ECJ C-158/25 (AEDT and État du Grand-Duché de Luxembourg) – Judgment – Directors’ Joint & Several VAT Liability & the Right to an Effective Remedy

On July 16, 2026, the ECJ released the judgment in the case C-158/25 (AEDT and État du Grand-Duché de Luxembourg.

Context: Reference for a preliminary ruling – Article 47 of the Charter of Fundamental Rights of the European Union – Right to an effective remedy – Whether applicable – National legislation providing for a system of joint and several liability of company directors for payment of value added tax (VAT) owed by the company – Binding effect of the findings of fact and legal classifications contained in a final tax assessment – Option for the director to challenge the assessment issued against the company as an incidental question – Respect for the rights of the defence

Summary

Facts: A former director (QJ) of a company (VN) in Luxembourg was subject to a “guarantee call” to pay the company’s outstanding VAT, which arose from tax assessments that had become final and could not be challenged by the company. QJ argues that national law, which prevents him from challenging the underlying tax assessment against the company, violates his right to an effective remedy under Article 47 of the Charter of Fundamental Rights of the EU.
Issues: The Court had to determine: 1) whether Article 47 of the Charter applies to national legislation establishing joint and several liability of company directors for unpaid VAT, and 2) if so, whether Article 47 grants directors subject to a guarantee call the ability to incidentally challenge the final VAT assessment issued against the company, and what grounds they can rely upon in such a challenge.
Decision: The Court ruled that Article 47 of the Charter does apply to such national legislation and that it precludes national legislation that prevents a director subject to a guarantee call from incidentally challenging the final tax assessment previously notified to the company.
Argumentation (Applicability of Charter): The Court reasoned that the national guarantee call mechanism, which ensures the collection of unpaid VAT, constitutes an implementation of EU law (specifically Article 273 of Directive 2006/112 and Article 325(1) TFEU). This is because there’s a direct link between VAT collection and the EU budget. Therefore, the requirements of Article 47 are applicable to judicial review proceedings against such a decision.
Argumentation (Right to Challenge): The Court emphasized that the right to an effective remedy under Article 47 requires a person to be able to effectively challenge adverse decisions and that denying a director the ability to incidentally challenge the underlying tax assessment against the company would adversely affect the very essence of their rights of defense. The Court clarified that this incidental challenge does not undermine the finality of the assessment for the company but allows the director to challenge the factual findings and legal classifications relevant to their own joint and several liability, including the VAT assessment amount and any infringements of their fundamental rights during the taxation procedure.

Reference to the EU Law

Charter of Fundamental Rights of the European Union (‘the Charter’)

Article 47 of the Charter, entitled ‘Right to an effective remedy and to a fair trial’, provides:

‘Everyone whose rights and freedoms guaranteed by the law of the Union are violated has the right to an effective remedy before a tribunal in compliance with the conditions laid down in this Article. Everyone is entitled to a fair and public hearing within a reasonable time by an independent and impartial tribunal previously established by law. Everyone shall have the possibility of being advised, defended and represented. Legal aid shall be made available to those who lack sufficient resources in so far as such aid is necessary to ensure effective access to justice.’

Article 51 of the Charter, which is entitled ‘Field of application’, provides, in paragraph 1:

‘1. The provisions of this Charter are addressed to the institutions, bodies, offices and agencies of the Union with due regard for the principle of subsidiarity and to the Member States only when they are implementing Union law. They shall therefore respect the rights, observe the principles and promote the application thereof in accordance with their respective powers and respecting the limits of the powers of the Union as conferred on it in the Treaties.’

Questions

Does the Charter of Fundamental Rights of the European Union, and in particular Article 47 thereof, apply, in the light of the criteria in Article 51(1) of the Charter, to the regulation, by national legislation, of the joint and several liability of company directors, on account of the failure to discharge their obligations, for payment of the VAT owed by the company which they run?
If the answer to the first question is in the affirmative, is Article 47 of the Charter to be interpreted as conferring on directors who are the subject of a guarantee call the ability to challenge, indirectly, in the context of an action available to them under national law against the administrative act establishing their joint and several liability, the ex officio VAT assessment previously issued to the company and to which the company did not file an objection in good time?
If the answer to the second question is in the affirmative, is Article 47 of the Charter to be interpreted as limiting the grounds on which directors may rely in the context of an indirect challenge to the ex officio tax assessment issued to the taxable company or as encompassing all grounds, including those relating to the determination of the VAT liability, such as the findings of fact which led to the ex officio administrative tax decision issued against the taxable company, and purely personal grounds, such as possible infringements of fundamental rights committed in respect of those directors in the context of the ex officio tax procedure?

AG Opinion

None

Decision

1. Article 47 and the first sentence of Article 51(1) of the Charter of Fundamental Rights of the European Union (‘the Charter’)

must be interpreted as meaning that the requirements stemming from the right to an effective remedy, as enshrined in Article 47, are applicable in the context of judicial review proceedings brought by a company director, who is subject to a guarantee call, against a guarantee call decision taken pursuant to national legislation which provides that that director is jointly and severally liable for payment of the value added tax (VAT) owed by that company in accordance with the provisions of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax if he or she fails to discharge his or her director’s legal obligations in relation to VAT.

2. Article 47 of the Charter

must be interpreted as precluding national legislation which does not allow a person subject to a guarantee call for the payment of VAT liability not paid by a company subject to that tax to challenge, as an incidental question, in the context of his or her appeal against that guarantee call decision, the tax assessment previously notified to that company and which has become final. Under that provision, such a person must be able, in support of his or her appeal, to challenge the findings of fact and legal classifications on which the competent authority relied in order to establish his or her joint and several liability, including the findings and classifications in relation to the VAT assessment and the unpaid amount for which that person is held liable, provided that those findings and classifications are useful for his or her defence, and including any infringements of that person’s fundamental rights committed in the course of the taxation procedure.

Reference to other ECJ Cases

Adler Real Estate and Others (C-546/18): This case is specifically mentioned as it addresses the rights of individuals in relation to administrative acts and the ability to challenge decisions affecting them. It emphasizes the importance of personal notification and participation in proceedings for those impacted by administrative tax assessments.
Åkerberg Fransson (C-617/10): The judgment in this case highlights the obligations of Member States to ensure the collection of VAT and to prevent evasion. It established that national procedural laws concerning VAT are part of the implementation of EU law, thereby activating the protections afforded by the Charter of Fundamental Rights, particularly Article 47.

Source

Curia

Reference to other ECJ Cases

The judgment references the following other ECJ cases:

26 February 2013, Åkerberg Fransson, C‑617/10, EU:C:2013:105 (cited multiple times regarding the applicability of the Charter when implementing EU law and Member States’ obligation to collect VAT)
9 September 2021, Adler Real Estate and Others, C‑546/18, EU:C:2021:711 (cited regarding a natural person not being bound by a final decision against a legal entity in which they participated as a representative)
28 November 2000, Roquette Frères, C‑88/99, EU:C:2000:652 (cited regarding the Court’s role in reformulating preliminary ruling questions)
18 December 2025, SACD and Others, C‑182/24, EU:C:2025:979 (cited regarding the Court’s role in reformulating preliminary ruling questions and the power of a court to ensure respect for rights)
29 July 2024, protectus, C‑185/23, EU:C:2024:657 (cited regarding the scope of the Charter and its applicability in situations governed by EU law)
6 March 2014, Siragusa, C‑206/13, EU:C:2014:126 (cited regarding the concept of “implementing Union law”)
12 September 2024, Syndyk Masy Upadłości A, C‑709/22, EU:C:2024:741 (cited regarding the concept of “implementing Union law”)
8 November 2012, Iida, C‑40/11, EU:C:2012:691 (cited regarding criteria for determining whether a national measure involves “implementing Union law”)
10 July 2025, DADA Music and UPFR, C‑37/24, EU:C:2025:551 (cited regarding criteria for determining whether a national measure involves “implementing Union law”)
13 October 2022, Direktor na Direktsia ‘Obzhalvane i danachno-osiguritelna praktika’, C‑1/21, EU:C:2022:788 (cited multiple times regarding Member States’ obligation to ensure VAT collection and the direct link between VAT collection and EU own resources)
3 April 2025, Cityland, C‑164/24, EU:C:2025:241 (cited regarding Member States’ obligation to ensure VAT collection)
6 October 2020, État luxembourgeois (Right to bring an action against a request for information in tax matters), C‑245/19 and C‑246/19, EU:C:2020:795 (cited regarding the recognition of the right to an effective remedy and the power of a court to ensure respect for rights)
25 February 2025, Sąd Rejonowy w Białymstoku and Adoreikė, C‑146/23 and C‑374/23, EU:C:2025:109 (cited regarding the recognition of the right to an effective remedy)
16 May 2017, Berlioz Investment Fund, C‑682/15, EU:C:2017:373 (cited regarding challenging administrative decisions based on national provisions implementing EU law)
16 October 2019, Glencore Agriculture Hungary, C‑189/18, EU:C:2019:861 (cited multiple times regarding challenging administrative decisions, rights of defense, access to file, finality of administrative decisions, and the lawfulness of evidence gathering)
25 April 2024, NW and PQ (Classified information), C‑420/22 and C‑528/22, EU:C:2024:344 (cited regarding respect for rights of defence, reasons for decisions, and access to material in the file)
27 February 2025, Adjak, C‑277/24, EU:C:2025:130 (cited multiple times regarding rights of defense in administrative procedures, restrictions on rights, and finality of administrative decisions)
6 March 2025, Obshtina Veliko Tarnovo and Obshtina Belovo, C‑471/23 and C‑477/23, EU:C:2025:155 (cited regarding rights of defense in administrative procedures)
4 June 2020, C.F. (Tax inspection), C‑430/19, EU:C:2020:429 (cited regarding the purpose of the right to be heard)
13 June 2024, C (Court-appointed administrators and liquidators), C‑696/22, EU:C:2024:499 (cited regarding the purpose of the right to be heard)
10 November 2022, DELTA STROY 2003, C‑203/21, EU:C:2022:865 (cited by analogy regarding different interests of legal and natural persons)
8 April 2025, European Public Prosecutor’s Office (Judicial review of procedural acts), C‑292/23, EU:C:2025:255 (cited regarding direct vs. incidental legal remedies)
14 September 2017, The Trustees of the BT Pension Scheme, C‑628/15, EU:C:2017:687 (cited regarding the effectiveness of judicial protection)
12 March 2026, Deldwyn, C‑477/24, EU:C:2026:182 (cited regarding rights of defense, reasons for decisions, access to material, and restrictions on fundamental rights)
13 September 2018, UBS Europe and Others, C‑358/16, EU:C:2018:715 (cited regarding balancing competing interests in confidentiality/professional secrecy)

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BRIEFING DOCUMENT

1. Executive Summary

The Court of Justice of the European Union (CJEU), in its judgment in Case C‑158/25 (QJ v. AEDT), has significantly clarified the scope of the right to an effective remedy under Article 47 of the Charter of Fundamental Rights of the European Union. The Court ruled that national legislation holding company directors jointly and severally liable for a company’s unpaid VAT, due to their failure to discharge legal obligations, constitutes an implementation of EU law. Consequently, the requirements of Article 47 apply to judicial review proceedings against such liability decisions. Crucially, this means that directors facing such personal liability must be allowed to incidentally challenge the underlying VAT assessment against the company, even if that assessment has become final for the company. This right to incidental challenge encompasses findings of fact, legal classifications, the VAT assessment itself, and any infringements of the director’s fundamental rights committed during the taxation procedure.

2. Background and Context

The case arose from a request for a preliminary ruling from the Cour de cassation du Grand-Duché de Luxembourg. The dispute involved QJ, a former director of company VN, who was made personally and jointly and severally liable for VN’s unpaid VAT for the years 2014-2016 through a “guarantee call decision” issued by the Luxembourg tax authorities (AEDT). This liability was based on Luxembourg’s Law of 12 February 1979 on VAT (LTVA), specifically Articles 67-1 to 67-3.

The key issue was that the original VAT assessments against VN had become final because VN’s appeal was out of time. When QJ appealed the guarantee call decision, he was prevented by national courts from challenging the merits of the underlying VAT assessments, as these were considered final and not directly notified to him in his personal capacity. QJ argued that this denial was incompatible with his right to an effective remedy under Article 47 of the EU Charter.

The referring court questioned whether the Charter applied to such national director liability schemes and, if so, whether Article 47 conferred on directors the ability to challenge the underlying, final tax assessment incidentally during their personal liability proceedings.

3. Key Legal Questions Addressed by the CJEU

The CJEU reformulated and addressed three core questions:

Applicability of the Charter: Does Article 47 and Article 51(1) of the Charter apply to national legislation establishing joint and several liability for company directors for unpaid VAT?
Right to Incidental Challenge: If yes, does Article 47 confer on directors the ability to incidentally challenge the ex officio VAT assessment previously issued to the company, even if the company did not object in time?
Scope of Challenge: If an incidental challenge is allowed, what grounds can directors rely on (e.g., factual findings, VAT determination, personal fundamental rights infringements)?

4. CJEU’s Main Findings and Reasoning

4.1. Applicability of EU Law and the Charter (First Question)

The Court ruled that the Luxembourg national legislation on director liability for unpaid VAT falls within the scope of EU law, thereby triggering the applicability of the Charter.

Implementation of EU Law: The CJEU reiterated that the Charter applies to Member States “only when they are implementing Union law” (Article 51(1)). It determined that the national system in question constitutes such implementation.
Obligation to Collect VAT: Member States are required by EU law (Article 2 and 273 of Directive 2006/112/EC, read with Article 4(3) TEU and Article 325(1) TFEU) to “take all legislative and administrative measures appropriate for ensuring collection of all the VAT due on their territory and for preventing fraud.” (para 27).
Direct Link to EU Budget: The Court emphasized the “direct link between the collection of VAT revenue in compliance with the EU law applicable and the availability to the EU budget of the corresponding VAT resources.” (para 28).
Nature of the Scheme: Even though Luxembourg argued its scheme aimed at compensating damage from wrongful conduct rather than solely collecting VAT, the Court found that any national measure helping to collect unpaid VAT “must be found to help ensuring the correct collection of VAT and, as the case may be, to combat fraud.” (para 33).

Conclusion on Q1: “Article 47 and the first sentence of Article 51(1) of the Charter must be interpreted as meaning that the requirements stemming from the right to an effective remedy, as enshrined in Article 47, are applicable in the context of judicial review proceedings brought by a company director, who is subject to a guarantee call, against a guarantee call decision taken pursuant to national legislation…” (para 40).

4.2. Right to an Effective Remedy and Incidental Challenge (Second and Third Questions)

The Court found that Article 47 of the Charter requires national law to allow directors to incidentally challenge the underlying tax assessment.

Essence of Rights of Defence: The right to an effective remedy ensures that a person can access a court with the power to “consider all the issues of fact and of law that are relevant for resolving the case before it.” (para 42). The national legislation, by preventing a director from challenging the findings of the final tax assessment, “is liable to adversely affect the very essence of the rights of the defence” (para 51) of the director. The tax assessment serves as evidence for the director’s joint and several liability, which they must be able to challenge.
Director’s Personal Rights vs. Company Representation: The Court stressed the subjective nature of defence rights. A director’s prior ability to challenge the assessment on behalf of the company does not negate their personal right to challenge it when their own liability is at stake, especially since “it indeed cannot be ruled out that the legal person and the natural person who has the power to bind or represent it have different interests.” (para 57).
Finality of the Assessment: Allowing an incidental challenge for the director does not undermine the legal certainty of the tax assessment’s finality for the company itself. It merely provides a defence for the director.
Scope of the Incidental Challenge: The director’s right to challenge is “limited to the necessary arguments allowing the director concerned to effectively challenge his or her joint and several liability.” (para 60). This includes:
Findings of fact and legal classifications in the tax assessment.
Findings relating to the VAT assessment bases and the unpaid amount for which the director is held liable.
“Any infringements of his or her fundamental rights committed in the course of the taxation procedure conducted against the taxable company.” (para 61).
Balancing Confidentiality: While confidentiality and professional secrecy are legitimate public interests, courts must balance these against the director’s right to access information necessary for their defence. The court should consider that the director “was in a position to know due to the role he or she fulfilled within that company during the tax period concerned.” (para 65).

Conclusion on Q2 & Q3: “Article 47 of the Charter must be interpreted as precluding national legislation which does not allow a person subject to a guarantee call… to challenge, as an incidental question… the tax assessment previously notified to that company and which has become final.” The director must be able to challenge relevant factual findings, legal classifications, and personal fundamental rights infringements that are useful for their defence (Ruling Point 2).

5. Key Takeaways and Implications

Enhanced Rights for Directors: This ruling significantly strengthens the procedural rights of company directors in Member States where they can be held personally liable for a company’s unpaid VAT.
Impact on National Legislation: National laws that currently prevent directors from challenging the substance of an underlying, final VAT assessment against a company, when facing personal liability, will need to be revised or reinterpreted in light of this judgment.
Broadening “Implementation of EU Law”: The decision reinforces the broad interpretation of “implementing Union law” under Article 51(1) of the Charter, extending it to national tax recovery mechanisms linked to EU VAT.
Importance of Incidental Review: The CJEU re-emphasizes that an effective remedy does not always require a direct legal action against a measure, but necessitates that incidental judicial review is available when it is the only way to ensure respect for EU-guaranteed rights.
Distinction of Interests: The ruling highlights the fundamental distinction between a legal person (company) and a natural person (director), even when the latter represents the former, particularly when personal liability arises.