May the employer be held liable for the employee’s fake invoicing?
C‑442/22. – P sp. z o.o. | If an employee issues a fake invoice on behalf of the employer, the employer can only be obliged to pay VAT if they did not exercise due diligence.
In Case C-442/22, an employee at a gas station in Poland, who was also responsible for invoicing, issued fake invoices using the employer’s data. Although the employee „ensured” that the invoices were issued only for the value corresponding to real refueling transactions recorded in the gas station’s cash register, the computer-generated fake invoices did not pass internal accounting controls, and the employer did not record them.
The Polish tax authority, referring to a uniform rule in the Union that whoever issues a VAT invoice is obliged to pay the VAT indicated on the invoice, established a tax debt for the employer. The tax authority assessed that the employer did not act with due diligence to prevent fictitious invoicing because the chairman of the board knew that invoices were issued for certain sales recorded in some cash registers, and these invoices did not undergo accounting controls.
In this case, the Polish Supreme Administrative Court initiated a preliminary ruling procedure because it was questionable whether, in such cases, the entity issuing the invoice should be considered the employer, not the employee abusing their data.
The European Court of Justice stated in its judgment that in the application of the obligation to pay VAT related to fictitious invoicing, the person issuing the invoice does not necessarily have to be a taxable person; in certain cases, an employee can be liable for VAT if they issue an invoice on behalf of another person. However, if an employee who is entitled to invoice on behalf of the employer issues a fake invoice, due diligence is expected from the employer, and it must be assessed whether the employer has taken all reasonably expected measures to control the employee and prevent abuse. If the employer did not demonstrate the expected diligence, the person issuing the fictitious invoice should be considered the negligent employer, not the employee.
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