According to the applicable regulations in Poland, if the company has not paid the tax, the tax authority first enforces the company’s assets, and when the enforcement is ineffective, it initiates proceedings against the members of the management board and demands payment of the arrears jointly responsible for the tax liabilities. In February 2025, the Court of Justice of the European Union (CJEU) issued a judgment that introduces a significant change in the existing mechanism.
Current practice
According to current practice, proceedings against the company are conducted to determine the tax liability, while the member of the management board is not a party to it and does not have full rights related to these proceedings. The liability of the member of the management board is determined in a separate proceeding, in which they cannot challenge the findings made earlier in the proceedings against the company.
CJEU judgment changes the rules
The CJEU judgment of 27 February 2025 (case no C-277/24) made a breakthrough in the existing approach to the liability of members of management boards for the tax debts of companies.
The Provincial Administrative Court (WSA) referred a preliminary question to the CJEU in administrative court proceedings concerning the former president of the management board of a limited liability company for the years 2014-2018. During the tax proceedings regarding the company’s VAT settlements for the period June-October 2016, the former president submitted a request to participate, which was dismissed. The complaint led to the discontinuation of the proceedings. The former president filed a complaint with the WSA, arguing that they had key knowledge in the case and potential liability with private assets for the company’s liabilities. The WSA, recognizing the validity of the arguments, suspended the proceedings and referred a preliminary question to the CJEU.
The CJEU, considering the question posed by the WSA, first emphasized that the member states of the European Union have an obligation to ensure full VAT collection and combat tax crime, in accordance with Article 273 of the VAT Directive. The mechanism of joint liability, such as Article 116 of the Tax Ordinance, supports the achievement of this goal. Member states, despite having some discretion in choosing measures to achieve the above goal, must act in accordance with EU law and its fundamental principles.
Next, the CJEU stated that the model excluding a third party from the first proceeding and preventing them from challenging the findings in the second violates EU standards. A member of the management board, although not a party to the proceedings against the company, must be guaranteed the right to defense in the proceedings for joint liability.
In the proceedings against the member of the management board (in the second proceeding), the authority should enable the member of the management board to effectively challenge the factual and legal findings made against the company (in the first proceeding) and provide access to the case files (of the first proceeding).
In practice, this means that the tax authority, issuing a decision to hold the member of the management board liable, can no longer uncritically refer to the findings contained in the decision against the company without verifying them. According to the CJEU guidelines, the authority will be obliged to enable the member of the management board to actively challenge the amount and existence of the company’s tax arrears at the stage of proceedings against them. Therefore, if, for example, the decision against the company was made without the participation of the member of the management board and – in their opinion – contains errors (e.g. omission of evidence in favor of the company, incorrect assessment of evidence, incorrectly calculated tax, etc.), they should now have the opportunity to present such arguments in their case.
The CJEU judgment directly concerns VAT tax liabilities, but its conclusions may have broader application and may also be applied in the case of other taxes for which members of the management board are jointly liable.
New possibilities
The CJEU judgment provides new opportunities for the defense of members of the management board, also in already concluded proceedings. Members of the management board can submit applications for the resumption of concluded proceedings regarding their liability for the company’s tax debts. This applies to both the resumption of administrative proceedings (when the tax authority’s decision on their liability is final) and the resumption of administrative court proceedings (when a final judgment of the WSA or NSA has been issued).
In the resumed proceedings, the administrative or judicial authority should apply the CJEU’s interpretation, enabling the member of the company’s management board to defend themselves substantively against the payment of the company’s tax. In many cases, this may lead to a change in the original decision, for example, to annul the decision on joint liability if it turns out that the company’s tax liability was incorrectly determined.
The resumption of proceedings does not occur automatically. The interested person (member of the management board) must submit an appropriate application within the prescribed period. The deadline for submitting such an application is:
- 30 days for tax proceedings before administrative authorities,
- 3 months for administrative court proceedings
from the date of publication of the CJEU judgment in the “Official Journal of the European Union”.
In light of the above, new possibilities for analysis and preparation for potential resumption of proceedings, challenging decisions, and recovering amounts paid or enforced by tax authorities from the member of the management board open up. SKLAW will help analyze the case and then take appropriate legal steps.