Clarification of Management Board Liability for Tax Arrears

Summary

Overview of General Interpretation No. DTS2.8012.5.2025 on Article 116 of the Tax Ordinance Act Following CJEU Judgments

• The Polish Minister of Finance and Economy issued General Interpretation No. DTS2.8012.5.2025, clarifying the application of Article 116 of the Tax Ordinance Act regarding management board members’ liability for corporate tax arrears, in light of recent CJEU judgments (Adjak and Genzyński).
• The interpretation establishes that management board members have the right to challenge the tax authority’s findings on tax arrears, access relevant assessment files, and demonstrate a lack of fault regarding bankruptcy filings, which are crucial for their defense against liability claims.
• It emphasizes a pro-Union approach to interpreting Article 116, ensuring that the rules apply uniformly across all taxes and urging tax authorities to consider individual circumstances when assessing liability, ultimately promoting fairness in tax enforcement.

See also

• ECJ C-277/24 (Adjak) – Judgment – ECJ affirms Rights of Defense in VAT Liability cases, permitting national Joint liability frameworks with safeguards – VATupdate
• ECJ C-278/24 (Genzyński) – Judgment – Board Members Jointly Liable for VAT Debts Under Proportionality and Legal Principles – VATupdate

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Detailed analysis

• Analysis of the General Interpretation No. DTS2.8012.5.2025 of the Minister of Finance and Economy, addressing the application of Article 116 of the Tax Ordinance Act in light of the judgments of the Court of Justice of the European Union (CJEU) in cases C-277/24 (Adjak) and C-278/24 (Genzyński).

1. Introduction:

• This briefing document summarizes the key aspects of the General Interpretation No. DTS2.8012.5.2025, issued by the Polish Minister of Finance and Economy on August 29, 2025. The interpretation addresses the implications of two CJEU judgments (Adjak and Genzyński) on the application of Article 116 of the Tax Ordinance Act (o.p.). Article 116 concerns the liability of management board members for the tax arrears of capital companies. The interpretation aims to ensure uniform application of tax law by tax authorities.

2. Background: Article 116 of the Tax Ordinance Act

• Article 116 o.p. stipulates that members of the management board of capital companies are jointly and severally liable for the company’s tax arrears, if the enforcement against the company’s assets proves wholly or partly ineffective.
• A management board member can avoid liability if:
• They identify company assets from which enforcement can satisfy a significant portion of the company’s tax arrears.
• They demonstrate that a bankruptcy petition was filed in a timely manner, or that a restructuring procedure was initiated, or that the failure to file a bankruptcy petition was not their fault.
• Article 108 o.p. establishes that the tax authority decides on the liability of a management board member through a decision. This decision generally requires a prior decision determining the amount of the tax liability or the initiation of enforcement proceedings based on a tax declaration.

3. Key Issues Addressed by the General Interpretation (Driven by CJEU Judgments)

• The CJEU judgments in cases Adjak (C-277/24) and Genzyński (C-278/24) raised concerns regarding:
  • The right of a management board member to challenge the tax authority’s findings regarding the existence and amount of the company’s tax arrears. This was the core issue in the Adjak case.
  • The principle of attributing liability to a management board member in the context of their fault in failing to file for the company’s bankruptcy. This was central to the Genzyński case.

4. Summary of the General Interpretation’s Key Clarifications:

• Pro-Union Interpretation: The CJEU rulings necessitate a pro-Union interpretation of Article 116 o.p., requiring a revision of previous legal views on this provision.
• VAT Relevance: Although the CJEU cases concerned VAT, the interpretation applies equally to all taxes, not just harmonized EU taxes. “Art. 116 o.p. ma natomiast charakter ogólny i nie ma podstaw, aby wykładać go w różny sposób w zależności od tego, czy dotyczy podatków zharmonizowanych, czy też nie.”
• Scope of the Interpretation: This general interpretation focuses on the following:

1. • The scope and manner of exercising the right of a management board member to raise objections to factual findings and legal classifications of the tax authority regarding the existence and amount of the company’s tax arrears.
   • The scope and manner of exercising the right of a management board member to access the files of the assessment proceedings directed to the company.
   • The possibility for a management board member to be released from liability for the company’s tax arrears by demonstrating a lack of fault in failing to file for bankruptcy.

• Right to Challenge Factual and Legal Findings (Adjak):
  • A management board member has the right to challenge the factual findings and legal classifications made by the tax authority in the assessment proceedings against the company. This is essential for their right to defense.
  • This right is limited if the member had a prior opportunity to raise objections during the company’s assessment proceedings. The interpretation emphasizes that the process should not simply duplicate the company’s assessment proceedings. “Realizacja prawa członka zarządu do obrony nie może prowadzić do inkorporowania postępowania wymiarowego do postępowania w sprawie odpowiedzialności członka zarządu.”
  • The interpretation provides specific rules for determining when a member had a prior opportunity, differentiating between situations where the tax liability was determined by a tax authority decision versus a self-assessed tax declaration.
  • The decision determining the tax liability, or the declaration, enjoys a presumption of credibility but can be challenged.
  • The process of challenging serves the purpose of seeking the material truth about the facts. “prawo członka zarządu do obrony w kontekście kwestii istnienia i wysokości zaległości podatkowej spółki, za którą ma odpowiadać, stanowi realizację zasady prawdy materialnej (zmierzając do prawidłowego ustalenia stanu faktycznego i jego kwalifikacji prawnej), a nie środek zaskarżenia decyzji wymiarowej skierowanej do spółki.” The member does not become a party to the company’s case.
• Right to Access Case Files (Adjak):
  • The right to challenge findings implies a right to access the files of the assessment proceedings against the company. This access is instrumental to the right to mount an effective defense.
  • This right is not absolute. It is limited to the extent necessary to challenge the findings affecting the existence and amount of the tax liability for which the member is to be held liable. Access can be restricted to protect the rights of the company and third parties, including trade secrets.
• Lack of Fault in Failing to File for Bankruptcy (Genzyński):
  • Article 116 o.p. is based on a presumption of fault on the part of the management board member in the creation of the tax arrears. “art. 116 o.p. opiera się na domniemaniu winy członka zarządu w powstaniu zaległości, za którą ma odpowiadać.” This presumption stems from their role in managing the company.
  • This presumption can only be rebutted in the circumstances specifically outlined in the provision.
  • Filing a bankruptcy petition is sufficient, regardless of its ultimate success.
  • The petition must be filed in a timely manner. A late filing is irrelevant for the purposes of liability.
  • The member can avoid liability by demonstrating that their failure to file was due to objective obstacles that they could not overcome with due diligence.

5. Protection from General Interpretation Compliance:

• The interpretation highlights that following the general interpretation before it is amended provides protection to those who applied it, even if it’s not considered in a tax case decision. However, there are certain exceptions. For instance, this protection doesn’t apply if tax benefits are obtained through circumvention of the law, abuse of rights, or the use of measures limiting contractual benefits.

6. Implications and Recommendations:

• Tax authorities are required to apply Article 116 o.p. in accordance with the clarifications provided in the General Interpretation.
• Management board members facing liability for company tax arrears should be aware of their rights to challenge the factual and legal findings, access case files, and demonstrate a lack of fault in failing to file for bankruptcy.
• This interpretation emphasizes the need for a thorough and nuanced assessment of each case, considering the specific circumstances and the management board member’s opportunities to influence the company’s tax compliance.

Source lex.pl

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