In its judgment C-613/23 Herdijk, the Court of Justice of the European Union addressed the question of the liability of members of statutory bodies for VAT debts in the Netherlands. The subject of the assessment was the compatibility of the Dutch legislation with Article 273 of Directive 2006/112/EC on VAT and the principle of proportionality. That legislation allows members of the statutory bodies to be liable for the tax debts of a company if they fail to report the company's insolvency or if their misconduct has led to tax arrears.
Although this is a judgment based on certain specifics of the Dutch legal environment, its main ideas and conclusions concerning the liability of a member of the statutory body for the tax obligations of the legal entity it manages could have an overlap with Czech law.
Specifically, it concerned the liability of a member of the statutory body for unpaid VAT if the entity failed to notify its insolvency. Dutch tax law provides for the liability of members of the statutory bodies of a company for certain tax arrears of that company. Under Dutch law, the statutory body is obliged to notify the insolvency of the company within a certain period of time. Failure to comply with this obligation gives rise to the legal fiction that the statutory body has not acted with due care.
A member of the institution may be exempted from this liability only if he proves that the failure to fulfil this obligation cannot fairly be attributed to his conduct. In particular, this is a case of force majeure (e.g. an accident) or the statutory body was guided by the opinion of a third party whom it reasonably considered to be a sufficient expert in the relevant field (e.g. a tax adviser). If the obligation to report this fact is fulfilled, liability only comes into play if the tax authority proves that the debt was caused by the statutory body's mismanagement or misadministration of the company (breach of due care).
The CJEU has confirmed that Member States may introduce measures to ensure the collection of VAT under Article 273 of Directive 2006/112/EC, provided that such measures respect the principle of proportionality and ensure legal certainty, including the possibility of an effective defence. The requirement for a member of the statutory body to prove that the failure to comply with the notification obligation is not imputable to him is not contrary to the principle of proportionality, provided that the legislation allows the application of any circumstances proving non-attributability (e.g. force majeure or third party expert opinion).
The CJEU also stated that liability must be apportioned according to the different tax years, which will be assessed separately. Thus, a member of the body may only be liable for debts incurred in periods where it has been proven that it has breached its legal obligations, e.g. a statutory body is liable for a VAT debt for a period when it has not been declared insolvent.
In the present case, the statutory body served the company from November 2018 to February 2019 (he resigned during February). For the period November 2018 to January 2019, he acted as a statutory body and failed to comply with the obligation to declare insolvency and can be held liable for unpaid tax. Conversely, in February 2019 he was deemed to be a former member of the company's statutory body and so was not liable for debts incurred during that period. This was because, at the date of his resignation as a statutory body, the period for notifying the company's insolvency for that period had not yet expired.
For members of statutory bodies, this judgment is a reminder of the importance of complying with reporting obligations, good corporate governance and acting in accordance with the diligence of a sound businessman. However, the Court's decision also emphasises that there are limits to accountability. The members of the statutory bodies cannot be held liable for every error or shortcoming, but only in situations where their actions have led to tax arrears. This approach protects not only state revenue but also the rights of individuals.
The extent of the liability of a member of the statutory body for the debts of the company in which he or she is or has been active and the extent of his or her liability for his or her own assets remains a frequently debated issue. A member of the statutory body may be liable with his/her private property, in particular in cases where the reason for non-payment of the legal entity's tax liabilities can be attributed to the actions or inaction of the member of the statutory body (breach of his/her duty of care) and where the company itself does not have sufficient assets to pay them.
Autor: Josef Machala
Although this is a judgment based on certain specifics of the Dutch legal environment, its main ideas and conclusions concerning the liability of a member of the statutory body for the tax obligations of the legal entity it manages could have an overlap with Czech law.
Specifically, it concerned the liability of a member of the statutory body for unpaid VAT if the entity failed to notify its insolvency. Dutch tax law provides for the liability of members of the statutory bodies of a company for certain tax arrears of that company. Under Dutch law, the statutory body is obliged to notify the insolvency of the company within a certain period of time. Failure to comply with this obligation gives rise to the legal fiction that the statutory body has not acted with due care.
A member of the institution may be exempted from this liability only if he proves that the failure to fulfil this obligation cannot fairly be attributed to his conduct. In particular, this is a case of force majeure (e.g. an accident) or the statutory body was guided by the opinion of a third party whom it reasonably considered to be a sufficient expert in the relevant field (e.g. a tax adviser). If the obligation to report this fact is fulfilled, liability only comes into play if the tax authority proves that the debt was caused by the statutory body's mismanagement or misadministration of the company (breach of due care).
The CJEU has confirmed that Member States may introduce measures to ensure the collection of VAT under Article 273 of Directive 2006/112/EC, provided that such measures respect the principle of proportionality and ensure legal certainty, including the possibility of an effective defence. The requirement for a member of the statutory body to prove that the failure to comply with the notification obligation is not imputable to him is not contrary to the principle of proportionality, provided that the legislation allows the application of any circumstances proving non-attributability (e.g. force majeure or third party expert opinion).
The CJEU also stated that liability must be apportioned according to the different tax years, which will be assessed separately. Thus, a member of the body may only be liable for debts incurred in periods where it has been proven that it has breached its legal obligations, e.g. a statutory body is liable for a VAT debt for a period when it has not been declared insolvent.
In the present case, the statutory body served the company from November 2018 to February 2019 (he resigned during February). For the period November 2018 to January 2019, he acted as a statutory body and failed to comply with the obligation to declare insolvency and can be held liable for unpaid tax. Conversely, in February 2019 he was deemed to be a former member of the company's statutory body and so was not liable for debts incurred during that period. This was because, at the date of his resignation as a statutory body, the period for notifying the company's insolvency for that period had not yet expired.
For members of statutory bodies, this judgment is a reminder of the importance of complying with reporting obligations, good corporate governance and acting in accordance with the diligence of a sound businessman. However, the Court's decision also emphasises that there are limits to accountability. The members of the statutory bodies cannot be held liable for every error or shortcoming, but only in situations where their actions have led to tax arrears. This approach protects not only state revenue but also the rights of individuals.
A preview of the Czech legal environment
The extent of the liability of a member of the statutory body for the debts of the company in which he or she is or has been active and the extent of his or her liability for his or her own assets remains a frequently debated issue. A member of the statutory body may be liable with his/her private property, in particular in cases where the reason for non-payment of the legal entity's tax liabilities can be attributed to the actions or inaction of the member of the statutory body (breach of his/her duty of care) and where the company itself does not have sufficient assets to pay them.
Autor: Josef Machala