Unpaid VAT by a Counterparty: The Purchaser’s Liability after the CJEU Judgment in Vaniz (C-121/24)

Unpaid VAT by a counterparty tends to become a problem not of the person who failed to pay the tax but of the person who paid the invoice. In its judgment of 11 December 2025 in Case C-121/24, Vaniz, the Court of Justice of the European Union held that EU law does not preclude a tax authority from pursuing the tax against the purchaser even after the supplier has entered insolvency and been deleted from the register. There is, however, one condition, and it rests with the tax authority: it must be established that the purchaser, in exercising his right of deduction, knew or ought to have known that the tax would not be paid. The disappearance of the principal debtor neither relieves the authority of that burden nor shifts it onto the purchaser. This analysis examines the judgment, what survived of the Advocate General’s Opinion, why the ruling does not operate automatically under Polish law, and the lines of defence available before and after a liability decision.

When the Tax Authority May Claim Another Person’s Tax from a Trader

Polish law provides two distinct routes by which unpaid VAT by a counterparty may reach the purchaser. The first flows from Article 105a of the VAT Act in conjunction with Article 117b of the Tax Ordinance. The purchaser of goods listed in Annex 15 is jointly and severally liable with the supplier for the supplier’s arrears, in the part proportionately attributable to the supply, if at the moment of the supply he knew or had reasonable grounds to suppose that the tax would not be paid into the account of the tax office. The statute indicates when such grounds exist: where the circumstances of the transaction departed from those usually encountered in trade in the goods concerned, in particular where the price was, without economic justification, lower than market value. The same statute offers the purchaser two exits which liability decisions seldom mention: he may demonstrate that those circumstances had no bearing on the non-payment of the tax (Article 105a(4)), and no liability arises at all where the supplier’s arrears were unconnected with its participation in dishonest tax accounting aimed at a financial advantage (Article 105a(3)(5)). In trade in goods, moreover, the mechanism operates only for invoices not exceeding PLN 15,000 gross, since higher invoices fall under obligatory split payment, which excludes the liability.

The second route is Article 117ba of the Tax Ordinance, in force since 1 January 2020. Here the premise is purely objective: payment by transfer to an account outside the register of VAT taxpayers, for a transaction above PLN 15,000, opens the way to the purchaser irrespective of what he knew. Both constructs belong to the broader institution of third-party tax liability, which always requires a separate decision and is subsidiary to the liability of the taxpayer himself: enforcement against the third party may be commenced only once enforcement against the supplier’s assets has proved ineffective. The mechanics of that liability in trade in goods are discussed in our analysis of joint and several VAT liability.

The Vaniz Case

The case is a model one precisely because there is nothing exotic in it. A Bulgarian road haulage company purchased lorries and hired vehicles in 2017 from a single supplier, which issued 35 invoices in that respect. The supplier included those transactions in its VAT returns, the purchaser deducted the input tax, and the invoices were paid. The declared VAT, however, was never paid by the supplier to the budget. In 2019 insolvency proceedings were opened against the supplier, and they ended in August 2020 with its deletion from the commercial register. One detail is worth retaining: in its observations before the Court the tax authority intimated a special connection between the two companies, but the referring court had made no such finding, and the Court ruled on the facts as stated by that court. The authority tells that story in every case of this kind; the dispute is whether it can prove it.

Only in January 2022, a year and a half after the disappearance of the principal debtor, did the tax authority open an audit of the purchaser aimed at establishing its joint and several liability, and issued a decision determining BGN 217,277.82 in tax and BGN 114,365.21 in default interest, roughly EUR 111,000 and EUR 58,000. The company contested the decision, arguing that with the deletion of the supplier its obligations had been extinguished, so that there was nothing left to claim from a third party. The Administrative Court in Veliko Tarnovo considered the doubt serious enough to refer questions for a preliminary ruling to the Court.

The Court answered that Article 205 of Directive 2006/112/EC, read in the light of the principles of proportionality and legal certainty, does not preclude national legislation under which a person held jointly and severally liable may incur that liability after the person liable for payment of the tax has ceased to exist as a legal person, where it is established that the former, while exercising his own right of deduction, knew or ought to have known that the tax would not be paid.

The reasoning rests on three pillars. The first is the nature of joint and several liability itself: since each debtor answers for the whole of the debt and the creditor chooses from whom to demand payment, the disappearance of one of them does not extinguish the obligation of the others. The Court drew that principle from its own customs judgment in Aebtri (C-224/16), delivered on the TIR Convention. The second is the purpose of the provision, which is to secure for the Treasury the effective collection of the tax from the person best placed in the given situation, and a situation in which the person liable is insolvent or no longer exists is precisely such a case. The third is the argument from abuse: were the liability of a third party enforceable only for so long as the principal debtor exists, a dishonest supplier could procure its own liquidation in order to shield those who assisted it in the abuse. The entire edifice rests on the earlier judgment in ALTI (C-4/20) of 2021, concerning the same Bulgarian provision, and it is from ALTI that one learns how much the authority is permitted under this construct and how much it is not.

Deletion of the Supplier Does Not Shift the Burden of Proof

The judgment is unfavourable to taxpayers, but it is not a judgment on automatic liability, and that distinction determines the practical value of the entire ruling. The subjective premise remains intact: it is for the authority to establish knowledge, or the duty to know, on the purchaser’s side, and to establish it by reference to the moment of the transaction, not the moment at which the authority itself realised that the supplier had not paid. The supplier’s insolvency and deletion are, in this construction, subsequent circumstances. They prove nothing about the purchaser’s state of knowledge several years earlier and do not substitute for findings of fact. Unpaid VAT by a counterparty is usually discovered by the authority years later, whereas the purchaser’s knowledge must be proved as at the date of purchase. The Court said as much in Aebtri: the mere fact that the consignee knew of the special transit regime and that the goods were not presented at the office of destination does not suffice to attribute to him that he “ought to have known” of the irregularity, for that would amount to an irrebuttable presumption, and no provision imposes on the consignee a personal duty to verify that his counterparty completed the formalities. The same logic carries over to VAT, as the Advocate General herself observed in her Opinion in Vaniz.

This has a direct bearing on tactics in tax proceedings. Reasoning in which the authority infers from the mere fact of the supplier’s subsequent bankruptcy that the purchaser “ought to have known” remains defective after Vaniz, because it inverts the order of proof. The position is different where the price departed from market value: there the authority may rely on the statutory presumption in Article 105a(2), and the initiative then passes to the purchaser. EU law permits this, but attaches a condition which the Court formulated in ALTI: the presumption must be rebuttable in practice, and the taxpayer must have a genuine opportunity to demonstrate his good faith, since otherwise joint and several liability would turn into strict liability, which goes beyond what is necessary to protect the rights of the Treasury. A trader who has taken every measure that may reasonably be required of him in order not to participate in another person’s abuse is entitled to rely on the legality of his transaction.

Under the Polish statute the instrument is Article 105a(4): the purchaser demonstrates that the circumstances of the transaction had no bearing on the non-payment of the tax. A supplier’s subsequent insolvency unconnected with the terms on which the purchase was made is, for that provision, a textbook argument, which is precisely what befell Vaniz. What a state of facts in which the purchaser truly “ought to have known” looks like is shown, by contrast, by ALTI. Both companies had entrusted their bookkeeping, the operation of their bank accounts and the filing of their VAT returns to one and the same person, the supplier’s acquisition of the equipment had been financed by a third company whose shareholders were the directors of both parties, and the transport had been arranged by a director of the purchaser. On such findings the presumption of knowledge cannot be rebutted. In an ordinary commercial relationship, as in Vaniz, the authority must first construct it. It is also noteworthy that the Court, in developing its proportionality analysis, consistently speaks of third parties “participating in the abuse”, not of every purchaser who happened upon an insolvent counterparty.

The second element which the judgment does not displace is the temporal limit. The Court recalled that the principle of legal certainty requires that the situation of the person liable should not be open to challenge indefinitely, and that this function is performed by limitation periods, the determination of which is left to the Member States. In Polish conditions this means Article 118 § 1 of the Tax Ordinance: against a purchaser liable under Article 117b no decision may be issued once 3 years have elapsed from the end of the calendar year in which the supply took place, whereas in the remaining cases of third-party liability, including Article 117ba, the 5-year period counted from the end of the year in which the arrears arose applies. The case law of the Supreme Administrative Court further takes the position that within that period the decision must be served, not merely signed. Where arrears date back several years this is usually the first objection to be checked before one even turns to the merits.

What of the Advocate General’s Opinion Survived the Judgment

Advocate General Juliane Kokott, in her Opinion of 4 September 2025, had proposed a far-reaching and considerably more taxpayer-friendly interpretation, and her remark that one might gain the impression that all is now fair in love, in war and in the fight against VAT fraud captures the temperature of the dispute. Its axis was the distinction between tax fraud and the mere non-payment of properly declared tax. Where the taxpayer has filed a correct return, the authority knows the amount of the obligation and has at its disposal the entire apparatus of audit and enforcement against the proper debtor, so that the failure to pay is an arrear, not a fraud. So held the Grand Chamber in Scialdone (C-574/15), and HA.EN. (C-227/21) added that a purchaser’s awareness of the seller’s poor financial condition does not make him a participant in fraud. A person who knew that his counterparty would not pay the declared tax may at most be complicit in the latter’s delay, and that, in the Advocate General’s view, justifies neither a refusal of deduction nor liability for another person’s debt. Shifting the risk of the supplier’s insolvency onto the purchaser therefore requires a special basis: intentional participation in fraud, a duty to know of fraud in the supply chain, or the purchaser’s own abuse, for instance the deliberate exploitation of the insolvency of a counterparty under his control.

The second theme of the Opinion, accessoriness, the Court resolved differently, though without engaging in polemic. The Advocate General argued that joint and several liability presupposes at least two co-obligors, that the joint debtor must retain a right of recourse, and that a burden placed on a third party after the debtor’s deletion without a successor is no longer joint and several liability but a subsequent transfer of the tax debt, for which Article 205 of the Directive provides no basis. The Court replied that the debtor’s ceasing to exist does not in itself affect the possibility of pursuing a third party, and there, at the level of EU law, that argument ends.

The first theme, by contrast, the Court did not take up. It did not reject it expressly, but built its ruling on a different plane, leaving unanswered the question where exactly the boundary runs between participation in an abuse and sheer misfortune in the choice of a counterparty. The tension which the Advocate General named has been preserved in the judgment: the reasoning speaks of persons participating in an abuse, while the operative part repeats, after ALTI, the formula of a purchaser who “ought to have known that the tax would not be paid”. Commentators have observed that this was an occasion to delineate the scope of the purchaser’s liability and that the Court declined to take it. For practice this means that the Opinion is not a decisive argument, but remains useful interpretive material wherever an authority attempts to equate an arrear with a fraud. The earlier case law on which the Advocate General founded the requirement of a ground of liability also remains in force: the designation of a joint debtor must be justified by a factual or legal relationship linking him with the taxpayer (ALTI), and the unconditional attribution to a purchaser of a loss of revenue caused by persons over whom he had no influence has been held, in the cases on the liability of company directors, to be manifestly disproportionate.

In Poland the Advocate General’s thesis has an additional foothold, since the distinction which the Court declined to articulate has been written into the statute by the Polish legislature. Article 105a(3)(5) excludes the purchaser’s liability where the supplier’s arrears were unconnected with its participation in dishonest tax accounting aimed at a financial advantage. Declared but unpaid tax, which the Advocate General terms complicity in delay, is the natural candidate for that exclusion, and the evidence that something more than an unpaid return was involved lies in the supplier’s file, to which the authority, not the purchaser, has access.

Why Vaniz Does Not Operate Automatically in Poland

The conclusion of greatest importance to Polish taxpayers is not visible in the operative part but in the passage of the reasoning devoted to legal certainty. The Court found the Bulgarian provisions compatible with that principle because they allow the purchaser to ascertain his position in advance: the Bulgarian VAT Act lays down the knowledge premise, and the Code of Tax and Social Security Procedure expressly provides that, upon the deletion of a legal person following liquidation, a public-law claim does not expire if other persons are liable for the debt. In other words, the Bulgarian legislature had itself provided for the situation that befell Vaniz.

Polish law contains no such provision, but neither does it contain the converse. The Tax Ordinance enumerates the modes of extinction of a tax obligation in the closed catalogue of Article 59, and the deletion of the debtor from the register is not among them, so the authority will answer an objection of absence of a legal basis simply: the supplier’s obligation has not expired, and there is nothing to keep alive. In cases concerning company directors the courts have long accepted that the deletion of the company does not bar a decision on third-party liability. The real barrier lies elsewhere, in Article 108 § 2(2) of the Ordinance. Proceedings against a third party may not be commenced before the taxpayer has been served with a decision determining the amount of its obligation, and nothing can any longer be served on a deleted company. The exception in Article 108 § 3 covers the situation in which an enforcement title has been issued on the basis of the supplier’s return. The argument is therefore strong where the supplier never declared the tax at all, and weak in a configuration such as that in Vaniz, where the supplier declared and did not pay. It is precisely that gap which the government bill UC138 amending the Tax Ordinance, of March 2026, is intended to close by permitting the authority to determine the arrears of a deleted company directly in the decision addressed to the third party. Until it enters into force, the defence in a case involving a deleted supplier proceeds on two tracks at once: the procedural one, through Article 108 § 2 and § 3, and the substantive one, through the evidentiary standard of Vaniz. Article 205 of the Directive is merely an authorisation for the Member States, not a self-standing basis for burdening a taxpayer, and the Vaniz judgment confirms the permissibility of a national rule without replacing it. Both objections may be raised in the appeal and in a complaint to the administrative court.

The second difference concerns money. In Vaniz the unpaid VAT by a counterparty had accrued default interest amounting to more than half of the principal, and the Court had already held in ALTI that a Member State may burden the joint debtor also with the interest due from the principal debtor. The Polish Ordinance is gentler here: the scope of the purchaser’s liability under Article 117b does not extend to default interest accrued before the date of the decision on that liability (Article 117b § 2). In a dispute over a supplier’s arrears several years old this is often the second objection in order of weight after limitation, since a decision which passes on to the purchaser interest computed from the original due date is defective in that part.

Split Payment and the White List: Two Mechanisms, Two Logics

The simplest means of ensuring that unpaid VAT by a counterparty does not become one’s own debt remains the split payment mechanism. Payment under split payment excludes joint and several liability and is admissible voluntarily for any invoice showing VAT, including where it is not obligatory. The technical precondition is a settlement account of the supplier with an assigned VAT account, for which reason verification of the counterparty in the register of taxpayers serves a twofold purpose.

The register of VAT taxpayers maintained under Article 96b of the VAT Act, known as the white list, serves an entirely different construct. Liability under Article 117ba of the Ordinance does not ask what the taxpayer knew but where he transferred the money. One may be released from it by notifying the head of the tax office of the payment to an account outside the register, or by paying under split payment. The two regimes are easily confused, yet the defence in each is quite different: in the first the dispute concerns the state of knowledge, in the second the mere fact of the transfer and compliance with the notification deadline. The amendment to the PIT and CIT Acts passed in September 2026, which from 2027 abolishes the loss of tax-deductible costs for a transfer to an account outside the register, leaves this liability untouched.

From 1 January 2027 the Risk Will Extend to Intangible Services

The Vaniz judgment was delivered at the very moment when the Polish legislature was extending the scope of joint and several liability. The Act of 4 September 2026 amending the Act on Goods and Services Tax and the Act on the Principles of Registration and Identification of Taxpayers and Remitters (Journal of Laws, item 1270) introduces, from 1 January 2027, a separate Annex 16 comprising 12 groups of intangible services, from software-related services and hosting, through bookkeeping, advisory and advertising services, to employment-related services and office support. The liability will cover invoices of at least PLN 15,000 gross, and also purchases below that threshold where the aggregate net value of services acquired in a month from a single supplier exceeds PLN 50,000. The logic of the threshold is thus the reverse of that for goods, where the liability attaches to invoices not exceeding PLN 15,000 and higher invoices are protected by obligatory split payment.

For the reader of this text one point is decisive: the subjective premise in the new regime is identical to that in the goods regime, namely knowledge or reasonable grounds to suppose that the tax will not be paid. The evidentiary standard developed under Article 105a, together with what follows from ALTI and Vaniz, will therefore apply equally to the purchase of accounting services or an advertising campaign, and unpaid VAT by a counterparty providing such services will become the purchaser’s risk on the same terms as in trade in goods. Payment under split payment remains a complete exclusion of liability also for services listed in the new Annex. This is worth remembering, because the government bill had provided that the protection would not operate where the purchaser knew that the invoice came from a non-existent entity or documented a transaction never performed, and some reports from the summer of 2026 still repeat that version. The Senate removed it, and the Act as passed left the exclusion intact.

Unpaid VAT by a Counterparty: Lines of Defence

The first level is prevention. Documented due diligence in the choice of counterparties defends simultaneously against joint and several liability and against a challenge to the right to deduct input tax, and in a dispute only what can be demonstrated counts: a screenshot from the register of taxpayers bearing the date of verification, an extract from the register, a note assessing the counterparty, a record of any decision to depart from the procedure. A procedure that exists only in a rulebook is evidence of nothing. Where the supplier’s invoices are later alleged to be fictitious, the same file becomes the first line of defence.

The second level is the dispute. Where a decision has already been issued, the order in which objections are examined is usually the same: the limitation of the right to issue the decision; next, the existence and amount of the supplier’s arrears themselves; then the authority’s proof of the purchaser’s state of knowledge at the moment of the transaction; then the rebuttal of the presumption in Article 105a(2) by demonstrating that the circumstances of the transaction had no bearing on the non-payment; and finally the grounds of exclusion, including split payment and the absence of any connection between the arrears and dishonest tax accounting aimed at a financial advantage. Last comes the quantum of the decision, including interest accrued before its issue. In cases in which the supplier has already been deleted from the register, the procedural objection under Article 108 § 2 and § 3 of the Ordinance, described above, is added to that list.

The third level concerns cases in which the authority couples joint and several liability with an allegation of participation in a VAT carousel or with an allegation of abuse of the right of deduction. These are parallel proceedings with different premises and a different burden of proof, and the line of defence adopted in one of them is apt to determine the outcome of the other. Separating those threads at the very outset of the dispute is often more important than the content of any single pleading.

The Vaniz judgment does not turn the purchaser into a guarantor of his counterparties’ tax affairs: unpaid VAT by a counterparty still becomes the purchaser’s debt only once the authority has proved his knowledge. It does, however, shift the moment at which the risk ceases to be theoretical: the supplier’s insolvency does not close the case but redirects the authority to another address. The question that will decide the outcome remains the same as before December 2025, namely what the purchaser knew on the day of the transaction and whether the authority can prove it.

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.