On May 12 2022, the CJEU issued a judgment (case C-714/20, U.I. Srl) concerning the joint and several liability of the indirect customs representative for the payment of import VAT.
Background to the case
The case concerns an import VAT debt which the Italian authorities demanded from the indirect customs representative of an importing company that was bankrupt. Since it was not possible for the authorities to collect the VAT directly from this company, they decided to claim it from the customs representative in their capacity, which the authorities viewed as jointly and severally liable for the VAT.
The customs representative acknowledged that they had acted in their own name and on behalf of the importing company on the basis of the mandate formalised between them. The representative therefore acknowledged that they had filed the relevant customs declarations according to this mandate.
However, the customs representative argued that there was no provision in the Italian legislation claiming joint and several liability of the indirect customs representative for the payment of VAT on importation.
Following a dispute between the parties, it was decided to refer two questions to the CJEU for a preliminary ruling. These sought to clarify:
The scope of the joint and several liability of the indirect customs representative; and
Whether, in accordance with the provisions of EU law, that liability may be extended in a generalised manner to the payment of VAT on importation.
The opinion of the CJEU
In regard to the questions, the CJEU pointed out that the indirect customs representative acts in their own name but on behalf of another person. Therefore, when the representative lodges a customs declaration, they do so in their own name but on behalf of the person who has given the representative a mandate and whom they represent, so that they acts as a declarant.
In turn, EU customs legislation (Regulation 952/2013 laying down the Union Customs Code) states that the declarant is the debtor of the customs debt and, in the case of indirect representation, the person on whose behalf the customs declaration is made is also the debtor. This legislation refers exclusively to the customs debt, but does not refer to VAT on importation.
The concept of customs debt is defined in the EU Community Customs Code as "the obligation on a person to pay the amount of import or export duty which applies to specific goods under the customs legislation in force”.
According to the above, import VAT does not seem to be part of import duties, which in turn are defined as "customs duty payable on the import of goods".
If we turn to the VAT Directive, we can see that Article 201 states: “on importation, VAT shall be payable by any person or persons designated or recognised as liable by the Member State of importation”.
This does not refer to the provisions of the Customs Code as regards the payment of import VAT, but states that this obligation is incumbent on the persons designated by the member state of importation.
Accordingly, the CJEU concluded that, as a general rule, the indirect customs representative is liable only for the payment of the customs duties due on the goods that they have declared to customs, but not for the payment of VAT on importation.
Freedom for member states under the VAT Directive
However, the VAT Directive states that member states are free to designate the persons liable for payment of import VAT. These persons could, for example, be the indirect customs representatives.
In other words, it will be up to the member states to determine whether a customs representative can be jointly and severally liable for VAT on importation.
If member states decide to make the representative liable, they must do so in a sufficiently clear and precise manner in their national legislation. This will ensure that the principle of legal certainty is respected and that the persons concerned are aware of their rights and obligations.
In the absence of national provisions designating or recognising the customs representative, explicitly and unequivocally, as the person liable for import VAT, it is not possible to hold them responsible.
The CJEU has defended the principle of legal certainty. According to its judgment, a customs representative cannot be required to pay VAT on importation if that joint and several liability is not clearly, explicitly, and unequivocally laid down in the domestic legislation of a member state. There are no provisions in EU customs legislation or in the VAT Directive to support this.
The CJEU´s judgment must be very much welcomed, as it clearly defends legal certainty. Joint and several liability for the payment of a given tax must always be based on clear and precise rules. Unfortunately, this is not always the case.
