Private buyer not obliged compensate a contractor's non-payment of VAT

A foreign contractor who had entered into an agreement to build a house failed to calculate and pay VAT on invoices of around NOK 2 million, which the buyer had paid before canceling the purchase. The lost VAT could not be recovered from the contractor. The State ordered the buyer to compensate for the loss. Since the invoices had been paid via a bank, the compensation rule in section 16-50 subsection 1 of the Tax Payments Act did not apply. The Supreme Court found that the statutory rule in this case could also not be supplemented by non-statutory rules on liability for damages. It was pointed to the wording of the Act compared to the preparatory works, and stated that any extension of liability for a buyer must be a task for the legislature. The Supreme Court ruled in favour of the buyer.

Read the whole ruling (Norwegian only)

Areas of law: VAT, tort law. Section 16-50 of the Tax Payment Act. 

Key paragraphs: 52, 56-58

Justices: Øie, Normann, Bull, Bergh, Steinsvik