The General Court of the European Union has issued a significant judgment concerning tax representatives, setting out several fundamental principles for understanding this legal framework.

First, the General Court addressed Article 204 of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax, as amended by Council Directive (EU) 2019/1995 of 21 November 2019. It held that that provision does not preclude a tax representative of a taxable person established in another Member State from being regarded as liable for the VAT, within the meaning of that provision, even where the tax representative is not involved in the taxable transactions carried out by that taxable person, provided that the tax representative has been designated as liable for the tax by the taxable person concerned, in accordance with the conditions and procedures laid down by national law.

It follows that, where, under the rules of the Member State concerned, a tax representative is designated as liable for VAT pursuant to Article 204, that representative’s liability need not be limited to transactions in which the representative is directly involved. In the case examined by the General Court, this principle is particularly relevant with regard to intra-Community acquisitions carried out by the Italian taxable person using the Greek tax representative’s VAT identification number.

The General Court also clarified the relationship between Articles 204 and 205 of the VAT Directive. A person designated as liable for VAT under Article 204 cannot, at the same time, be regarded as jointly and severally liable under Article 205. The latter provision allows a person other than the person liable for the tax to be made jointly and severally liable for payment of that tax. The two forms of liability must therefore be clearly distinguished.

As regards Article 205, read in the light of the principle of proportionality, the General Court held that that provision precludes a tax representative who has not been designated as liable for the VAT owed by a taxable person established in another Member State, but who is merely entrusted, on behalf of that taxable person, with complying with VAT reporting obligations, without being required to keep accounting records or issue documents relating to the transactions carried out by the represented taxable person, from being held automatically jointly and severally liable for payment of the VAT due.

For such liability to be compatible with the principle of proportionality, it must be possible to assess, on the basis of the circumstances of the individual case, factors going beyond the tax representative’s merely formal appointment. These include, in particular, whether the representative was involved in the taxable person’s economic activity, whether the representative knew or should have known that the tax would not be paid, whether the representative acted in good faith, and whether the representative took all the measures that could reasonably be required of them to ensure compliance with VAT obligations.

The principle established by the General Court is therefore that the joint and several liability of a tax representative cannot automatically arise from the representative’s mere appointment or from the performance of reporting functions. Rather, it must be possible to carry out a concrete assessment of the representative’s position and conduct in relation to the failure to pay the tax.

Lastly, the General Court held that the fact that the transaction giving rise to the VAT liability was carried out using the individual VAT identification number assigned to the taxable person by the Member State in which that person is established, or the VAT identification number assigned by the Member State in which the VAT is due, cannot, in itself, be decisive for determining tax liability, whether as the primary person liable for the tax or on a joint and several basis.

The use of one or the other VAT identification number does not, in itself, make it possible to establish the extent of the tax representative’s involvement in the taxable person’s economic activity and therefore cannot, on its own, constitute the basis for holding the tax representative liable for unpaid VAT.