The Seal on the Invoice: Case T‑569/25 and Good Faith under the VAT Margin Scheme

A Polish dealer brings a used car in from Germany on an invoice that carries a note saying the margin scheme applies. Three years later the tax office finds that the German seller had no right to use the scheme, and issues a decision charging VAT on the full sale price. On a car bought for PLN 90,000 and sold for PLN 100,000, that is more than PLN 16,000 of additional tax on a single vehicle, and decisions in this trade rarely stop at one. In its judgment of 14 October 2026 in Case T‑569/25, the General Court of the European Union held that the buyer’s good faith must be assessed in that very decision, and that where the buyer holds an invoice bearing a margin-scheme note, it is for the authority to prove that he knew, or should have known, of the irregularity.

A stamp, a plate and a seal that is not meant to be broken by hand

Picture a car lot on the ring road of any Polish city. A three-year-old estate car arrives from a dealership outside Munich. The German invoice carries a small printed line, Differenzbesteuerung nach § 25a UStG, the German way of saying that the seller taxed only his margin. The Polish dealer sells the car a month later and, as Article 120(4) of the Polish VAT Act (ustawa o podatku od towarów i usług) allows him to, pays VAT only on the difference between what he paid and what he charged. Nothing about this is a loophole. The margin scheme exists so that value which already carries irrecoverable VAT is not taxed a second time: a car bought from a consumer, from a seller using an exemption, or from another dealer who himself applied the scheme (Article 120(10) of the VAT Act, mirroring Article 314 of the VAT Directive). The note on the invoice works like a seal. The buyer takes it as confirmation that the conditions were met upstream, and builds his own return on it.

Fraud on the margin consists in the paper saying one thing and the trade another. A car sold under the ordinary VAT regime acquires, somewhere along the way, a documented history of purchase from a private individual, or a margin note that the seller had no right to place. The audit arrives years later, establishes the irregularity at the supplier’s end, and then does something that is the real subject of this article: it breaks the seal in a single motion. The whole of the buyer’s resale is moved to the general rules and VAT is recalculated on the full price, usually without a sentence about what the buyer knew or could have known. The question whether the scheme’s conditions were objectively met is rarely the live one, because objectively they usually were not. The live question is whether a buyer who did not know, and had no way of knowing, is the one who pays.

The arithmetic on one car shows what is at stake. Bought for PLN 90,000 and sold for PLN 100,000, the gross margin is PLN 10,000 and the VAT on it PLN 1,869.92. Once the scheme is refused, the tax is computed on the full price and comes to PLN 18,699.19. The difference is PLN 16,829.27 on a single vehicle, before interest. Decisions in this line of business seldom concern one vehicle; across the dozens of transactions typically covered by an audit period, the dispute passes half a million złoty quickly.

The tax office’s best argument, and the place where it stops

The authorities’ position deserves to be stated at its strongest before anything is said against it. The margin scheme is an exception to the general rules, and it is available only where the goods reached the reseller from a supplier within the closed list of Article 314 of the Directive. If the supplier did not meet those conditions, then objectively there were none, and exceptions are not construed broadly. The Supreme Administrative Court (Naczelny Sąd Administracyjny, NSA) has said for years that it is for the taxpayer to show from whom he bought, and that where the purchase contracts turn out to be unreliable the authority is under no duty to go looking for the real seller on his behalf (judgments of 28 November 2019, I FSK 1581/17, of 17 August 2023, I FSK 761/23, and of 7 February 2024, I FSK 1803/19); that a margin note on an invoice which is inconsistent with the facts does not suffice on its own (judgment of 16 April 2015, I FSK 261/14); and that the formal correctness of an invoice cannot stand in for the reality of the transaction it records (judgment of 7 December 2018, I FSK 1993/16). Seen from that side of the desk, a decision moving the resale to the general rules looks like simple subsumption: no condition, no scheme, tax on the whole.

The argument is correct exactly halfway. In its judgment of 18 May 2017 in Litdana (C‑624/15), the Court of Justice held that a taxable person who has received an invoice bearing a margin-scheme note may not be refused the scheme merely because the supplier applied it wrongly; refusal becomes possible only once the authorities establish that the buyer did not act in good faith, or failed to take every reasonable measure to make sure the transaction did not draw him into tax evasion. The authorities may not, as a general matter, require the buyer to check whether the issuer of the invoice accounted for VAT and met the remaining conditions of the scheme, nor to collect documents proving it (paragraph 40 of Litdana, repeated in paragraph 32 of the judgment discussed here). The Polish courts took the standard up at once. Less than a month after Litdana, the NSA held that where the invoices unambiguously record a purchase under the margin scheme, an authority wishing to take the scheme away must show unambiguously that the taxpayer knew, or should have known, that the transaction was connected with a fraud committed by the issuer (judgment of 13 June 2017, I FSK 1952/15). It repeated the formula in its judgment of 5 November 2024 (I FSK 845/21), although there the taxpayer lost, because the firms on his invoices either did not exist or denied the sales, and he admitted to having checked neither their documents nor their VAT numbers.

The two lines are reconcilable, and the reconciliation is the key to every case of this kind. The burden of showing from whom the goods were bought lies on the taxpayer; once he produces an invoice with a margin note from a supplier who actually delivered the goods, the burden of showing his bad faith shifts to the authority. The dispute in Poland is therefore not about whether good faith matters, which was settled in 2017, but about what “should have known” means in practice, and where in the proceedings it has to be examined.

What the General Court actually decided

The case is German, but its mechanics are familiar to any Polish dealer. X‑GmbH traded in jewellery and watches, partly through online platforms, and in its returns for 2013 and 2014 applied the margin scheme to some of its sales on the strength of invoices bearing the margin note. After an audit the tax office took the view that the suppliers had not been entitled to the scheme, because the goods were said to be new, and in February 2020 it issued corrected assessments with VAT on the full value of the sales. The first-instance tax court dismissed the company’s action with reasoning that is the heart of the whole dispute: the buyer’s good faith is irrelevant in the assessment procedure, and can be protected only in a separate procedure based on equity, in which the authority acts at its discretion. The Federal Fiscal Court doubted whether that separation was compatible with EU law and referred a question in February 2025. Under the jurisdiction in VAT matters transferred to it in 2024 (Article 50b of the Statute of the Court of Justice), the General Court took the reference over from the Court of Justice and decided it in a five-judge formation of the Second Chamber, the standard composition for preliminary rulings in that court, presided over by Nina Półtorak, the same judge who in 2015, as rapporteur at the NSA, wrote the judgment in I FSK 261/14 on the margin note that cannot replace the facts. There was no Advocate General’s opinion.

The ruling has two layers. The first confirms and entrenches Litdana: where the taxpayer holds an invoice bearing a margin-scheme note, the scheme may be refused only after the authority has established that he did not act in good faith or neglected reasonable precautions (paragraph 33), and the burden of proving those circumstances lies with the authorities, not with the taxpayer. The second layer is new and concerns the place of that examination. The principle of effectiveness of EU law precludes a national practice under which good faith is not taken into account in the assessment procedure itself but is shunted into a separate, discretionary equity procedure. The Court counted what the split costs the taxpayer: two sets of administrative proceedings and two sets of court proceedings, doubled legal fees, a value of the dispute counted twice for court costs, delays of up to several years, and worse rules of evidence, since the equity procedure as a rule examines only the evidence the taxpayer himself brings (paragraphs 38 to 48). The operative part says it in one sentence: Article 314 of the VAT Directive, read in the light of the principle of effectiveness, precludes such a national practice.

What is certain here and what is not yet. The operative part and the good-faith standard are certain, because they follow from the published text. It is also certain that this is another link in an established line rather than a one-off: the Court builds expressly on Litdana and on its effectiveness case law. One procedural point remains open. A preliminary ruling of the General Court may, exceptionally, be reviewed by the Court of Justice on a proposal by the First Advocate General lodged within one month of delivery; that month runs out on 14 November 2026, which is a Saturday, so the deadline moves to Monday 16 November (Article 49 of the Rules of Procedure of the Court of Justice). If no proposal is made, the General Court’s answer takes effect at the end of that period; if one is made, the Court of Justice has a month to decide whether to open a review, and only its outcome settles the fate of the judgment (Articles 62 and 62b of the Statute). Reviews are opened rarely, and only where there is a serious risk to the unity or consistency of EU law; a judgment that repeats Litdana does not create one. Still, before the ruling is cited in a pleading, it is worth checking on the curia website whether it has taken effect.

Why the judgment cuts deeper in Poland than in Germany

Polish procedure knows nothing of the German split between assessment and equity, and that is precisely why the judgment lands harder here than its German pedigree suggests. The remission of tax arrears under Article 67a of the Tax Ordinance (Ordynacja podatkowa) is a discretionary instrument and concerns payment, not the right to a scheme. Good faith therefore has to be examined in the only procedure that comes into play, the assessment procedure, just as the administrative courts have examined it for years in disputes over the right to deduct input VAT. The practice we see in clients’ files runs the other way: decisions moving sales from the margin to the general rules are issued once the irregularity at the supplier has been established, with no findings at all about what the buyer knew. In the light of T‑569/25 and Litdana such a decision has an evidential gap in the very element that conditions the outcome, and that is a textbook breach of Articles 122 and 187 § 1 of the Tax Ordinance, the duty to establish the facts and to gather and weigh the whole of the evidence, including the premise the authority itself must prove.

Against the background of Polish case law the judgment changes three things. First, it makes good faith a structural element of the decision, without which the refusal of the scheme is premature. The NSA said as much in 2017, when it held that findings about the taxpayer’s state of knowledge which the authority never made in the proceedings cannot be made up for by assertions in a cassation appeal (I FSK 1952/15, paragraph 5.4). But that was a line of case law from which an authority could try to distinguish its own case; it is now an interpretation of EU law, binding on every authority and every court. Second, in paragraph 32 the judgment repeats the boundary drawn in Litdana: the authority may not generally require the buyer to investigate whether the issuer of the invoice met the conditions of the scheme. That is an argument against a practice in which “should have known” swells into a duty to audit one’s supplier, as in the NSA’s judgment of 17 July 2025 (I FSK 959/22). The signals there were a new contractor without a written contract and without any surviving trace of his assurance that he was entitled to the scheme, and invoices that differed from intra-Community supply invoices only by the words “marge revelling” and bore the supplier’s EU VAT number; from them the court derived an expectation that the buyer would demand his contractor’s own purchase documents, and held it against the company that it had produced no evidence of taking any steps at all. Litdana permits additional checks where there are signals of irregularity, but forbids turning them into a rule. Third, in paragraph 46 the judgment says in terms who bears the burden: the taxpayer is entitled to the scheme unless the authority proves bad faith or the absence of reasonable precautions. That is also the answer to the reasoning in I FSK 959/22: the absence of evidence of diligence on the buyer’s side is not yet evidence of its absence, and the latter is for the authority to produce.

Whether the buyer “should have known” is decided by documents, and they are the first thing we examine in a client’s file: the purchase invoices with the margin note and their completeness, the correspondence with the supplier, the traces of checks on the vehicle itself (history, VIN, odometer reading, provenance), and finally the purchase price against the market, because a price grossly below market is, in this line of case law, one of the signals that can break through the protection. The case law adds what else counts as a signal: a new, unknown contractor without a written contract; no trace of any enquiry about his right to the scheme; an invoice that looks like an intra-Community supply invoice, with the supplier’s EU VAT number and a bare margin note (I FSK 959/22); and, in purchases from private individuals at car markets, no identity documents of the sellers (I FSK 1581/17). Good faith has a trade-specific dimension here, and the general principles of good faith in VAT apply by analogy: more may be asked of a professional car dealer than of an occasional buyer, but not so much that he privately audits his supplier’s tax affairs; Litdana drew that line, and the case law on how the authority must prove a trader’s dishonesty applies accordingly. A separate risk in cases involving cars from the EU is the reclassification of the purchase as an intra-Community acquisition, with the obligation to account for the tax falling on the buyer; the courts decide that question on the facts, not on the label the parties chose (so the Poznań administrative court in its judgment of 6 February 2014, I SA/Po 553/13), and it is a different front of the same war. One caveat belongs here. If the car was a new means of transport within the meaning of the VAT Act (up to six months from first entry into service, or up to 6,000 kilometres), the margin scheme is out of the question: its acquisition from another Member State is always an intra-Community acquisition taxable in Poland, whatever the seller’s status (Articles 9(3) and 16 of the VAT Act), so the conditions of Article 120(10) cannot be met, and for an onward supply of such a car to another Member State Article 120(21) excludes the scheme expressly. A dealer who saw the date of first registration and the odometer will not defend himself with good faith. For completeness: the scheme discussed here concerns second-hand goods; its sister construction, the margin on travel services, lives under its own regime in Article 119 of the VAT Act.

What to do now: an audit under way, a decision, a closed case

The first situation is an audit or proceedings still in progress. It makes no difference whether the matter was opened as a tax audit by the tax office or as a customs-and-fiscal audit, which is common in the trade in cars from the EU: the argument is the same, because the assessment decision is issued in tax proceedings under the Tax Ordinance either way. The judgment supplies a ready line of defence. In objections to the audit protocol, or after service of the result of a customs-and-fiscal audit, and then throughout the proceedings, the taxpayer should demand findings on good faith, file evidence of diligence (the documents listed above), and challenge any draft decision that omits the element as premature. This is not a plea for leniency; it is the enforcement of a structural element of the decision which the authority has to prove on its own. Evidence motions belong before the authority, because before an administrative court only supplementary documentary evidence remains available (Article 106 § 3 of the Law on Proceedings before Administrative Courts, Prawo o postępowaniu przed sądami administracyjnymi).

The second situation is a decision that is not yet final, an appeal, or a complaint to the administrative court. The plea based on T‑569/25 read with Litdana and with Articles 122 and 187 § 1 of the Tax Ordinance is raised at each of those stages, in the administrative appeal as much as in the complaint to the voivodeship administrative court; the administrative courts are bound by the interpretation of EU law, and a reasoning that passes over a fresh judgment of the General Court is, for that reason alone, open to attack.

The third situation is a closed case, and here a deadline appears, so the description has to be precise and comes with reservations. The Tax Ordinance allows proceedings closed by a final decision to be reopened where a ruling of the Court of Justice of the European Union affects the content of the decision (Article 240 § 1(11)), on an application lodged within one month of publication of the operative part in the Official Journal of the EU (Article 241 § 2(2)). The boundary is the limitation of the tax liability: once it has run, the authority will find that the ground for reopening exists but will not set the decision aside (Article 245 § 1(3)(b)). For cases closed by a final judgment of an administrative court, Article 272 § 2a of the Law on Proceedings before Administrative Courts has opened an analogous door since 2021: a ruling of the CJEU affecting the content of the judgment, a complaint within three months, likewise counted from publication of the operative part in the Official Journal. The NSA requires the EU ruling to have been published after the national judgment became final, and after five years from that date reopening is, as a rule, excluded (Article 278). Two reservations. The provisions speak of a ruling of the Court of Justice of the European Union, whereas T‑569/25 was delivered by the General Court under the preliminary-ruling jurisdiction transferred to it in 2024. The systemic reading favours covering the General Court’s judgments too: under the Treaty the Court of Justice of the European Union comprises both courts, and a preliminary ruling of the General Court performs exactly the same function. But the courts have not yet tested the point. The second reservation concerns the phrase “affects the content”: the NSA reads it as a direct correlation between the EU ruling and the national decision and examines it on the merits. The authority will say that T‑569/25 concerns a German practice that does not exist in Poland; the answer is that the judgment confirms the condition for refusing the margin scheme, which is an examination of good faith, and that a decision issued without such findings contradicts it. In practice this means that the deadlines will begin to run only from publication in the Official Journal, which had not occurred at the time of writing; that in closed cases the application should be prepared in advance and lodged within a conservatively counted period, without waiting for the interpretive dispute to be resolved; and that the client should be presented with reopening as an option whose cost is small against the stakes, not as a promise.

What not to do: do not manufacture documentation after the fact. Evidence may be gathered later, a supplier’s statement or witness testimony for instance, but what carries the most weight is the record created at the time of the transaction, and a document drafted for the purposes of the proceedings and backdated will be recognised by the authority and used against the taxpayer.

The seal

The judgment in T‑569/25 does not abolish the conditions of the margin scheme, and it protects no one whom the authority can show to have known of the supplier’s fraud, to have looked away from it, or to have left undone what a reasonable trader in his position would have done. What it changes is an order of events that Polish practice has been inclined to reverse: first the findings about what the buyer knew, then, if they warrant it, the decision taking the margin away, and not the other way round. The margin-scheme note is a seal on the invoice. It protects the dealer who genuinely bought from the issuer. It may be broken only by someone who has first proved that the buyer knew what was inside, or should have known.

We handle disputes over the margin scheme at each of the three stages described above: in audits and tax proceedings, in administrative appeals and before the administrative courts, and in applications to reopen closed cases. Each engagement begins with a review of the purchase documentation, so that the question whether the evidence of diligence exists, and what it proves, is answered before the authority answers it in its own way.

State of the law and facts as at 1 November 2026. Judgment of the General Court of 14 October 2026, T‑569/25 (X‑GmbH v Finanzamt Y), cited from the provisional edition published on InfoCuria; an official English text was not yet available at the time of writing. Under the Statute of the Court of Justice, preliminary rulings of the General Court may exceptionally be reviewed by the Court of Justice (proposal of the First Advocate General within one month of delivery; absent a proposal, the General Court’s answer takes effect at the end of that month), and the operative part had not yet been published in the Official Journal of the EU, on which the reopening deadlines described above depend. Case law cited: judgment of the Court of Justice of 18 May 2017, C‑624/15 Litdana; judgments of the Supreme Administrative Court of 13 June 2017, I FSK 1952/15, of 5 November 2024, I FSK 845/21, and of 17 July 2025, I FSK 959/22; order of the Supreme Administrative Court of 18 November 2020, I FSK 460/20; judgment of the Supreme Administrative Court of 13 August 2025, III FSK 656/25; other decisions by their case numbers in the text. The figures are illustrative: the same gross price of PLN 100,000, a 23 per cent rate, and no VAT on any intra-Community acquisition, which is neutral where input VAT is fully deductible.

Robert Nogacki

Robert Nogacki is a Polish attorney at law (radca prawny), the founder and managing partner of Kancelaria Prawna Skarbiec (Skarbiec Law Firm), which has operated continuously since 2006.

The law is equal for everyone, but the parties rarely are: on one side stands an organization with time, money, and lawyers, on the other a person with one business, one nest egg, and one life.

Clients rarely come to him with a legal problem. They come with a problem that also has a legal side: an audit that began with a single invoice, money entrusted to someone who has disappeared, a company that has to be passed on before it is too late. Most such matters are decided long before the first letter is written, in decisions made without asking and in deadlines nobody remembered. So he begins by asking how the client got here, not what the client should have done.

He advises entrepreneurs and families from more than a dozen countries, including those whose accounts the tax office has just seized and who do not know what to do tomorrow morning. He defends them in tax audits, customs and fiscal inspections, disputes with the tax authorities, and criminal tax proceedings. He represents victims of investment fraud and Ponzi schemes. He helps families set up family foundations and plan succession, so that a life’s work outlasts a single generation.

Not every case can be won. Every case can be run so that the client knows where they stand. Since 2006 he has represented the victims in the WGI case (Warszawska Grupa Inwestycyjna, the Warsaw Investment Group), one of the longest criminal cases in the history of the Polish financial market, because some things must not be left half finished, even when they take two decades. In the case of the collapsed cryptocurrency exchange Zonda (Zondacrypto, operated by BB Trade Estonia OÜ), he represents several hundred victims in the criminal investigation conducted by Poland’s National Prosecutor’s Office and in the Estonian bankruptcy proceedings.

Kancelaria Prawna Skarbiec is listed in the rankings of Poland’s largest tax advisory firms published by Dziennik Gazeta Prawna and Rzeczpospolita, and it is a four-time recipient (2015 to 2018) of the European Medal awarded by the Business Centre Club and the European Economic and Social Committee. Robert Nogacki publishes regularly, in the press and on the firm’s website, for people who have a problem rather than a law degree, because a legal opinion the client cannot understand protects only the lawyer.

He believes that the best legal advice is the kind that means the client never has to appear in court.