Joint and Several Liability for a Non-Existent Entity – CJEU judgment

The issue of joint and several liability for the payment of VAT owed by a taxpayer’s counterparty is frequently disputed. Recently, the Court of Justice of the European Union addressed this matter in its judgment of 11 December 2025 in Case C-121/24, Vaniz. Although the judgment concerned Bulgarian tax legislation, many of its findings are of a general nature and provide guidance that should be taken into account by any EU Member State introducing joint and several liability.

CJEU Judgment – factual background

The CJEU judgment in Case C-121/24, Vaniz, concerned a Bulgarian transport company which, in 2017, purchased trucks from its counterparty and leased additional vehicles from the same supplier. The counterparty issued a total of 35 invoices documenting various transactions. The company exercised its right to deduct VAT, and the counterparty reported the invoices and the output VAT in its VAT return; however, the declared VAT was not paid to the state treasury. Insolvency proceedings were opened against the counterparty and concluded in 2020, after which the counterparty was struck off the commercial register and ceased to exist as a legal entity.

In 2022, the tax authorities initiated proceedings against the company to establish its joint and several liability for the unpaid VAT arising from the 35 invoices, taking the view that Vaniz knew or should have known that the VAT would not be paid. A decision was issued assessing the tax liability together with late-payment interest. Vaniz challenged the decision, arguing that the counterparty had been struck off the register in 2020, i.e. before the proceedings were initiated, which in its view precluded the establishment of joint and several liability.

The tax authority maintained that a VAT liability does not lapse upon the dissolution of the principal debtor if there is a jointly and severally liable third party. Referring to the CJEU’s case law, the Bulgarian court expressed doubts as to the temporal limits of such liability and its compatibility with Article 205 of the VAT Directive. It therefore referred preliminary questions to the CJEU, in particular asking whether the VAT Directive allows proceedings to be initiated to establish joint and several liability for VAT, and to determine its amount, where the principal debtor has already ceased to exist as a legal person.

CJEU Judgment – key conclusions

In the case at hand, the CJEU held that “the person liable for payment of the VAT ceasing to exist as a legal person does not, in itself, affect the opportunity for the tax authority, as the creditor under the joint and several obligation, seeking to impose liability on the jointly and severally liable third party for the payment of the VAT debt.” The Court emphasised that, in cases of VAT abuse, the state treasury must be able to recover the tax due from any of the parties involved in the abuse, in particular where the person primarily liable for payment has become insolvent or has ceased to exist as a legal entity.

The CJEU also confirmed the compatibility with EU law of the basic principle of joint and several VAT liability provided for under Bulgarian law, pursuant to which such liability may be imposed on a purchaser who, at the time of the transaction, knew or should have known that the VAT would not be paid and nevertheless exercised the right to deduct VAT.

Implications for the Polish taxpayers

In Poland, joint and several liability of the purchaser for VAT unpaid by the supplier arises under Article 105a of the VAT Act and Article 117b of the Tax Ordinance. If, at the time of the supply, the purchaser (a VAT taxpayer) knew or had reasonable grounds to suspect that the VAT due on the supply would not be paid to the tax office, the purchaser is jointly and severally liable with the supplier for the tax debt, proportional to the value of the supply in question.

Polish rules on joint and several liability are therefore very similar to the Bulgarian regulations, and the CJEU judgment indirectly confirms the continued applicability of these rules. In Poland, it remains crucial to demonstrate that the purchaser “knew or had reasonable grounds to suspect” the supplier’s unreliability. Such awareness may arise, for example, when the circumstances or terms of the supply deviate from typical market conditions, including cases where the price is unreasonably low compared to market value.

It is therefore important for purchasers to implement and follow robust due diligence procedures to show proper care and protect the right to VAT deduction. From 2026, under the draft UC314, joint and several liability is planned to be extended to certain services listed in Annex 15 to the VAT Act (e.g., construction services), making due diligence equally critical when acquiring these services. The split-payment mechanism may also provide a way to avoid joint liability.

A key difference between Polish and Bulgarian law is that Bulgarian regulations explicitly impose joint and several liability even if the supplier is struck off the register after liquidation proceedings. In Poland, if the supplier has been removed from the National Court Register, applying joint liability to the purchaser would require specific national provisions. Based on the CJEU ruling, the VAT Directive alone cannot justify imposing liability in such cases, which may allow purchasers to avoid joint liability when the supplier no longer exists.