose of Article 205 of the VAT Directive is to protect the rights of the public exchequer as effectively as possible by making another person liable on an ancillary basis for the taxable person’s tax debt, then that depends on the tax debt (principal debt) being established and therefore capable of being assessed. That condition is not satisfied in the present case, with the result that Article 205 of the VAT Directive cannot be applied. By contrast, Article 203 of the VAT Directive expressly provides that a tax debt is payable in respect of the VAT entered on false invoices. ¹³

C. Additional ‘liability for third-party tax debts’ at an amount equal to the person’s own tax debt in accordance with Article 273 of the VAT Directive

1. General remarks

44Even though Article 205 of the VAT Directive restricts the possibilities for Member States to provide that another person is liable for payment of VAT to the VAT specifically owed by a specific person, it does not follow that it precludes further measures by the Member States in their national law of tax procedure. It may be that Article 273 of the VAT Directive allows for corresponding liability to attach to the taxable person.

45That being said, the amount demanded in the present case is not, strictly speaking, liability for third-party tax debts but a flat-rate penalty for a presumed loss of tax revenue. As the Court has held in settled case-law, in the absence of harmonisation of EU legislation in the field of sanctions applicable where conditions laid down by arrangements under that legislation are not complied with, Member States remain empowered to choose the sanctions which seem to them to be appropriate. ¹⁴

46This is consistent with the first paragraph of Article 273 of the VAT Directive. That provision allows Member States to impose other obligations to ensure the correct collection of VAT and to prevent tax evasion. ‘Extended liability’ on the part of the supplier for the merely presumed tax debts of a third party arising from untaxed resale, with a view to preventing tax evasion under the first paragraph of Article 273 of the VAT Directive, therefore is a possibility, if it is applied in a proportionate manner.

47According to the Court’s case-law, for example, it is not contrary to European Union law to require a person other than the person liable to pay the tax (the applicant, in the present case) to take every step which could reasonably be required of him or her to satisfy him or herself that the transaction which he or she is effecting does not result in his or her participation in tax evasion. ¹⁵ The applicant appears to have failed to fulfil that obligation. On the contrary, it was actively involved in the fraud of a third party. A proportionate penalty is therefore possible.

48However, there is a certain tension between these statements and the Court’s case-law on an undertaking’s right to deduct input tax in the context of VAT fraud. According to that case-law, a taxable person who knew or should have known ¹⁶ that he or she was taking part in a transaction connected with fraudulent evasion of VAT must, for the purposes of the VAT Directive, be regarded as a participant in that fraud. ¹⁷ That obliges the Member States to refuse the taxable person (the applicant, in the present case) the right of deduction. ¹⁸

49If, in accordance with that case-law, the applicant was refused or is still refused the right to deduct input tax, however, there would be only very little damage to the public exchequer that would have to be guarded against or penalised by means of ‘liability’. If Article 203 of the VAT Directive is also taken into account, then there will presumably be no loss of tax revenue at all, since the applicant alone would have to pay almost three times the amount of the VAT (tax debt arising from the supply, tax debt arising from the false invoices, refusal of the right to deduct input tax in respect of the purchase).

2. Condition: no strict liability

50Clarification is required as to whether, in such a case, further additional liability and penalisation by fine is still covered by Article 273 of the VAT Directive with due regard to the principle of proportionality.

51Irrespective of the possible refusal of the right to deduct input tax, the Court has already held that national measures which bring about, de facto, a system of strict (unconditional) joint and several liability go beyond what is necessary to preserve the public exchequer’s rights. ¹⁹ Imposing responsibility for paying VAT on a person other than the person liable to pay that tax, without allowing him or her to escape liability by providing proof that he or she had nothing whatsoever to do with the acts of the person liable to pay the tax must, therefore, be considered contrary to the principle of proportionality. ²⁰ It would clearly be disproportionate to hold that person unconditionally liable for the shortfall in tax caused by acts of a third party over which he or she has no influence whatsoever. ²¹ The applicant invokes that argument.

52However, the Belgian rule in Article 51bis(4) of the WBTW does not appear to go in the direction of such strict (unconditional) liability. Under that provision, liability only arises if the supplier knew or should have known at the time of his or her transaction that the recipient of the supply would not pay the tax, intending to evade it. If that ‘should have known’ is limited to gross negligence, then there are no objections in principle in respect of the principle of proportionality.

53According to the Court’s case-law, ²² then, it is not contrary to European Union law to require the person other than the person liable to pay the tax to take every step which could reasonably be required of him or her to satisfy him or herself that the transaction which he or she is effecting does not result in his or her participation in tax evasion. Accordingly, the fact that the person other than the person liable to pay the tax acted in good faith, exhibiting all the due diligence of a circumspect trader, that he or she took every reasonable measure in his or her power and that his or her participation in fraud is excluded are important points in deciding whether that person can be obliged to account for the VAT owed. ²³

54According to the request for a preliminary ruling, the applicant even knew positively that the recipient of the supply intended to evade VAT is respect of his output transactions with the purchased goods and actively participated in that endeavour (by issuing false invoices). That being the case, there can be no question of strict liability within the meaning of the case-law cited.

55The fact that the ‘liability’ provided for in Belgian law does not allow the individual contributions to the offence to be weighted also does not entail strict liability within the meaning of that case-law. It solely affects the question of the principle of proportionality (see below).

3. Proportionality of the penalties possible under Article 273 of the VAT Directive

56Under Article 273 of the VAT Directive, the Member States may adopt measures to ensure the correct collection of VAT and to prevent evasion. They must, however, exercise that power in compliance with EU law and its principles, inter alia the principles of proportionality and of VAT neutrality. ²⁴

57Thus, the penalties must not go beyond what is necessary to attain the objectives referred to in Article 273 of the VAT Directive and must not undermine the neutrality of that tax. ²⁵ In order to assess whether a penalty is consistent with the principle of proportionality, account must be taken of, inter alia, the nature and the degree of seriousness of the infringement which that penalty seeks to sanction, and of the means of establishing the amount of that penalty. ²⁶

58In that regard it should be noted that, in the present case, for the purpose of ensuring the correct collection of VAT and preventing evasion, national law provides for the imposition of a fine, the amount of which, rather than being calculated according to the taxable person’s tax debt, is equal to the amount of VAT which the applicant improperly entered on the invoices (see point 39 et seq. above). That legal consequence follows from Article 203 of the VAT Directive and is proportionate where and because the person concerned – even if he or she was acting in bad faith – can correct that tax debt by adjusting the invoice and eliminating the risk of loss of tax revenue.

59Moreover, the tax debt arising from the applicant’s supplies remains, with the result that tax revenue at that level is also secure. Under Article 203 of the VAT Directive alone (provided that the provision has been transposed into Belgian law), the applicant continues to owe the tax entered on the incorrect invoices until an adjustment is made which presupposes the elimination of the risk of loss of tax revenue. ‘Liability’ for the amount of that tax and a penalty amounting to 200% of that tax results in the almost fivefold taxation of a single transaction, with the consequence that the loss of tax revenue at the level of the purchaser – if it can even be quantified – is overcompensated almost fourfold. That is disproportionate, especially since the public exchequer has at most suffered a tax loss equal to the added value of the resale (that is to say, the difference between the selling and purchase prices).

60Furthermore, that approach is not consistent with the principle of VAT neutrality. The principle of neutrality is ensured by the possibility, to be provided for by the Member States, of correcting any tax improperly invoiced where the issuer of the invoice shows that he or she acted in good faith or where he or she has, in sufficient time, wholly eliminated the risk of any loss of tax revenue. ²⁷ National law, however, rules out the latter in the present case. Even if the applicant adjusts the false invoices and, in some form or other, eliminates the risk of loss of tax revenue, the imposition of a fine amounting to 200% of the VAT improperly entered on the false invoices renders redundant the possibility of adjustment in respect of the tax debt under Article 203 of the VAT Directive. ²⁸

61On closer consideration, that inappropriate level of penalty for a participant in a third party’s tax fraud is also detrimental to the prevention of VAT evasion. In practice, the tax authorities may (and will) confine themselves to prosecuting third parties involved in VAT evasion, with the result that the actual perpetrators will remain largely undiscovered and unprosecuted. That, however, runs counter to the objective of Article 273 of the VAT Directive.

62Furthermore, fundamental doubts remain as to whether penalising participation in VAT fraud should not be entrusted to national criminal law rather than EU VAT law. In any event – in the view of the Court ²⁹ – the national provisions must ensure coordination of the procedures (criminal proceedings and tax proceedings) enabling the additional disadvantage associated with combining measures imposed to be reduced to what is strictly necessary and to ensure that the severity of all of those measures is commensurate with the seriousness of the offence concerned. That is the only way to avoid potential conflicts with the principle ne bis in idem enshrined in Article 50 of the Charter. Whether that is guaranteed under Belgian law remains open.

63Irrespective of the foregoing, the answer to the first and second questions referred is that Article 203 of the VAT Directive, read in conjunction with Article 273 thereof and in conjunction with the principles of proportionality and VAT neutrality, must be interpreted as precluding national legislation under which VAT which has been improperly entered on invoices in the context of participation in VAT evasion committed by a third party, without the possibility of adjustment, is established in the form of secondary liability and supplemented by a fine of 200% of the amount entered.

VI. Conclusion

Conclusion

64I therefore propose that the Court of Justice answer the questions referred for a preliminary ruling by the Rechtbank van eerste aanleg Oost-Vlaanderen Afdeling Gent (Court of First Instance, East Flanders, Ghent Division, Belgium) as follows:

The principle ne bis in idem (Article 50 of the Charter of Fundamental Rights) is not applicable in the present case because the offences at issue are not one and the same.

Article 205 of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax

must be interpreted as permitting liability for third-party tax debts only where the person liable for payment and his or her tax debt are known. The liability for an unknown third party whose tax debt is merely estimated cannot be based on Article 205 of Directive 2006/112; at most, it may be based on Article 273 of that directive.

Article 203 of Directive 2006/112, read in conjunction with Article 273 thereof and in conjunction with the principles of proportionality and VAT neutrality,

must be interpreted as precluding national legislation under which VAT which has been improperly entered on invoices in the context of participation in VAT evasion committed by a third party, without the possibility of adjustment, is established in the form of secondary liability and supplemented – alongside the options offered by criminal law – by a fine of an additional 200% of the amount entered.

¹ Original language: German.

² Karl Marx, ‘Debatten über Preßfreiheit und Publikation der Landständischen Verhandlungen. Von einem Rheinländer, 1842’, Rheinische Zeitung No 135, 15 May 1842.

³ Already critical in that regard: Opinion of Advocate General Cruz Villalón in R (C‑285/09, EU:C:2010:381, point 58 et seq. and 104 et seq.). Likewise critical in that regard, for example, the President of one of the two turnover tax chambers of the Bundesfinanzhof (Federal Fiscal Court, Germany): Wäger, C., Der Kampf gegen die Steuerhinterziehung, UR 2015, p. 81 et seq.

⁴ Judgment of 7 December 2010, R (C‑285/09, EU:C:2010:742).

⁵ OJ 2006 L 347, p. 1, in the version applicable in the period at issue.

⁶ Law of 3 July 1969 establishing the VAT Code, as amended by the Law of 9 December 2019 (Belgische Staatsblad of 18 December 2019). The German translation of that code, taking account of the amendments, was published in the Belgische Staatsblad as ‘unofficial coordination’, until the official translation into German of the Gesetz vom 9. Dezember 2019 zur Abänderung des allgemeinen Gesetzes vom 18. Juli 1977 über Zölle und Akzisen und des Mehrwertsteuergesetzbuches zur Umsetzung der Richtlinie (EU) 2017/1371 (Law of 9 December 2019 amending the general law of 18 July 1977 on customs and excise and transposing Directive (EU) 2017/1371 (Belgische Staatsblad of 18 May 2021)).

⁷ Judgment of 20 March 2018, Menci (C‑524/15, EU:C:2018:197, paragraph 25), and, to that effect, judgment of 26 February 2013, Åkerberg Fransson (C‑617/10, EU:C:2013:105, paragraph 34).

⁸ The following may be mentioned in that respect: judgments of 21 December 2011, Vlaamse Oliemaatschappij (C‑499/10, EU:C:2011:871, paragraph 19 et seq.), and of 11 May 2006, Federation of Technological Industries and Others (C‑384/04, EU:C:2006:309, paragraph 25 et seq.), both relating to the predecessor provision, the content of which is identical. Mention can also be made of the judgment of 26 March 2015, Macikowski (C‑499/13, EU:C:2015:201), which, however, resolved the problem of liability at issue there without an interpretation of Article 205 of the VAT Directive (see my Opinion in that case (C‑499/13, EU:C:2014:2351, point 58 et seq.)). With renewed frequency recently: see judgments of 13 October 2022, Direktor na Direktsia ‘Obzhalvane i danachno-osiguritelna Praktika’ (C‑1/21, EU:C:2022:788), and of 20 May 2021, ALTI (C‑4/20, EU:C:2021:397).

⁹ Judgment of 2 June 2016, Kapnoviomichania Karelia (C‑81/15, EU:C:2016:398, paragraph 38 et seq.); see also Opinion of Advocate General Bot in Karelia (C‑81/15, EU:C:2016:66, point 37).

¹⁰ Judgment of 11 May 2006, Federation of Technological Industries and Others (C‑384/04, EU:C:2006:309, paragraph 43 et seq.), again concerning the predecessor provision.

¹¹ Judgment of 20 May 2021, ALTI (C‑4/20, EU:C:2021:397, paragraph 42).

¹² See my Opinion in ALTI (C‑4/20, EU:C:2021:12, point 44 et seq.).

¹³ However, that provision presupposes that even an invoice issuer acting in bad faith can eliminate the risk of loss of tax revenue, which appears not to be possible in respect of ‘secondary liability’ under Article 51bis(4) of the WBTW – if that is a transposition of Article 203 of the VAT Directive.

¹⁴ Judgments of 8 May 2019, EN.SA. (C‑712/17, EU:C:2019:374, paragraph 38), and of 26 April 2017, Farkas (C‑564/15, EU:C:2017:302, paragraph 59); see also, to that effect, judgments of 6 February 2014, Fatorie (C‑424/12, EU:C:2014:50, paragraph 50), and of 7 December 2000, de Andrade (C‑213/99, EU:C:2000:678, paragraph 20).

¹⁵ Judgments of 21 December 2011, Vlaamse Oliemaatschappij (C‑499/10, EU:C:2011:871, paragraph 25); of 21 February 2008, Netto Supermarkt (C‑271/06, EU:C:2008:105, paragraph 24); of 27 September 2007, Teleos and Others (C‑409/04, EU:C:2007:548, paragraph 65); and of 11 May 2006, Federation of Technological Industries and Others (C‑384/04, EU:C:2006:309, paragraph 33).

¹⁶ In some earlier decisions the Court still used the wording ‘could not know’ (see, for example, judgment of 6 July 2006, Kittel and Recolta Recycling (C‑439/04 and C‑440/04, EU:C:2006:446, paragraph 60)). However, this excessively broad wording, stemming solely from the question referred, now seems to have been rightly abandoned.

¹⁷ Judgments of 20 June 2018, Enteco Baltic (C‑108/17, EU:C:2018:473, paragraph 94); of 22 October 2015, PPUH Stehcemp (C‑277/14, EU:C:2015:719, paragraph 48); of 13 February 2014, Maks Pen (C‑18/13, EU:C:2014:69, paragraph 27); of 6 September 2012, Mecsek-Gabona (C‑273/11, EU:C:2012:547, paragraph 54); of 6 December 2012, Bonik (C‑285/11, EU:C:2012:774, paragraph 39); and of 6 July 2006, Kittel and Recolta Recycling (C‑439/04 and C‑440/04, EU:C:2006:446, paragraph 56).

¹⁸ See judgments of 22 October 2015, PPUH Stehcemp (C‑277/14, EU:C:2015:719, paragraph 47); of 18 December 2014, Schoenimport Italmoda Mariano Previti (C‑131/13, C‑163/13 and C‑164/13, EU:C:2014:2455, paragraph 62); of 13 March 2014, FIRIN (C‑107/13, EU:C:2014:151, paragraph 40); of 13 February 2014, Maks Pen (C‑18/13, EU:C:2014:69, paragraph 26); of 6 December 2012, Bonik (C‑285/11, EU:C:2012:774, paragraph 37); of 21 June 2012, Mahagében (C‑80/11 and C‑142/11, EU:C:2012:373, paragraph 42); and of 6 July 2006, Kittel and Recolta Recycling (C‑439/04 and C‑440/04, EU:C:2006:446, paragraphs 59 and 61).

¹⁹ Judgments of 21 June 2012, Mahagében (C‑80/11 and C‑142/11, EU:C:2012:373, paragraph 48); of 21 December 2011, Vlaamse Oliemaatschappij (C‑499/10, EU:C:2011:871, paragraph 24); and of 11 May 2006, Federation of Technological Industries and Others (C‑384/04, EU:C:2006:309, paragraph 32); and Opinion of Advocate General Poiares Maduro in Federation of Technological Industries and Others (C‑384/04, EU:C:2005:745, point 27).

²⁰ As is expressly held in the judgment of 21 December 2011, Vlaamse Oliemaatschappij (C‑499/10, EU:C:2011:871, paragraph 24).

²¹ Judgments of 21 December 2011, Vlaamse Oliemaatschappij (C‑499/10, EU:C:2011:871, paragraph 24), and of 21 February 2008, Netto Supermarkt (C‑271/06, EU:C:2008:105, paragraph 23).

²² Judgments of 21 December 2011, Vlaamse Oliemaatschappij (C‑499/10, EU:C:2011:871, paragraph 25); of 21 February 2008, Netto Supermarkt (C‑271/06, EU:C:2008:105, paragraph 24); of 27 September 2007, Teleos and Others (C‑409/04, EU:C:2007:548, paragraph 65); and of 11 May 2006, Federation of Technological Industries and Others (C‑384/04, EU:C:2006:309, paragraph 33).

²³ See judgment of 21 December 2011, Vlaamse Oliemaatschappij (C‑499/10, EU:C:2011:871, paragraph 26); similarly, judgments of 21 February 2008, Netto Supermarkt (C‑271/06, EU:C:2008:105, paragraph 25), and of 27 September 2007, Teleos and Others (C‑409/04, EU:C:2007:548, paragraph 66).

²⁴ Judgments of 8 May 2019, EN.SA. (C‑712/17, EU:C:2019:374, paragraph 39), and of 26 April 2017, Farkas (C‑564/15, EU:C:2017:302, paragraph 59 and the case-law cited).

²⁵ Judgments of 8 May 2019, EN.SA. (C‑712/17, EU:C:2019:374, paragraph 39), and of 9 July 2015, Salomie and Oltean (C‑183/14, EU:C:2015:454, paragraph 62).

²⁶ Judgments of 8 May 2019, EN.SA. (C‑712/17, EU:C:2019:374, paragraph 39), and of 26 April 2017, Farkas (C‑564/15, EU:C:2017:302, paragraph 60 and the case-law cited).

²⁷ Judgments of 2 July 2020, Terracult (C‑835/18, EU:C:2020:520, paragraph 28); of 8 May 2019, EN.SA. (C‑712/17, EU:C:2019:374, paragraph 33); of 31 January 2013, LVK (C‑643/11, EU:C:2013:55, paragraph 37); of 18 June 2009, Stadeco (C‑566/07, EU:C:2009:380, paragraph 37); of 6 November 2003, Karageorgou and Others (C‑78/02 to C‑80/02, EU:C:2003:604, paragraph 50); and of 19 September 2000, Schmeink & Cofreth and Strobel (C‑454/98, EU:C:2000:469, paragraph 58).

²⁸ Regarding a comparable situation in which the Court has already denied proportionality, see judgment of 8 May 2019, EN.SA. (C‑712/17, EU:C:2019:374, paragraph 42 et seq.).

²⁹ Judgment of 4 May 2023, MV – 98 (C‑97/21, EU:C:2023:371, paragraph 58).