Opinion of the Advocate General — ECLI:EU:C:2021:12
Date: 2021-01-14
Language of the case: Bulgarian
Subject matter: Taxation;Value added tax
Procedure: Reference for a preliminary ruling
Origin: Bulgaria

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: 
7 January 2020 
Referring court: 
Varhoven administrativen sad (Bulgaria) 
Date of the decision to refer: 
16 December 2019 
Appellant in the appeal in cassation: 
‘Alti’ OOD 
Respondent in the appeal in cassation: 
Direktor na Direktsia ‘Obzhalvane i danachno-osiguritelna 
praktika’ — Plovdiv pri Tsentralno upravlenie na Natsionalnata 
agentsia za prihodite (Director of the ‘Appeals and Tax/Social 
Insurance Practice’ Directorate — Plovdiv within the Central 
Administration of the National Revenue Agency) 
  
Subject matter of the main proceedings 
Appeal against a tax assessment notice by which the recipient of a supply is held 
jointly and severally liable for the value added tax not paid by the supplier plus 
the default interest owed by the supplier. 
Subject matter and legal basis of the request for a preliminary ruling 
Interpretation of EU law; Article 267(1)(b) TFEU 
Questions referred 
1. Are Article 205 of Council Directive 2006/112/EC of 28 November 2006 on the 
common system of value added tax and the principle of proportionality to be 
EN 
SUMMARY OF THE REQUEST FOR A PRELIMINARY RULING — CASE C-4/20 
 
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interpreted as meaning that the joint and several liability of a registered person, 
which is the recipient of a taxable supply, for the value added tax not paid by its 
supplier in addition to the supplier’s principal debt (the value added tax debt) also 
includes the accessory obligation to pay compensation for late payment in the 
amount of the statutory interest on the principal debt from the beginning of the 
debtor’s default until the issuance of the tax assessment notice by which the joint 
and several liability is established or until the discharge of the debt? 
2. Are Article 205 of Directive 2006/112 and the principle of proportionality to be 
interpreted as precluding a national provision such as Article 16(3) of the 
Danachno-osiguritelen protsesualen kodeks (Tax and Insurance Procedure Code) 
according to which a third party’s liability for unpaid taxes of a taxable person 
includes the taxes and the interest? 
Provisions of EU law and case-law relied on 
Council Directive 2006/112/EC of 28 November 2006 on the common system of 
value added tax, in particular Articles 193 and 205. 
Judgment of 11 May 2006, Federation of Technological Industries and Others, 
C-384/04 (EU:C:2006:309), in particular paragraphs 28 to 33. 
Judgment of 21 December 2011, Vlaamse Oliemaatschappij, C-499/10 
(EU:C:2011:871), in particular paragraphs 19 to 22. 
Judgment of 18 May 2017, Latvijas Dzelzceļš, С-154/16 (EU:C:2017:392), in 
particular paragraph 85. 
Judgment of 21 February 2008, Netto Supermarkt, С-271/06 (EU:C:2008:105), in 
particular 19 to 22. 
Provisions of national law relied on 
Zakon za danak varhu dobavenata stoynost (Value Added Tax Law, ‘the ZDDS’), 
in particular Article 177. 
Danachno-osiguritelen protsesualen kodeks (Tax and Social Insurance Procedure 
Code, ‘the DOPK’), in particular Articles 14 and 16. 
Zakon za zadalzheniata i dogovorite (Law on obligations and contracts, ‘the 
ZZD’), in particular Articles 121, 122 and 126. 
Brief summary of the facts and procedure 
1 ‘Alti’ OOD is a Bulgarian company with limited liability. 
ALTI 
 
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2 In 2014, ‘Alti’ OOD (also ‘the recipient’) acquired from the Bulgarian single-
member company with limited liability ‘Fotomag’ EOOD (also ‘the supplier’) a 
‘CLAAS Lexion 570 T’ combine harvester, a ‘John Deere 8420’ tractor and a 
‘CLAAS 7190’ cart. ‘Fotomag’ EOOD issued ‘Alti’ OOD with the following 
invoices in respect of the supplies: an invoice (for the combine harvester) of 
11 April 2014, with a taxable amount of 284 000 Leva (BGN) and value added tax 
(VAT) in the amount of BGN 56 800, an invoice (for the tractor) likewise of 
11 April 2014, with a taxable amount of BGN 166 000 and VAT in the amount of 
BGN 32 200, and an invoice (for the cart) of 8 May 2014, with a taxable amount 
of BGN 7 500 and VAT in the amount of BGN 1 500. The recipient transferred 
the amounts into a bank account of the supplier and exercised the right of input 
tax deduction; it entered the invoices in its purchase ledgers and in the tax returns 
for the April 2014 and June 2014 tax periods. 
3 According to an invoice of 10 April 2014, the supplier in turn acquired the 
agricultural technology mentioned from SJB Tractors Ltd (United Kingdom). 
After a tax audit had been carried out at ‘Fotomag’ EOOD, a tax assessment 
notice was issued against it on 27 June 2016, by which it was found that the 
undertaking had reported the intra-Community acquisitions in the April 2014 tax 
period and had calculated the VAT on the basis of the first two invoices issued to 
‘Alti’ OOD. As a result, VAT in the amount of BGN 86 680 was to be paid for 
that tax period, of which the supplier still owed BGN 86 211.82 when the tax 
assessment notice was issued. For May 2014, it recorded VAT in the amount of 
BGN 1 500, as calculated in the third invoice issued to ‘Alti’ OOD. However, that 
VAT was not paid. 
4 A tax audit was also ordered in respect of the recipient. On 23 February 2018, the 
revenue authorities issued a tax assessment notice against ‘Alti’ OOD, holding it 
jointly and severally liable under Article 177 of the ZDDS for the VAT that had 
been shown by ‘Fotomag’ EOOD in the three invoices issued by it, but not paid, 
as follows: for the April 2014 tax period in the amount of BGN 86 211.82 together 
with default interest of BGN 33 123.83 for the period from 15 May 2014 to 
23 February 2018, and for the May 2014 tax period in the amount of BGN 1 500 
together with default interest of BGN 563.08 for the period from 15 June 2014 to 
23 February 2018. 
5 ‘Alti’ OOD raised an objection to the tax assessment notice. As it was dissatisfied 
with the outcome of the administrative proceedings, it brought an action against 
the administrative act at the Administrativen sad (Administrative Court) of 
Plovdiv. The Administrative Court before which the matter was brought dismissed 
the action as unfounded for the following reasons: 
5.1. The supplier and the recipient were registered under the ZDDS in the 
periods in question, in which the taxable supplies were effected. The recipient 
exercised the right of input tax deduction in respect of the invoices issued thereto 
by the supplier. The supplier did not pay to the budget the VAT owed for the 
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supplies. The parties are in dispute as to whether the recipient knew or should 
have known that its supplier would not pay the VAT. 
5.2. Article 177(3) of the ZDDS provides for a rebuttable presumption of 
knowledge. The evidence gathered in the proceedings proves that ‘Alti’ OOD had 
known that its supplier would not discharge its obligation to pay the VAT. This is 
the case because the actual relations between ‘Alti’ OOD and ‘Fotomag’ EOOD 
go beyond the customary business relations between supplier and recipient and are 
aimed at circumventing the law. In the present case, the intended legal 
consequence, not permitted by law, consisted in input tax being deducted instead 
of an intra-Community acquisition being declared and a transaction resulting in 
‘zero’ with regard to the input tax deduction being made. The representatives of 
both undertakings had knowledge thereof. 
5.3. ‘Alti’ OOD concluded a contract for the supply of agricultural technology 
with an undertaking which had not previously performed such activity and had no 
corresponding experience. The supplier did not have the necessary means to 
acquire the technology to be sold to ‘Alti’ OOD, but had borrowed them from 
‘Sunvision’ AD, a company whose managing director is the manager of ‘Alti’ 
OOD and whose shareholder is the manager of the supplier. The manager of ‘Alti’ 
OOD also arranged the transportation. Furthermore, the bank transfers in the chain 
‘Sunvision’ AD — ‘Fotomag’ EOOD, ‘Sunvision’ AD — ‘Alti’ OOD — 
‘Fotomag’ EOOD — ‘Sunvision’ AD were made by the same person, who was 
authorised by each of the three undertakings. That person also kept the books of 
‘Alti’ OOD and the supplier as well as of ‘Bultrans 73’ EOOD, via whose email 
address the transportation was arranged. 
5.4. The Administrative Court found that default interest was to be paid in the 
context of the joint and several liability. This resulted from the fact that the 
application of Article 16(3) of the DOPK was not excluded and it was expressly 
established in that provision that the party liable for the liabilities of a taxable 
person was liable for the taxes and the statutory social insurance contributions as 
well as for the interest and the costs for the charging thereof. The joint and several 
liability under Article 177(1) of the ZDDS was not limited to the amount of the 
‘owed and unpaid tax’. The supplier’s default also put the recipient in default. 
6 ‘Alti’ OOD lodged an appeal in cassation against the judgment of the Plovdiv 
Administrative Court at the Varhoven administrativen sad (Supreme 
Administrative Court, ‘the VAS’). The VAS is of the opinion that, for the case to 
be decided, there is a need for an interpretation of Article 205 of Directive 
2006/112, and it is therefore referring the two questions set out above to the Court 
of Justice for a preliminary ruling. 
Principal arguments of the parties in the main proceedings 
7 The following findings were made by the revenue authorities in the scope of the 
tax audit at ‘Alti’ OOD: firstly, the acquisition of the goods by ‘Fotomag’ EOOD 
ALTI 
 
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was financed by a third company, namely ‘Sunvision’ AD, whose partners are the 
managers of ‘Fotomag’ EOOD and ‘Alti’ OOD. Secondly, the transportation of 
the combine harvester from the United Kingdom was organised via the email 
address of ‘Bultrans 73’ EOOD, whose manager and legal representative is the 
manager of ‘Alti’ OOD. Thirdly, the same person keeps the books of ‘Fotomag’ 
EOOD and ‘Alti’ OOD, and both companies have granted that person wide-
ranging powers, including the authority to manage their bank accounts and to file 
their VAT returns under the ZDDS. 
8 With these findings, the revenue authorities justified their conclusion that the 
acquisition of agricultural technology by ‘Fotomag’ EOOD via an intra-
Community acquisition was organised by ‘Alti’ OOD for the purpose of VAT 
abuse. The recipient had known that the supplier would not pay the VAT that it 
owed according to the invoices issued by it. The revenue authorities are of the 
opinion that the transaction in question between ‘Fotomag’ EOOD and ‘Alti’ 
OOD circumvented the law. The statutory presumption of knowledge therefore 
applied, this in turn being a condition for the joint and several liability of the 
recipient of the supplies under Article 177 of the ZDDS. 
9 ‘Alti’ OOD asserts that the subjective element of Article 177 of the ZDDS, 
namely the knowledge that the supplier would not pay VAT, has not been proven. 
In order for knowledge to exist, this must be proven in respect of the manager of 
the company. 
10 ‘Alti’ OOD also asserts that, similarly to liability for third-party liabilities, no 
default interest is owed for the period between the VAT debt becoming due and 
the tax assessment notice being issued. The recipient of a taxable supply does not 
owe VAT, which means that it has not breached any duty to pay VAT with the 
period prescribed by the ZDDS. The liability of the recipient of a taxable supply 
under Article 177 of the ZDDS does not include default interest. 
Brief summary of the basis for the reference 
11 The referring court is examining the main question at issue on the basis of the 
applicability of the joint and several liability of the recipient under Article 177 of 
the ZDDS and the scope of that liability. According to that provision, a registered 
person which is the recipient of a taxable supply or service is liable for the tax 
owed and not paid by another registered person where it has made use of the right 
to deduct input tax directly or indirectly connected with the tax owed and not paid. 
The liability occurs if the registered person knew or should have known that the 
tax would not be paid. 
12 The Supreme Administrative Court is of the opinion that this provision of the 
Bulgarian ZDDS, in the light of the judgments of the Court of Justice of the 
European Union of 21 February 2008, Netto Supermarkt (C-271/06), and of 
11 May 2006, Federation of Technological Industries and Others (C-384/04), is 
compatible with EU law and in particular with Article 205 of Directive 2006/112. 
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It follows from the very nature of joint and several liability under Article 205 of 
Directive 2006/112 that each debtor is liable for the total amount of the debt and 
the creditor remains, in principle, free to request the payment of that debt by one 
or several debtors as it chooses. 
13 When determining the scope of this joint and several liability, the Bulgarian 
legislature did not expressly regulate in Article 177 of the ZDDS that, in addition 
to the unpaid tax, the recipient of the supply also owes default interest from the 
time the tax becomes due. Instead, under Article 177(1) of the ZDDS, the 
recipient’s liability is limited to the amount of the tax owed for the supply and not 
paid by the taxable person, provided the recipient has exercised the right of input 
tax deduction to that extent. However, arguments in support of the joint and 
several liability being more comprehensive in the present case can be derived 
from other provisions of national law (in particular from Article 16(3) of the 
DOPK and Article 126(3) of the ZZD). 
14 As the Bulgarian case-law on this matter is not uniform, the referring court is 
uncertain as to the correct answer to the question in the present. 
15 According to the first opinion expressed in the national case-law, the joint and 
several debtors under Article 177 of the ZDDS are liable for the liabilities of the 
taxable person. Under Bulgarian law, they are, in the cases prescribed by law, 
obliged to pay the tax which the taxable person has not paid in good time. 
Article 16(3) of the DOPK expressly provides that the liability of the third party 
(which is not the taxable person) includes the tax and the statutory social 
insurance contributions as well as the interest and the costs for the charging 
thereof. Therefore, the joint and several liability under Article 177 of the ZDDS is 
not limited to the amount of the owed and unpaid tax. The relative effect of joint 
and several liability that is typical of contractual legal relationships does not apply 
to public liabilities, which means that default by one joint and several debtor also 
puts the other joint and several debtors in default. Therefore, the recipient of the 
supply is jointly and severally liable not only for the supplier’s principal debt (the 
VAT debt), but also for the accessory obligation to pay compensation for late 
payment in the amount of the statutory interest on the principal debt from the 
beginning of the default until the discharge of the debt. 
16 According to the second opinion expressed in the national case-law, the liability 
under Article 177 of the ZDDS is a particular type of joint and several liability for 
a person registered under the ZDDS, which occurs when the complex 
requirements prescribed in that provision are met. Such a liability occurs when a 
registered person is under the obligation to settle the VAT debt of another 
registered person. Article 177 of the ZDDS constitutes a special provision in 
relation to Article 16(3) of the DOPK. Article 177 of the ZDDS governs an 
exception to the general principle, in that it provides for the joint and several 
liability of a person other than the supplier. The provision expressly limits the 
liability to ‘the owed and unpaid tax’. As an exception, it must be applied in 
accordance with its precise meaning. 
ALTI 
 
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17 The relevant judgments of the Court of Justice of the European Union do not 
provide an answer to the question of whether, in view of the nature of joint and 
several liability and in consideration of the principle of proportionality, a national 
provision such as Article 16(3) of the DOPK, which provides that this liability 
also includes default interest, is admissible. Therefore, the referring court 
considers an interpretation of the provisions of Directive 2006/112 and in 
particular of Article 205 of that directive to be necessary. It is referring the 
questions set out above to the Court of Justice of the European Union for a 
preliminary ruling under Article 267(1)(b) TFEU.