The Supreme Administrative Court (SAC) has confirmed that a payment to an unpublished bank account does not in itself give rise to the taxable supply recipient’s liability for unpaid VAT. It is always necessary to also prove that the taxpayer knew or could have known that the tax would not be properly paid.
Case No. 2 Afs 382/2019-33 involved a situation where the tax administrator demanded a taxpayer to pay VAT that was not paid by the supplier. According to the tax administrator, a liability for unpaid VAT had arisen as the taxpayer had made the payment for the received taxable supply to the supplier's Czech bank account that had not been published by the tax administrator in the online VAT register.
The Regional Court in Ostrava took into account earlier judgments in which the SAC denied a supply recipient’s liability for VAT not paid by the supplier solely on the grounds that the payment for the taxable supply had been made to a bank account in Slovakia. The SAC then applied these conclusions also to situations where the payment for the taxable supply is made to a Czech bank account not officially published by the tax administrator. The SAC therefore dismissed the tax administrator’s cassation complaint.
According to the SAC, the fact that Section 109(2)(c) of the VAT Act was fulfilled cannot in itself be considered the absence of the taxpayer’s good faith. For a liability for unpaid VAT to originate, the knowledge test must also have been met, i.e. that the supply recipient knew or could have known at the time of making the payment that VAT would not be properly paid. The fact that the payment was made to an account other than the one published by the tax administrator does not in itself mean that the taxpayer could not have been in good faith that the tax would be properly paid by the supplier.
The SAC emphasised that business practice varies and therefore the tax administrator should, in each individual case, carefully assess the reasons why the payment was made to a bank account other than a published one, and prove the absence of a taxpayer’s good faith. Otherwise, a liability would arise without the taxpayer’s fault, which is prohibited by CJEU case law. The SAC thus fully agreed with the conclusions of the Regional Court in Ostrava and judged the tax administrator's cassation complaint to be unfounded.