Comments on ECJ C-278/24: Polish liability of the chairman of the Executive Board for VAT debt not contrary to EU law

On April 30, 2024, the ECJ issued a judgment (case C-278/24) that questions the Polish regulations on the joint and several liability of management board members for company tax arrears, impacting both completed and ongoing proceedings in this area.
The ECJ ruled that Polish regulations limit the rights of defence for management board members, stating they should be able to demonstrate due diligence in managing the company, and that tax authorities cannot require a bankruptcy petition if the company isn’t objectively insolvent.
The judgment opens up new possibilities for board members, allowing them to resume completed proceedings, challenge past decisions on liability, and defend themselves in ongoing cases by proving they acted responsibly, with strict deadlines for action following the judgment’s publication.

Source MDDP

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Director Liability for VAT Debts Clarified

The CJEU ruled that EU Member States can impose joint and several liability on company directors for VAT debts, but directors must have the chance to prove they acted responsibly.
A regulation cannot automatically assume a director’s guilt; they must be allowed to demonstrate due diligence in their actions.
The presence of only one creditor, such as tax authorities, does not exempt a director from filing for bankruptcy unless it can be shown that doing so was genuinely impossible.

Recent ECJ judgments (C-278/24 and C-277/24) highlight the need to reform the Polish model of management board members’ liability for corporate tax debts, shifting the focus towards fairer conditions for defense against such liabilities.
The ECJ ruled that board members can be jointly liable for unpaid VAT only if the company has failed to pay, and they can defend against this liability by proving due diligence in managing company affairs and timely filing for bankruptcy when necessary.
These rulings not only strengthen the position of management board members in current and past tax liability disputes but also establish principles that could apply to various tax contexts beyond VAT within the EU legal framework.

Source Prawo

Ruling Overview: The Court of Justice of the European Union affirmed that Poland can hold a company’s chairman jointly and severally liable for VAT debts incurred during their term.
Case Context: In the case of E. sp. z o.o., since the company does not offer recourse for its VAT debt, the Polish tax authorities are pursuing the chairman, P.K., for liability.
Exemption Conditions: The ruling allows the chairman to be exempted from liability if they can prove timely bankruptcy filing for the company or that failure to file was not their fault, regardless of the company’s unsuccessful tax enforcement.