Liability for a supplier's VAT: what the decision means and how to defend against it

The tax office has served you with a VAT liability decision, under which you are to pay the tax that your supplier did not pay into the state budget. The law does not make this obligation conditional on whether you have already paid the supplier the invoice including the tax. You have eight days from service of the decision both to pay and to appeal, and the appeal does not suspend payment. This article explains under what conditions the tax office can apply the liability, what deadlines apply, and which questions to focus on in your defence.

1. What a VAT liability decision means

Tax on the supply of goods or a service domestically is payable by the taxable person who supplies the goods or service (§ 69(1) of Act No 222/2004 Coll. on value added tax, the „VAT Act"). If the supplier does not pay the tax stated on the invoice, the law allows it, under certain conditions, to be demanded from the customer — who is then the guarantor (liable party).

Only a VAT payer to whom goods or a service are or are to be supplied domestically can be a guarantor. They are liable for the tax at the previous stage stated on the invoice, i.e. the tax the supplier invoiced to them (§ 69(13) of the VAT Act); the tax office's procedure is governed by § 69b. Until 31 Dec 2024 the conditions were in § 69 para 14 (renumbering was introduced by Act No 102/2024 Coll.), to which older judgments refer.

The liability decision is issued by the tax office with local jurisdiction over your supplier (§ 69b(3)), which need not be the same as your tax office; the decision must state the amount of the unpaid tax (§ 69b(4)). The decision does not assess your tax and does not decide on your deduction. The Supreme Administrative Court of the SR (No 1Sfk/40/2022, para 71) stated that liability, unlike assessment proceedings, is applied at the stage of payment of the tax and is a special case of surety intended to secure payment of the tax.

2. When the tax office can apply VAT liability

Liability requires the cumulative fulfilment of a condition on the supplier's side and a condition on the customer's side (SC SR No 8Sžfk/13/2016; No 1Sžfk/95/2017, para 31).

2.1 The supplier did not pay the tax from the invoice

The first condition is that the supplier did not pay the tax stated on the invoice or became unable to pay it (§ 69(13) of the VAT Act). „Unpaid tax" is the tax from an invoice that the supplier did not pay at all, or paid only in part, by the due date under § 78 (§ 69b(1)). You are therefore liable only for the tax from invoices the supplier issued to you, not for its other tax arrears. If the amount in the decision does not correspond to the specific invoices, this is a separate ground of appeal.

2.2 You knew, or should and could have known

The second condition is your knowledge. The law requires that, at the time the tax liability arose, you knew or, on the basis of sufficient grounds, should and could have known that all or part of the tax would not be paid (§ 69(13) of the VAT Act). Decisive is the time the tax liability arose, usually the day of supply (§ 19(1) and (2)); the SC SR (No 1Sžfk/95/2017, para 32) assessed the connection of persons precisely as at that day.

Since 1 January 2025 the law requires that the payer should and at the same time could have known; until 31 Dec 2024 it was enough that they should or could have known (the change was introduced by Act No 354/2024 Coll.). For supplies from before that date it is therefore necessary to assess which wording the tax office relied on.

2.3 When the law presumes you should and could have known

In § 69(13)(a) to (c) the law lists facts it treats as sufficient grounds for the conclusion that you should and could have known (so-called statutory presumptions):

• the consideration on the invoice was, without economic justification, disproportionately high or disproportionately low;
• at the time the tax liability arose, your statutory body, its member or your shareholder was at the same time a statutory body, member or shareholder of the supplier (the SC SR applied this presumption even to a natural person who was themselves the managing director and shareholder of the supplier — No 1Sžfk/95/2017, para 32);
• you paid the consideration, or part of it, to an account other than the one the supplier had published on the day of payment in the list of bank accounts of the Financial Directorate of the SR (§ 6(6) of the VAT Act); the day of payment is the day the payment order was submitted.

According to the SC SR, one of these facts is enough to satisfy the knowledge condition; if it is proved, the office need not examine your actual knowledge separately (No 1Sžfk/95/2017, paras 31 to 33). The Court of Justice of the EU, however, in C-384/04 Federation of Technological Industries (para 32), held that such presumptions must not be framed so as to make them practically impossible or excessively difficult to rebut by proof to the contrary — otherwise liability without fault would arise, exceeding what is necessary to protect public finances.

For the price, the law requires it to be disproportionate and at the same time without economic justification — a deviation from the usual price that does have economic justification does not satisfy this presumption. For payment, the state of the list of bank accounts on the day the payment order was submitted is decisive, so it is advisable to keep a record that the account was published that day.

3. Eight days: what to do after the decision is served

For liability, the VAT Act sets deadlines significantly shorter than the general appeal deadline in tax proceedings:

• You must pay the unpaid tax within 8 days of service of the decision (§ 69b(4)).
• You can also appeal within 8 days of service (§ 69b(4)). The general 30-day deadline under § 72(3) of the Tax Procedure Code does not apply, as the special act prevails.
• The appeal does not have suspensory effect — the obligation to pay within 8 days remains even while you appeal.

When served to an e-mailbox, the decision is deemed served even if you did not open it; when served into own hands, no later than on expiry of the 15-day storage period (§ 32 of Act No 305/2013 Coll. on e-Government). If the decision lacks instruction on appeal, or the deadline in it is shortened, the appeal can be filed within six months of service (§ 63(6) of the Tax Procedure Code). Once the payment deadline expires, the decision is enforceable and the office can recover the unpaid amount in tax enforcement (§ 63(10) and § 88(1) of the Tax Procedure Code).

4. How to defend against the liability decision

4.1 First inspect the file

As a guarantor, you have the right to inspect the file concerning the unpaid tax to the extent necessary to lodge a remedy (§ 69b(5) of the VAT Act). From it you can find out, for example, how the supplier declared the tax, when it was due and what materials on your knowledge the office gathered. Given the 8-day deadline, request access to the file without delay.

4.2 What to focus on in the appeal

You file the appeal with the tax office that issued the decision (§ 72(2) of the Tax Procedure Code), and it must contain the grounds, the evidence and a proposal on how the decision should be changed or annulled (§ 72(4)). In a liability case, verify in particular:

• Does the amount correspond to the invoices the supplier issued to you, and does it reflect any payments by the supplier?
• Is the presumption under (a) to (c) actually satisfied at the decisive time (price vs. market and the economic reasons for the transaction; connection of persons per the commercial register as at the day the tax liability arose; the state of the list of bank accounts on the day the payment order was submitted)?
• If the decision relies on no presumption, from what specific findings did the office infer that you should and at the same time could have known?
• What measures did you take in the transaction (contracts, orders, correspondence, verification of the supplier in the registers, payments to the published account)?
• Does the reasoning state which facts were the basis of the decision, how the office dealt with your objections and what considerations guided it in assessing the evidence (§ 63(5) of the Tax Procedure Code)?

4.3 What the case law means for a defence

The Court of Justice of the EU in C-384/04 (para 33) held that a person who takes the measures that may reasonably be required of them to ensure that their transactions are not part of a chain tainted by VAT fraud must be able to rely on the lawfulness of those transactions without risking joint and several liability. In C-499/10 Vlaamse Oliemaatschappij it added that a person's good faith, the taking of all reasonable measures and the exclusion of their participation in the fraud are circumstances to be taken into account when imposing such liability (paras 24 to 26).

In the SC SR decisions, the customer's mere assertion of lack of knowledge did not prevail: in No 8Sžfk/13/2016 the court dismissed the customer's action where knowledge followed from a chain of evidence on personnel and family ties; in No 1Sžfk/95/2017 it regarded the proven connection of persons as at the day the tax liability arose as decisive. A defence must therefore be specific and supported by evidence.

5. What follows if the appeal is unsuccessful

If the tax office does not itself fully allow the appeal (§ 73(1)), it is decided by the Financial Directorate of the SR (§ 74). It may confirm, change or annul the decision and remit the matter; no further appeal lies against its decision (§ 74(7)).

The appellate body's decision can be challenged by an administrative action (§ 177 of the Administrative Judicial Procedure Code) within two months of notification; missing this deadline cannot be excused (§ 181). Without a timely appeal you generally will not reach judicial review (§ 7(a) of the Code). The action has no suspensory effect, but the court may grant it on a motion if, for example, there is a risk of significant economic harm from immediate enforcement (§ 185). The claimant must be represented by an attorney unless they themselves hold a second-cycle law degree (§ 49(1)).

6. What happens to your excess VAT deduction

If you claim an excess deduction (VAT refund) to be returned to you, the supplier's tax office uses it to pay the unpaid tax and issues a decision on it (an appeal against which has no suspensory effect). Such use takes precedence over use under the Tax Procedure Code (§ 69b(6)). If you paid the unpaid tax and the office also used your excess deduction, it must return to you without delay the amount exceeding the unpaid tax (§ 69b(7)).