Recently, the Court of Justice of the European Union issued a very interesting ruling regarding the question of whether an indirect representative can be held (jointly and severally) liable for VAT. An important ruling for many customs brokers.
The Italian tax authorities have imposed two tax claims on an Italian company in its capacity as indirect representative of two Italian import companies against which bankruptcy proceedings have been initiated. The Italian tax authorities hold the indirect representative jointly and severally liable for the payment of VAT.
According to the Italian tax authorities, the declarations of intent attached to the import declarations, pursuant to which a VAT exemption was applied, were unreliable. The declarations were based on the false assertion that the importing companies frequently carried out export transactions. The VAT exemption would have been wrongly applied. Therefore, VAT would still have to be remitted.
For import duties, the indirect representative is jointly and severally liable under Article 77(3) of the Union Customs Code (hereafter: the UCC). Or put more precisely: the declarant (and thus indirect representative) is debtor. However, in the case of indirect representation, the person on whose behalf the customs declaration is made is also a debtor. Under Section 84 UCC, one can be held jointly and severally liable.
According to the Italian tax authorities, the indirect representative is also jointly and severally liable for the payment of the import VAT under sections 77 and 84 UCC, among others.
However, the indirect representative took the position that she is not (jointly and severally) liable for the remittance of VAT under the provisions of the UCC or the European VAT Directive.
The Italian court therefore referred two preliminary questions to the Court of Justice of the European Union (CJEU).
The CJEU starts with answering the first preliminary question. With the first preliminary question, the Italian referring court seeks to know whether Article 77(3) UCC is to be interpreted as meaning that the indirect representative is liable for VAT on importation solely by virtue of that provision (in addition, of course, to import duties under the same article).
In summary, through an analysis of the UCC, the CJEU considers that Article 77(3) UCC refers to import duties (all customs duties) and not VAT on imports.
The CJEU concludes that the indirect representative cannot be held liable (together or in addition to the importer) solely on the basis of Section 77(3) UCC with respect to the payment of VAT on imports.
Next, the CJEU discusses the second preliminary question. The second preliminary question concerns the question whether Article 201 of the VAT Directive must be interpreted as meaning that the indirect representative can be held jointly and severally liable with an importer for the payment of VAT upon importation, when - note - there are no national provisions expressly designating or recognizing him as the person who is (also) liable to pay the VAT.
In that context, the CJEU considers that it is apparent from Article 201 of the VAT Directive that the Member States have discretion to designate the persons liable for payment of that tax. Thus, having regard to the discretion under Article 201 of the VAT Directive, the Member States are free to provide, in implementation of that article, that the debtors of the import duties are also liable to pay the VAT on importation, and in particular, therefore, that the indirect customs representative is jointly and severally liable for the payment of the VAT on importation. But there is more:
If a Member State wants to provide that someone other than the importer is (jointly and severally) liable, then - according to the CJEU - this must be laid down "expressly and unambiguously" in a national provision.
Subsequently, the ECJ of course leaves open the question whether or not the Italian indirect representative is liable for VAT on importation, as this is ultimately up to the Italian court, which will have to take into account the legal framework mentioned above.
What does this mean for the Netherlands?
Does Dutch law provide a sufficiently clear, express and unambiguous provision under which the indirect representative can be held liable for VAT on imports?
In my view: it does not. Article 22 of the Turnover Tax Act (Wet omzetbelasting) initially seems to provide for this joint and several liability by making a reference to the Dutch General Customs Law (Algemene douanewet) which in turn refers to the UCC.
However, the judgment discussed in this blog shows precisely that a reference to the UCC is insufficient to designate the indirect representative as (jointly and severally) liable. After all, necessary is an (i) "express and unambiguous" (ii) national provision designating the debtor or debtors. In my view, both conditions are not met by Section 22 of the Turnover Tax Act.
According to the CJEU, the provisions of the UCC only apply to (joint and several liability in respect of) the customs debt / import duties.
Furthermore, according to the CJEU, on the basis of Article 201 of the VAT Directive, the indirect customs representative cannot be held jointly and severally liable with the importer for the payment of the VAT upon importation if there are no national provisions that "explicitly and unambiguously" designate or recognize him as the person who is (also) liable for the payment of that tax.
Dutch legislation seems to be deficient on this point as well.
Want to know more?
Do you have questions about the liability of a direct or indirect representative? Do you have other customs law questions? Feel free to contact one of our lawyers.