Opinion of the Advocate General — ECLI:EU:C:2024:310
Date: 2024-04-11
Language of the case: Polish
Procedure: Reference for a preliminary ruling
Origin: Poland

Summary C-709/22 – 1 
Case C-709/22 
Summary of the request for a preliminary ruling pursuant to Article 98(1) of 
the Rules of Procedure of the Court of Justice 
Date lodged: 
17 November 2022 
Referring court: 
Wojewódzki Sąd Administracyjny we Wrocławiu (Poland) 
Date of the decision to refer: 
22 September 2022 
Applicant: 
Syndyk Masy Upadłości A 
Defendant: 
Dyrektor Izby Administracji Skarbowej we Wrocławiu (Director of 
the Tax Administration Chamber, Wrocław) 
  
Subject matter of the main proceedings 
Refusal by a tax authority to grant consent for the transfer, by an insolvency 
administrator, of funds held in the VAT account of a taxable person (split payment 
mechanism) 
Subject matter and legal basis of the request 
Compatibility with EU law of national legislation and practice concerning the 
transfer of funds held in the VAT account of a taxable person (split payment 
mechanism) in the context of insolvency law; Article 267 TFEU 
Questions referred for a preliminary ruling 
1. Must the provisions of Council Implementing Decision (EU) 2019/310 of 
18 February 2019 authorising Poland to introduce a special measure 
derogating from Article 226 of Directive 2006/112/EC on the common system 
EN 
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of value added tax (OJ 2019 L 51, p. 19 et seq.; ‘Council [Implementing] 
Decision 2019/310’) [and] the provisions of Council Directive 2006/112/EC of 
28 November 2006 on the common system of value added tax (OJ 2006 L 347, 
p. 1; [‘the VAT Directive’]), in particular Articles 395 and 273 thereof, as 
well as the principle of proportionality and the principle of neutrality, be 
interpreted as precluding national legislation and practice which, in the 
circumstances of the case at hand, preclude the grant of consent for the 
transfer, by an insolvency administrator, of funds held in the VAT account of 
a taxable person (split payment mechanism) to a bank account which has 
been designated by that taxable person? 
2. Must Article 17(1) of the Charter of Fundamental Rights of the 
European Union ([OJ 2007 C 303, p. 1 et seq].; ‘the Charter’) – [concerning 
the] right to property – in conjunction with Article 51(1) and Article 52(1) 
thereof, be interpreted as precluding national legislation and practice which, 
in the circumstances of the case at hand, by precluding the grant of consent 
for the transfer, by an insolvency administrator, of funds held in the VAT 
account of a taxable person (split payment mechanism), consequently result 
in the funds owned by the insolvent taxable person in that VAT account 
being frozen, and thus make it impossible for the insolvency administrator to 
carry out his or her duties in the course of the insolvency proceedings? 
3. Having regard to the context and objectives of Council [Implementing] 
Decision 2019/310, as well as the provisions of [the VAT Directive], must the 
principle of the rule of law stemming from Article 2 of the Treaty on 
European Union ([OJ 2012 C 326, p. 13]; ‘TEU’) and the principle of legal 
certainty which implements it, the principle of sincere cooperation stemming 
from Article 4(3) TEU, and the principle of good administration stemming 
from Article 41(1) of the Charter, be interpreted as precluding national 
practice which, by precluding the grant of consent for the transfer, by an 
insolvency administrator, of funds held in the VAT account of a taxable 
person (split payment mechanism), seeks to frustrate the objectives of the 
insolvency proceedings defined by an insolvency court as falling within Polish 
jurisdiction for the purposes of Article 3(1) of Regulation (EU) 2015/848 of 
the European Parliament and of the Council of 20 May 2015 on insolvency 
proceedings (recast) (OJ 2015 L 141, p. 19), and consequently leads to a 
situation as a result of which, through the application of an inappropriate 
national measure, the State Treasury is treated preferentially as a creditor at 
the expense of the general body of creditors? 
Provisions of European Union law relied on 
TEU: Article 2, Article 4(3) and Article 6(1) 
Charter of Fundamental Rights of the European Union (‘the Charter’): 
Article 6(3), Article 17(1), Article 41(1), Article 51(1) and Article 52(1) 
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Council Directive 2006/112/EC of 28 November 2006 on the common system of 
value added tax (‘the VAT Directive’): recital 4; Article 273 and Article 395(1) 
Council Implementing Decision (EU) 2019/310 of 18 February 2019 authorising 
Poland to introduce a special measure derogating from Article 226 of Directive 
2006/112/EC on the common system of value added tax (‘[Implementing] 
Decision 2019/310’): recitals 4, 7, 11 and 12; Articles 1 and 3 
Regulation (EU) 2015/848 of the European Parliament and of the Council of 
20 May 2015 on insolvency proceedings (recast): recitals 3, 4 and 5; Article 3(1) 
Provisions of national law relied on 
Ustawa o podatku od towarów i usług (Law on the tax on goods and services) of 
11 March 2004 (Dz. U. of 2021, item 685, as amended; ‘the Law on VAT’) 
Article 106e(1)(18a): In the case of invoices in which the total amount due 
exceeds 15 000 zlotys (PLN) or its equivalent expressed in foreign currency, 
covering a supply, to a taxable person, of goods or services referred to in 
Annex 15 to this Law, the invoice shall include the expression ‘split payment 
mechanism’ […]; 
- Article 108a(1): Taxable persons who have received an invoice showing the 
amount of tax may apply the split payment mechanism when paying the amount 
due arising from that invoice; 
- Article 108a(1a): When making payments for purchased goods or services listed 
in Annex 15 to this Law, specified in an invoice in which the total amount due 
exceeds PLN 15 000 or its equivalent expressed in foreign currency, taxable 
persons are required to apply the split payment mechanism. […]; 
- Article 108a(2): Application of the split payment mechanism shall involve the 
following: (1) payment of the amount corresponding to all or part of the amount of 
tax arising from the invoice received shall be made to a VAT account; (2) 
payment of all or part of the amount corresponding to the net sales value arising 
from the invoice received shall be made to a bank account or to an account with a 
cooperative savings and credit union for which a VAT account is maintained, or 
shall be settled in another manner; 
- Article 108b(1): At the taxable person’s request, the director of the tax office 
shall grant, by means of a decision, consent for the transfer of the funds held in the 
VAT account designated by the taxable person to a bank account designated by 
that taxable person or to an account with a cooperative savings and credit union 
for which that VAT account is maintained; 
- Article 108b(2): In the request, the taxable person shall specify the amount of the 
funds held in the VAT account which is to be transferred; 
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- Article 108b(3): The director of the tax office shall issue a decision within 
60 days of receiving the request. In the decision, the director of the tax office shall 
specify the amount of the funds to be transferred; 
- Article 108b(5)(1): The director of the tax office shall refuse, by means of a 
decision, to grant consent for the transfer of the funds held in a VAT account 
where the taxable person has arrears by way of taxes and duties referred to in 
Article 62b(2)(2)(a) of the [ustawa – Prawo bankowe (Law on Banking) of 
29 August 1997] in the amount corresponding to such arrears, plus default 
interest, […]; 
- Article 108e: Taxable persons who supply goods or services referred to in 
Annex 15 to this Law, as well as taxable persons who purchase those goods or 
services, are required to have a clearing account as referred to in Article 49(1)(1) 
of [the Law on Banking], or a personal account with a cooperative savings and 
credit union opened in connection with the economic activity carried out, 
maintained in Polish currency; 
Ustawa – Prawo bankowe (Law on Banking) of 29 August 1997 (Dz. U. of 2020, 
item 1896, as amended; ‘the Law on Banking’) 
- Article 62a(1): The bank shall maintain a VAT account for the clearing account. 
- Article 62b(2)(2)(a): The VAT account may be debited only for the purposes of 
payment into the account of the tax office of: (-) the tax on goods and services 
[…]; (-) corporation tax […]; (-) personal income tax […]; (-) excise duty […]; (-) 
customs duties […]; 
- Article 62d(1)(1): Funds held in the VAT account shall be free from seizure on 
the basis of a judicial or administrative enforcement order relating to the 
enforcement or securing of claims other than those referred to in 
Article 62b(2)(2); 
Ustawa – Prawo upadłościowe (Law on Insolvency) of 28 February 2003 (Dz. U. 
of 2020, item 1228, as amended; ‘the Law on Insolvency’) 
- Article 342(1)(2): Claims to be satisfied from the funds of the insolvency estate 
shall be divided into the following categories – Category Two – other claims, 
where they are not to be satisfied in other categories, in particular taxes and other 
public levies, as well as other claims by way of social security contributions; 
- Article 343(1): The insolvency estate shall be used in the first instance to meet 
the costs of the proceedings as well as, if the funds of the insolvency estate so 
allow, other liabilities of the insolvency estate, […]; 
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Succinct presentation of the facts and procedure in the main proceedings, as 
well as the essential arguments of the parties in those proceedings 
1 The insolvency administrator asked the tax authority of first instance to transfer 
the funds held in the VAT account of the insolvent taxable person to the account 
of the insolvency estate. She stated that the funds were to be transferred to the 
account of a municipality in order to pay property tax. 
2 The [insolvency] administrator stated that the company [in insolvency] has no 
outstanding liabilities to the State Treasury since the date of the declaration of 
insolvency. The funds in the VAT account were held during the insolvency 
proceedings. It is common ground that the claims declared by another tax 
authority relate to the situation prior to the declaration of insolvency and were 
included in the schedule of claims. All amounts due to public authorities have 
been paid, in accordance with the rules, within the second category, alongside 
other non-public-law claims. Public authorities are therefore treated in the same 
way as other creditors of the insolvent taxable person. With regard to the 
satisfaction of the insolvent person’s creditors, the provisions of the Law on 
Insolvency constitute lex specialis in relation to the provisions of the Law on VAT 
and the Law on Banking. Thus, in insolvency there is no possibility of, as it were, 
‘automatic’ satisfaction of the tax authority within the framework of a separate 
VAT account where the taxable person has arrears. The funds held in the VAT 
account are therefore the property of the taxable person. The fact that no negative 
conditions were satisfied, that is to say, there were no arrears of taxes and duties 
referred to in Article 62b(2)(2)(a) of the Law on Banking, indicated that the 
request was valid. 
3 The tax authority of first instance refused to grant the abovementioned consent. It 
referred to Article 108b(1) and (5) of the Law on VAT, as well as 
Article 62b(2)(2)(a) of the Law on Banking, and emphasised that, since the 
company in insolvency [had] VAT and personal income tax arrears as at the date 
of the decision and they [were] higher than the amount which the [insolvency] 
administrator [had] requested be transferred to the bank account, the condition laid 
down in Article 108b(5)(1) of the Law on VAT [was] satisfied and the refusal to 
transfer the funds [was] justified. In the view of that authority, the legislature has 
specified the purpose for which the funds held in a VAT account may be used. A 
declaration of insolvency does not affect the tax status of a taxable person, since 
an insolvent company remains a taxable person. The difference is that actions on 
its behalf are undertaken and conducted by an [insolvency] administrator. The 
Law on VAT is a special rule in relation to the general rule of the Law on 
Insolvency. 
4 The appellate authority upheld the decision of the tax authority of first instance 
and concurred with the arguments contained therein. It emphasised that although 
the funds held in a VAT account are the property of the taxable person, one of the 
conditions for refusing to grant the abovementioned consent is that the taxable 
person has tax arrears. The amount of funds held in the VAT account is, in 
SUMMARY OF THE REQUEST FOR A PRELIMINARY RULING – CASE C-709/22 
 
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essence, the amount of tax resulting from VAT invoices paid by counterparties. It 
is therefore not possible to treat that amount and those funds on a par with an 
overpayment which the authority may set off against arrears. 
5 In its application to the Wojewódzki Sąd Administracyjny we Wrocławiu 
(Regional Administrative Court, Wrocław), the applicant has requested that the 
decision of the appellate authority be annulled. 
Reasoning in the request for a preliminary ruling 
Reasons for the first question referred 
6 The doubts of the Wojewódzki Sąd Administracyjny relate to the lawfulness of 
the introduction, and limits of the application, of a national measure – the split 
payment mechanism – which was adopted with the aim of combating VAT fraud. 
7 The split payment mechanism is governed in the Polish legal system by the 
provisions of the Law on VAT and the Law on Banking. Its adoption in 
mandatory form was based on the provisions of [Implementing] Decision 
2019/310. That mechanism introduces the necessity to split the payment of the 
VAT amount due and the taxable amount due. When a supplier is covered by the 
provisions concerning split payment, it is obliged to have, in addition to its 
ordinary bank account, a separate blocked VAT account. That separate account 
can be used only to receive VAT from customers and to pay VAT to suppliers; it 
can also be used to pay other public-law debts, but only to the State Treasury. In 
that case the purchaser pays the taxable amount to the supplier, normally to an 
ordinary bank account, whereas the VAT due on the supply is paid to the blocked 
VAT account. This method of payment is solely the result of the will of the person 
making the payment and does not take place automatically. The release of the 
funds held in the VAT account of a taxable person requires the consent of the tax 
authority. The national law also lays down the conditions and time limit under 
which the release of such funds is to be refused. 
8 When applying for a derogation from Article 226 of the VAT Directive, Poland 
stated that a mandatory split payment mechanism would eliminate VAT fraud; the 
Commission agreed with this view and considered that the measure is 
proportionate to the objective of combating tax evasion. 
9 The derogation was granted on a temporary basis until 28 February 2022 by 
[Implementing] Decision 2019/310. It is clear from Article 1 of that decision that 
the derogation relates to Article 226 of the VAT Directive. Therefore, a special 
requirement is placed on the invoice, that is to say, it must state ‘split payment 
mechanism’. This is reflected in Article 106e(1)(18a) of the Law on VAT. 
10 For its part, Article 206 of the VAT Directive provides that any taxable person 
liable for payment of VAT must pay the net amount of the VAT when submitting 
the VAT return provided for in Article 250 of that directive. Member States may, 
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however, set a different date for payment of that amount or may require interim 
payments to be made. 
11 The first doubt of the Wojewódzki Sąd Administracyjny is essentially whether or 
not the national measure adopted constitutes a derogation from Article 206 of the 
VAT Directive and thus required the relevant notification pursuant to Article 395 
of that directive. This is important in so far as a failure to notify constitutes a 
procedural defect and consequently renders the regulations inapplicable with 
regard to individuals (see judgment of the Court of Justice of 4 February 2016, 
Ince, C-336/14, EU:C:2016:72, paragraph 67). 
12 It follows from Article 206 of the VAT Directive that a taxable person is obliged 
to pay VAT not after each taxable transaction, but on expiry of each tax period. 
Thus, the net amount of VAT, to which reference is made in the first sentence of 
that provision, is obtained by adding together the VAT payable on all input 
taxable transactions made during the tax period, from which the VAT paid on all 
output transactions made during that same period is deducted. Therefore, 
payments received previously from counterparties should be at the taxable 
person’s free disposal. This is not so in the case of a VAT account. The funds are 
blocked before the public-law VAT liability arises in the amount of the maximum 
liability in that case, namely the entire VAT amounts paid in that regard. 
However, to use its own funds for a purpose other than the payment of the stated 
public-law liabilities, an undertaking requires the consent of a body governed by 
public law, for which the deadline is 60 days, even if there are no public-law 
arrears. The possibility of collecting interim payments, as provided for in the 
second sentence of Article 206 of the VAT Directive, allows Member States to 
require, in advance, a partial payment of the net amount of VAT calculated over 
the tax period as a whole. The term ‘interim payment’ in fact means the partial 
payment of an amount which will be payable subsequently, that is to say, the net 
amount of VAT calculated over the tax period as a whole. However, the amount 
of VAT paid to a supplier on a single transaction by a purchaser can hardly be 
deemed to constitute such an interim payment (see judgment of the Court of 
Justice of 9 September 2021, Dyrektor Izby Administracji Skarbowej w 
Bydgoszczy (Intra-Community acquisitions of diesel), C-855/19, EU:C:2021:714, 
paragraph 33, and the Opinion of Advocate General Saugmandsgaard Øe of 
18 March 2021 in that case, EU:C:2021:222, points 111 and 112). 
13 However, neither Poland nor the Commission has stated that the derogation also 
concerns Article 206 of the VAT Directive. 
14 Therefore, the split payment mechanism may be classified as ‘other liabilities’ 
which the Member States deem necessary to prevent tax evasion within the 
meaning of Article 273 of the VAT Directive. That article does indeed afford 
discretion to the Member States as regards the choice of measures to be adopted in 
order to achieve, inter alia, the objective of combating fraud. However, they must 
exercise their power in accordance with EU law and its general principles and, in 
particular, in accordance with the principle of proportionality and the principle of 
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fiscal neutrality (judgments of the Court of Justice of: 17 May 2018, Vámos, 
C-566/16, EU:C:2018:321, paragraph 41; 21 November 2018, Fontana, C-648/16, 
EU:C:2018:932, paragraph 35; 8 May 2019, EN.SA., C-712/17, EU:C:2019:374, 
paragraphs 38 and 39). 
15 The evasion or avoidance of tax is inherent in the common system of VAT, thus 
the fight against it has become an objective recognised and encouraged by the 
VAT Directive ([see,] inter alia, judgment of the Court of Justice of 21 May 2021, 
ALTI, C-4/20, EU:C:2021:397). Member States have the possibility of introducing 
specific national measures in their legal system to attain, inter alia, such an 
objective. However, the measures adopted in that regard must not go beyond what 
is necessary to achieve the objectives pursued. In accordance with the principle of 
proportionality, the Member States must employ means which, whilst enabling 
them effectively to attain the objectives pursued by their domestic laws, cause the 
least possible detriment to the objectives and principles laid down by the relevant 
EU legislation (see judgments of the Court of Justice of: 18 December 1997, 
Molenheide and Others, C-286/94, C-340/95, C-401/95 and C-47/96, 
EU:C:1997:623, paragraph 46; 27 September 2007, Teleos and Others, C-409/04, 
EU:C:2007:548, paragraph 52). Therefore, whilst it is legitimate for the measures 
adopted by the Member States to seek to preserve the rights of the State Treasury 
as effectively as possible, they must not go further than is necessary for that 
purpose (see the above judgment of the Court of Justice in Molenheide and 
Others, EU:C:1997:623, paragraph 47, and the judgment of the Court of Justice of 
11 May 2006, Federation of Technological Industries and Others, C-384/04, 
EU:C:2006:309, paragraph 30). In particular, those measures cannot be used in 
such a way that they would have the effect of undermining the neutrality of VAT 
(see judgments of the Court of Justice of: 19 October 2017, Paper Consult, 
C-101/16, EU:C:2017:775, paragraph 50; 21 March 2000, Gabalfrisa and Others, 
C-110/98 to C-147/98, EU:C:2000:145, paragraph 52; 21 June 2012, Mahagében 
and Dávid, C-80/11 and C-142/11, EU:C:2012:373, paragraph 57). 
16 The split payment mechanism is an experiment aimed at combating VAT fraud. 
On 29 April 2021, Poland submitted the required report regarding the overall 
impact of the measure in question on the level of VAT fraud and on the taxable 
persons concerned (recital 12 and Article 2 of [Implementing] Decision 
2019/310), the content of which is not known to the Wojewódzki Sąd 
Administracyjny. The application of that national measure was extended to 
28 February 2025 by Council Implementing Decision (EU) 2022/559 of 5 April 
2022 amending Implementing Decision (EU) 2019/310 as regards the 
authorisation granted to Poland to continue to apply the special measure 
derogating from Article 226 of Directive 2006/112/EC on the common system of 
value added tax (OJ 2022 L 108, p. 51). 
17 It is not evident from any of the documents submitted to the Commission and 
available to the Wojewódzki Sąd Administracyjny that Poland submitted a report 
on the effects of the split payment mechanism under insolvency law. This is 
crucial as that measure may lead to negative consequences in the form of failure to 
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achieve the main objectives of insolvency proceedings, and thus to a systemic, 
real impact on entities in insolvency (taxable persons for the purposes of VAT) 
and their creditors, as well as to the State Treasury being favoured at the expense 
of the general body of creditors. 
18 The Wojewódzki Sąd Administracyjny has well-founded doubts as to whether or 
not the above measure and the associated practice of applying it go beyond the 
objective of combating VAT fraud, an objective which is apparent from both 
Articles 273 and 395 of the VAT Directive and [Implementing] Decision 
2019/310. 
19 In its judgment of 11 July 1988, Direct Cosmetics Ltd and Laughtons 
Photographs Ltd, 138/86 and 139/86, EU:C:1988:383, the Court of Justice noted 
that the term ‘tax avoidance’ includes tax evasion. This involves an element of 
intent (paragraph 21 of that judgment). Tax evasion is a practice by which a 
taxable person attempts to evade his, her or its legal obligations by fraudulent 
means. It involves a direct and intentional infringement of tax law by fraudulently 
evading the assessment or payment of tax in full or in part. In the context of VAT, 
the taxable person’s conduct is aimed at evading tax, which directly and 
manifestly infringes applicable tax law. This includes forms of conduct such as, 
for example, failing to disclose the subject of taxation and thus failing to declare 
tax, applying understated rates, deliberately failing to pay tax, issuing irregular 
invoices, and so on (see, inter alia, judgment of the Court of Justice of 
7 December 2010, R., C-285/09, EU:C:2010:742, paragraph 49 and the case-law 
cited). 
20 It is doubtful whether obtaining the above consent from the tax authority falls 
within the bounds of the stated objective. Such a measure de facto restricts an 
undertaking in the disposal of its funds, actually requiring that the funds obtained 
from VAT be allocated to public-law liabilities chosen by the legislature even 
before the VAT liability arises. 
21 A key doubt emerges here, namely the situation of a taxable person for the 
purposes of VAT who is in insolvency and the disposal by the insolvency 
administrator of the funds in the VAT account of the insolvent undertaking. The 
insolvency estate includes assets belonging to the insolvent taxable person at the 
date of the declaration of insolvency and those acquired by that person during the 
insolvency proceedings, apart from certain exceptions. The funds held in the VAT 
account are not among those exceptions and must therefore be included in the 
insolvency estate. The tax authority refused to refund the funds held in the taxable 
person’s VAT account on the ground that there were tax arrears (which arose 
before the declaration of insolvency) due to the tax authority (in terms of VAT 
and corporation tax). However, those arrears were stated in the schedule of claims. 
The importance of the schedule of claims manifests itself in the fact that it 
authorises the creditors whose claims have been included therein to participate in 
the insolvency proceedings and obtain satisfaction from the distribution of the 
funds of the insolvency estate together with other creditors. Once proceedings 
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have been completed or discontinued, an extract from the schedule of claims 
constitutes an enforcement order against the debtor. The insolvency administrator 
has stated that the insolvent taxable person had no other VAT arrears (arising 
during insolvency) and needed the funds to pay its ongoing property tax liability 
to the local government budget. 
22 A refusal to pay VAT funds to an insolvency administrator, acting under the 
supervision of a presiding judge, performing duties under the Law on Insolvency, 
can hardly be deemed to be effected in order to combat VAT fraud. 
23 Moreover, the principle of proportionality indicates that when there is a choice 
between several appropriate measures recourse must be had to the least onerous, 
and the disadvantages caused must not be disproportionate to the aims pursued 
(judgment of the Court of Justice of 12 July 2001, Jippes and Others, C-189/01, 
EU:C:2001:420, paragraph 81). The above refusal of consent may appear 
excessive. Firstly, the above arrears cannot be treated in the same way as those 
subject to enforcement, as they are included in the schedule of claims. Secondly, 
in the absence of VAT arrears, the insolvency administrator has no possibility of 
assigning those funds to the payment of creditors. 
24 The Court of Justice has already made it clear that, while the Member States have 
a certain freedom in determining the conditions for refunding excess VAT, those 
conditions cannot undermine the principle of fiscal neutrality by making the 
taxable person bear the burden of the VAT in whole or in part. In particular, such 
conditions must enable the taxable person, in appropriate circumstances, to 
recover the entire amount of the credit arising from that excess VAT. This implies 
that the refund is to be made within a reasonable period of time by a payment in 
liquid funds or equivalent means, and that, in any event, the method of refund 
adopted must not entail any financial risk for the taxable person (judgments of the 
Court of Justice of: 6 July 2017, Glencore Agriculture Hungary, C-254/16, 
EU:C:2017:522, paragraph 20 and the case-law cited; 12 May 2021, technoRent 
International and Others, C-844/19, EU:C:2021:378, paragraphs 37 and 38 and 
the case-law cited). Since the insolvent taxable person for VAT purposes 
essentially carries on no economic activity and thus creates no possibility of VAT 
liability arising, and the [insolvency] administrator states that the insolvent person 
has no ongoing VAT arrears following the declaration of insolvency, the question 
arises as to whether or not blocking funds in the VAT account undermines the 
principle of VAT neutrality. 
Reasons for the second question referred 
25 The Wojewódzki Sąd Administracyjny has doubts as regards infringement of the 
right to property under Article 17(1) of the Charter. 
26 It is common ground that the funds held in a VAT account are the property of a 
taxable person, including a taxable person in insolvency (as an element of the 
insolvency estate). The blocking of those funds constitutes a restriction of their 
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use. The taxable person, as well as the insolvency administrator, must obtain 
consent from the tax authority for their transfer to other purposes (including the 
payment of taxes to other public creditors under the law). Consent is refused 
automatically where there are tax arrears. However, such refusal does not have to 
be automatic where such claims are included in the schedule of claims and are 
therefore expected to be enforced during the insolvency proceedings. The 
interpretation is at the discretion of the tax authority. However, where consent is 
refused the double economic benefit obtained by the State Treasury is apparent: it 
declares its claims in the schedule of claims, on the one hand, and, for the same 
reason, blocks the funds in the VAT account, on the other. That blocking leads to 
a situation where the insolvency administrator is unable to use those funds to 
satisfy the general body of creditors (which includes the State Treasury) during 
insolvency proceedings conducted under the supervision of a presiding judge. As 
in this case, the taxable person cannot have ongoing liabilities from economic 
activity (which is carried out by an [insolvency] administrator on [that taxable 
person’s] behalf), but can have liabilities from other rights which do not form part 
of the State budget, that is to say, property tax (local government budget). The tax 
authority itself cannot effect enforcement in relation to the above bank account 
because, pursuant to the Law on Insolvency, during insolvency proceedings all 
enforcement proceedings (including those relating to VAT) are discontinued by 
operation of law. The Law on VAT affects the performance of duties by the 
insolvency administrator since it decides, contrary to the Law on Insolvency, 
which decisions the insolvency administrator is to take in respect of the above 
funds belonging to the taxable person, which, by operation of law, must be 
included in the insolvency estate. It should be noted that a presiding judge is also 
unable to act in this regard. Funds blocked in a VAT account (in the absence of 
other funds of the insolvent person), and not transferred to the insolvency 
administrator, may lead to the discontinuation of insolvency proceedings and the 
actual satisfaction of the State Treasury alone, at the expense of other creditors, 
while at the same time preventing the liquidation of the undertaking of the 
insolvent taxable person. However, if the insolvent taxable person has financial 
assets which allow the general body of creditors of that taxable person to be 
satisfied, the exclusion of these funds from the insolvency estate may lead to a 
situation where there is no one to hand them over to when the undertaking is 
liquidated. The taxable person will be deleted from the register by a decision of 
the insolvency court. This will result in an unauthorised contribution to the State 
Treasury. 
27 In EU law, the right to property is protected, in particular, under Article 17 of the 
Charter. Under Article 51(1) thereof, the Charter is addressed to the Member 
States only when they are implementing Union law. This undoubtedly applies to 
VAT cases (see judgment of the Court of Justice of 26 February 2013, Åkerberg 
Fransson, C-617/10, EU:C:2013:105, paragraph 25 et seq.). Under Article 52(3) 
thereof, in so far as the Charter contains rights which correspond to rights 
guaranteed by the Convention for the Protection of Human Rights and 
Fundamental Freedoms, concluded in Rome on 4 November 1950 (ECHR), the 
meaning and scope of those rights are to be the same as those laid down by that 
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convention. As for Article 17 of the Charter, according to the Explanations 
relating to the Charter, that provision is based on Article 1 of Protocol No 1 to the 
ECHR. Accordingly, Article 17 of the Charter must be interpreted in the light of 
the case-law of the European Court of Human Rights (ECtHR) concerning that 
other provision as the minimum threshold of protection (see judgment of the Court 
of Justice of 21 May 2019, Commission v Hungary (Usufruct over agricultural 
land), C-235/17, EU:C:2019:432, paragraph 72). The concept of ‘possessions’ 
referred to in Article 17(1) [of the Charter] has an autonomous meaning which is 
not limited to the ownership of material goods, and certain other rights and 
interests constituting assets can also be regarded as ‘property rights’ (ECtHR, 
22 June 2004, Broniowski v. Poland, no. 31443/96, § 129). In certain 
circumstances, ‘possessions’ can be assets, including claims (see ECtHR, 
28 September 2004, Kopecký v. Slovakia, no. 44912/98, § 35). As regards VAT, 
paragraph 57 of the ECtHR judgment of 22 January 2009 regarding Application 
no. 3991/03 (‘Bulves’ AD v. Bulgaria) held that the applicant company’s right to 
claim a deduction of the input tax amounted to at least a ‘legitimate expectation’ 
of obtaining effective enjoyment of a property right amounting to a ‘possession’ 
within the meaning of the first sentence of Article 1 of Protocol No. 1 (see, 
mutatis mutandis, ECtHR: 29 November 1991, Pine Valley Developments Ltd and 
Others v. Ireland, [no. 12742/87,] § 51; 16 April 2002, S.A. Dangeville v. France, 
no. 36677/97, § 48; 22 July 2003, S.A. Cabinet Diot and S.A. Gras Savoye v. 
France, nos. 49217/99 and 49218/99, § 26; 25 April 2007, Aon Conseil and 
Courtage S.A. and Christian de Clarens S.A. v. France, no. 70160/01, § 45; and 
23 May 2007, Intersplav v. Ukraine, no. 803/02, §§ 30 to 32). Thus, the right to 
deduct VAT is an expectancy of a property right subject to protection under 
Article 17 of the Charter. There is no doubt that funds held in a separate VAT 
account amount to possessions within the meaning of Article 17(1) of the Charter 
and are subject to protection under that provision. 
28 The effectiveness of a public authority is met with an insurmountable barrier in 
the form of the fundamental rights of citizens, any limitations on which, as 
Article 52(1) of the Charter stipulates, may be provided for only by law and with 
due respect for the essence of those rights, if those limitations are necessary and 
genuinely meet objectives of general interest recognised by the Union or the need 
to protect the rights and freedoms of others (see judgment of the Court of Justice 
of 15 February 2016, N., C-601/15 PPU, EU:C:2016:84, paragraph 50). It is 
therefore a question of a difficult balance between public policy and the freedom 
to possess. That ‘law’ must, in effect, be adequately accessible and foreseeable, 
that is, formulated with sufficient precision to enable the individual – using 
professional advice if need be – to regulate his [or her] conduct [and] to foresee 
the consequences of that law for him [or her] (ECtHR, 26 March 1987, Leander v. 
Sweden, no. 9248/81, § 50). The ‘law’ must therefore be sufficiently clear 
(ECtHR, 3 July 2007, Tan v. Turkey, no. 9460/03, §§ 22 to 26) and foreseeable as 
to the meaning and nature of the applicable measures (see decision of the ECtHR 
of 25 September 2006 in Coban v. Spain, no. 17060/02), and must define with 
sufficient clarity both the scope of the power to interfere in the exercise of the 
rights guaranteed by the ECHR and the manner in which that power is to be 
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13 
exercised (ECtHR, 14 September 2010, Sanoma Uitgevers B.V. v. The 
Netherlands, no. 38224/03, §§ 81 and 82). A law which confers a discretion is not 
in itself inconsistent with that requirement, provided that the scope of the 
discretion and the manner of its exercise are indicated with sufficient clarity, 
having regard to the legitimate aim in question, to give the individual adequate 
protection against arbitrary interference (ECtHR, [25 February 1992,] Margareta 
and Roger Andersson v. Sweden, [no. 12963/87,] § 75). A law which confers a 
discretion must therefore indicate the scope of that discretion (ECtHR, 25 March 
1983, Silver and Others v. The United Kingdom, nos. 5947/72, 6205/73, 7052/75, 
7061/75, 7107/75, 7113/75 and 7136/75, § 88). All of these conditions stem from 
the idea of the supremacy of the law (ECtHR, 25 May 1998, Kopp v. Switzerland, 
no. 23224/94, § 55). The condition that any limitation must be ‘provided for by 
law’ therefore means, according to the case-law of the ECtHR, that the actions of 
the public authority must observe the limits defined in advance by the rules of 
law, which imposes certain requirements which must be satisfied both by the rules 
of law themselves and by the procedures designed to impose effective observance 
of those rules. Lastly, the ECtHR has explained that the term ‘law’ should be 
understood in its ‘substantive’ sense, not only its ‘formal’ one, because it may 
include both ‘written law’ and ‘unwritten law’ – or even ‘judge-made law’ 
(ECtHR, 26 April 1979, The Sunday Times v. The United Kingdom (No. 1), no. 
6538/74, § 49; 13 July 1995, Tolstoy Miloslavsky v. The United Kingdom, no. 
18139/91, § 37). ‘Consistent decisions’ which are published and therefore 
accessible and are followed by the lower courts may, in some circumstances, 
supplement legislative provisions and clarify them to the point of rendering them 
foreseeable (ECtHR, 24 May 1988, Müller and Others v. Switzerland, no. 
10737/84, § 29). As regards the principle of proportionality, it requires that a 
restriction on the exercise of the right to property does not exceed what is 
appropriate and necessary in order to attain the objectives legitimately pursued by 
that legislation, it being understood that, when there is a choice between several 
appropriate measures, recourse must be had to the least onerous and the 
disadvantages caused must not be disproportionate to the aims pursued (judgment 
of the Court of Justice of 20 March 2018, Menci, C-524/15, EU:C:2018:197, 
paragraph 46 and the case-law cited). 
29 As has already been stated above, the split payment mechanism was introduced to 
combat VAT fraud, which in itself should be considered to be in the public 
interest (see ECtHR, 22 September 1994, Hentrich v. France, no. 13616/88, § 39). 
However, the legislature did not provide for the effects of such rules under the 
Law on Insolvency. In such a situation, it is difficult to speak of clear and precise 
rules which enable a professional legal entity, such as an insolvency administrator, 
to conduct insolvency proceedings and foresee the tax authority’s actions. The 
competition of legal measures which has arisen has created legal uncertainty. One 
tax authority, applying only a literal interpretation, will refuse consent for the 
release of funds on grounds of nominal tax arrears, whilst another, applying a 
contextual and teleological interpretation, will release such funds. In addition, the 
current legislation mitigates in favour of the inclusion of funds from a VAT 
account in the insolvency estate. The unforeseeable nature of the law is also 
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visible at a substantive level. In the case-law of the administrative courts, it is 
unclear which conflict-of-law rule is considered to be key, and three are apparent: 
lex superior; lex specialis derogat legi generali; [and] lex posterior derogat legi 
priori. In that regard, the status of lex specialis is sometimes conferred on the Law 
on Insolvency, and sometimes on the Law on VAT. This state of affairs supports 
the argument that the rules introduced are unclear and unforeseeable and creates 
uncertainty on the part of the insolvency administrator. 
Reasons for the third question referred 
30 The European Union is a union of law, and the rule of law has been the 
cornerstone of the functioning of that organisation and a common Europe since its 
inception (see judgment of the Court of Justice of 23 April 1986, Les Verts v 
Parliament, 294/83, EU:C:1986:166, paragraph 23). Each Member State shares 
with all the other Member States – and recognises that they share with it – a set of 
common values on which the Union is founded, as stated in Article 2 TEU. That 
premiss implies and justifies the existence of mutual trust between the Member 
States that those values will be recognised and, therefore, that the law of the 
European Union that implements them will be respected (see opinion of the Court 
of Justice of 18 December 2014, 2/13, EU:C:2014:2454, paragraph 168). It is 
precisely in that context that the Member States are obliged, by reason inter alia of 
the principle of sincere cooperation set out in the first subparagraph of Article 4(3) 
TEU, to ensure in their respective territories the application of and respect for EU 
law, and to take for those purposes any appropriate measure, whether general or 
particular, to ensure fulfilment of the obligations arising out of the Treaties or 
resulting from the acts of the institutions of the Union (see judgment of the Court 
of Justice of 6 March 2018, Achmea, C-284/16, EU:C:2018:158, paragraph 34). In 
turn, the principle of legal certainty, the corollary of which is the principle of the 
protection of legitimate expectations, requires, in particular, that rules involving 
negative consequences for individuals should be clear and precise and that their 
application should be predictable for those subject to them (see judgments of the 
Court of Justice of: 12 December 2013, Test Claimants in the Franked Investment 
Income Group Litigation, C-362/12, EU:C:2013:834, paragraph 44; 15 February 
1996, Duff and Others, C-63/93, EU:C:1996:51, paragraph 20; 29 April 2004, 
Sudholz, C-17/01, EU:C:2004:242, paragraph 34; 11 June 2015, Berlington 
Hungary and Others, C-98/14, EU:C:2015:386, paragraph 77). The principle of 
legal certainty is binding on every national authority responsible for applying EU 
law (see judgment of the Court of Justice of 17 July 2008, ASM Brescia, 
C-347/06, EU:C:2008:416, paragraph 65 and the case-law cited). Undoubtedly, 
therefore, for there to be good administration within the meaning of Article 41(1) 
of the Charter, it must act in accordance with and within the limits of the law, 
including Union law. 
31 Combating VAT fraud, which is one of the recognised objectives of the Union, 
cannot be considered solely in terms of its effectiveness. The means and methods 
of doing so must comply with the requirements of the rule of law. If a public 
authority were to be given excessively far-reaching instruments to combat VAT 
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fraud, there would be nothing to prevent its uncontrolled and unrestrained action 
from ultimately becoming detrimental to the common system of VAT and, 
consequently, to taxable persons. 
32 Aspects of the case in the main proceedings demonstrate the inconsistency of the 
Polish legal system. The restriction of the use of funds held in a VAT account 
whose transfer is requested by an insolvency administrator following the 
declaration of insolvency of a taxable person for the purposes of VAT, through an 
interpretation of the legislation which disregards legal restrictions arising from EU 
law, can hardly be regarded as a measure appropriate to the intended purpose of 
combating VAT fraud. The actions which an [insolvency] administrator carries 
out under the supervision of a court cannot be equated with fraudulent actions and 
actions aimed at VAT fraud. The national legislature has created a system of 
insolvency law whose main objective is not only to pay off creditors, but also to 
save (if possible) the economic entity concerned. Thus, when the Polish 
legislature introduces a measure by which it seeks to combat VAT fraud, it cannot 
be assumed that its intention was simultaneously to render ineffective other 
provisions of national law (without providing an unequivocal statement to that 
effect) which are equally important for the functioning of the market (including 
the internal market of the Union). Therefore, the tax authorities, when interpreting 
provisions of law, including Union law, must not construe them in a manner 
which may lead to the objectives of insolvency proceedings being nullified and, 
consequently, to the State Treasury being privileged at the expense of the general 
body of creditors. In their interpretation, the tax authorities must not exacerbate 
the difficulties and inconsistencies between the two legal systems, that is to say, 
the public and the private. In a country based on the rule of law, economic 
operators have the right to expect the State authorities to have reasonable grounds 
within the limits of their interference in fundamental rights.