VAT Liability even for Nominees

Some businessmen need a nominee as their CEO. As mostly everybody knows the job a Geschäftsführer of GmbH is pretty risky. Can it really be that a CEO is liable for VAT eventhough he does not really run the business? The FG Munich answered this question on September 30, 2007 (re 14-V-2593/08).

In this discussed case, the issue was about the assessment of VAT after an audit. The plaintiff is in the construction business. During the audit it was noticed that she did not declare turnover from two different companies. There were so many irregularities that the tax office assumed tax evasion. The plaintiff disagreed and argued that she did not act recklessly nor gross negligently but she had relied on her former husband and the company’s CEO.

Whoever acts in public as a businessperson is generally liable for VAT from any turnover. It does not matter if you do your business yourself or with helpers or how much of the economic profit remains with a person. Following ruling case law, even the argument to only have acted as a nominee does not change the liability risk. When somebody in business acts for somebody without disclosing this hidden person’s identity then civil law rules that only the person acting is legally responsible (§§116, 117 BGB). Therefore, all acts will be attributed to the acting person and nobody else. In other words, nominees are always the “dummy” when it comes to legal liability.