Provisional text
OPINION OF ADVOCATE GENERAL
KOKOTT
delivered on 5 September 2024 (1)
Case C‑331/23
Dranken Van Eetvelde NV
v
Belgische Staat
(Request for a preliminary ruling from the Rechtbank van eerste aanleg Oost-Vlaanderen Afdeling Gent (Court of First Instance, East Flanders, Ghent Division, Belgium))
( 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
1. Countering 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)
2. The 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.
3. The 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).
4. Secondly, 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.
5. The 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.
6. It 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.
7. Should 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.
8. The 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).
9. In 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
10. The 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’).
11. Recital 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.’
12. Article 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.’
13. Article 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.’
14. The 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
15. Belgium 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.’
16. In 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
17. Dranken 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.
18. The 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.
19. On 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.
20. The 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%).
21. The 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).
22. It 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.
23. Criminal 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 20 000. 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’.
24. In 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
25. In 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:
‘(1) 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?
(2) 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?
(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?’
26. In 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
27. The 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
28. By 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.’
29. Therefore, 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.
30. That 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
31. The 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.
32. Article 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.
33. Article 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
34. The 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?
35. With 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).
36. The 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.
38. Accordingly, 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.
39. That 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.
40. The 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.
41. Provided 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.
42. On 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.
43. If 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
44. Even 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.
45. That 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)
46. This 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.
47. According 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.
48. However, 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)
49. If, 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
50. Clarification 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.
51. Irrespective 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.
52. However, 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.
53. According 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)
54. According 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.
55. The 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
56. Under 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)
57. Thus, 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)
58. In 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.
59. Moreover, 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).
60. Furthermore, 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)
61. On 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.
62. Furthermore, 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.
63. Irrespective 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
64. I therefore propose that the Court 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:
(1) 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.
(2) 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.
(3) 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.