Joint liability for VAT

What it means

Joint liability means the customer answers for VAT the supplier failed to pay. It is not a punishment for fraud but a statutory mechanism tied to defined indicators.

Those indicators include a price plainly out of line with the market without economic reason, a supplier on the risky-payer list, or a connection between the parties.

Joint liability is not the same as a refused input VAT deduction: with a refusal the company loses its own entitlement, whereas under joint liability it pays tax the supplier owed. The tax administrator claims it from the customer by a decision stating a specific amount, and both can hit the same invoice at once.

How it works in practice

The practical defence is cheap: verify the partner’s VAT number, check the risky-payer list, and keep the contract, delivery note and proof of payment to the published account.

With a new supplier a short supplier check pays for itself. Half an hour before the first order beats a year-long argument about a deduction.

Checking is not a one-off: a supplier’s status can change between the order and the payment. For larger invoices we therefore check the Financial Administration’s lists and the bank account on the day of payment, for regular partners at set intervals, and keep the result as evidence for any tax audit.

What to watch out for

Risk rises with unusually attractive offers and payments to an account other than the published one. Those two are the first things the office examines when refusing an input VAT refund.

If the supplier’s registration has been cancelled in the meantime, the invoice may still show VAT, but the customer has no right to deduct it and nobody will refund the tax paid. This happens with companies that stopped filing returns; checking for cancelled registration before paying avoids the loss.