CJEU ruled on joint and several liability for company tax debts

In its judgment of 14 November 2024 (Case C-613/23), the Court of Justice of the EU held that national legislation allowing a company’s tax arrears to be passed on to the company’s manager where the manager fails to comply with the company’s obligation to give notice of the company’s inability to pay tax is compatible with EU law, provided that such legislation ensures that it can be shown that the manager is not at fault in failing to comply with that obligation.

What was the case concerning?

The case concerned Dutch legislation which, like Polish legislation, provides for the possibility of transferring liability for a company’s unpaid tax to the company’s manager.

The Dutch tax authority held the former manager liable for the company’s tax arrears, arguing that he had failed to ensure the timely filing of information about the company’s inability to pay tax.

The manager fought for his rights, going through all court instances. Eventually, the case went to the Dutch Supreme Court, which noted doubts about the nature of joint and several liability of managers for the company’s tax arrears in the Dutch legal system. The court emphasised that such provisions may violate the EU principle of proportionality.

CJEU position on liability for company tax debts

The Court held that the Dutch legislation providing for the liability of the manager for the company’s tax arrears where he fails to comply in due time with his obligation to notify the authorities of the company’s inability to pay tax was compatible with the principle of proportionality insofar as it allowed the manager to rely on any circumstances capable of demonstrating that he was not at fault in failing to comply with the notification obligation.

The CJEU pointed out that these provisions must not limit the possibility to defend themselves only to cases of force majeure, and that the manager should be entitled to show that he is not liable for failing to comply with the information obligation, e.g. when he has acted in good faith by relying on expert advice. By the same token, Member States must ensure that the joint and several liability mechanism does not go beyond what is necessary to ensure the effective collection of VAT, with adequate remedies for those jointly and severally liable.

The CJEU also stated that the EU principle of proportionality does not preclude Dutch legislation that imposes a joint and several liability for VAT on the manager if he has failed to comply with his obligation to declare the company’s inability to pay tax, even if he has performed his duties in good faith, exercising due diligence and his involvement in the fraud or abuse has been ruled out.

Consequences of the judgment

The CJEU once again stressed that national legislation should provide board members with adequate tools to demonstrate that they are not at fault in failing to comply with their obligations to forfeit the company’s ability to pay tax.

The CJEU judgment shows how important it is for businesses to put in place adequate procedures to properly discharge their tax settlement obligations and to limit the risks on the part of board members.

It is worth bearing in mind, however, that the CJEU’s judgment in thic case relied  heavily on the specifics of Dutch law and did not provide general conclusions that could be clearly translated to Polish ground.

Therefore, of key importance for the Polish practice regarding joint and several liability of management board members for the tax arrears of companies will be the decisions of the CJEU with regard to the preliminary questions posed by the WSA in Wrocław of 25 and 31 January 2024 (which we previously wrote about on our blog: https://www.mddp.pl/tsue-oceni-polskie-przepisy-dotyczace-odpowiedzialnosci-czlonkow-zarzadu-za-dlugi-podatkowe-spolki/). There is nothing else to do but to await these judgments in the hope that they will dispel many doubts regarding the compliance of Polish regulations with EU law.