VAT Liability for Front Men

The BFH judged in its verdict of April 7, 2011 (re V R 44/09, published on August 31, 2011) whether or not you can be held liable for incorrectly showing VAT in invoices on your letterhead even if you personally did not invoice because you were only acting as a nominee for someone else.

Granny was once persuaded to step up for her son in order to act as his front woman. Due to a tax fraud investigation, it was noticed that her publishing house had sent 464,000 forms titled as “invoices”. Allegedly this was for publishing a business directory of fax numbers, which was never really intended to be used. Each invoice was over € 998 plus € 130.17 on VAT. The tax office held Granny responsible and issued a tax assessment over € 2,356,374.53. The lower tax courts agreed with the tax office and dismissed the case.

The Federal Tax Court helt that Granny was assessed correctly. Assessing somebody to VAT payment requires that an individual person can be identified as an issuer (§14 III UStG). The wording of §14 III UStG is clear: Whoever shows in his or her invoice VAT without owing such to the fiscal authorities, is subject to pay the shown tax. The aim of this regulation, which goes back to the Directive is to prevent misuse of invoices showing VAT. For this reason, a fault when erroneously showing VAT is not an issue. The rule is simple “You show, you pay!”.

Granny however argued, she personally did not issue those invoices, it was her son. The court dismissed this hypothetical argument because she owned the business and therefore it is personal business risk when she uses an agent to issue her invoices. The billed persons had the right to believe that the invoices came from her.


The BFH has changed its previous ruling case law with this judgment.