ECJ C-278/24 (Genzyński) – Questions – Joint and several liability on directors for VAT debts

The ECJ issued the preliminary ruling in the case C-278/24 (Genzyński).

Context:

Summary

The case involves PK, who was the director of E.Sp company. In 2022, the tax authority held PK jointly and severally liable for the company’s VAT payment arrears for a specific period. PK has appealed against this decision.
The referring court questions whether national legislation, which imposes joint and several liability on directors for VAT debts without considering their intent or culpability, is compatible with the VAT Directive, the principle of proportionality, and fundamental rights.
The court also raises concerns about a national practice that requires a director to file for bankruptcy to avoid joint and several liability for VAT debts, even if bankruptcy would be ineffective under national insolvency laws. This practice may infringe on the right to property.
Another issue is whether treating directors differently based on the number of creditors, where directors of companies with multiple creditors can avoid liability through bankruptcy while directors of companies with a single creditor cannot, violates the principles of equality and non-discrimination.
The questions seek interpretation of provisions in the VAT Directive, Treaty on European Union, Charter of Fundamental Rights, and principles such as legal certainty, legitimate expectations, effective remedy, and non-discrimination. The aim is to determine whether the national legislation and practices in question comply with EU law and fundamental rights.

Articles in the EU VAT Directive

Articles 193, 205 and 273 of the EU VAT Directive 2006/112/EC.

Facts & Background

Applicant is ‘P.K’. He was director of the company ‘E.Sp’ between 2014 and 2017. In 2022, the tax authority held PK jointly and severally liable for the company’s VAT payment arrears, which was due for the months May to August 2017. PK has appealed against the tax authority’s decision.

Recital:
Under Article 273 of the VAT Directive, Member States have discretion as to the means they use to ensure full collection of VAT on their territory, within the limits of Union law. The joint and several liability of directors of commercial companies is regarded as strict liability under national law in Poland. The referring court states that this may conflict with various fundamental rights and with the principle of proportionality. In addition, the only option for PK to avoid liability was to file for bankruptcy, which, according to the referring court, could conflict with, among other things, the right of ownership.

Questions

Preliminary questions:
1. Should the provisions of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax (hereinafter also: ‘VAT Directive’), including Articles 193, 205 and 273, read in conjunction with Article 325 of the Treaty on the Functioning of the European Union (hereinafter also ‘TFEU’) and Article 17 of the Charter of Fundamental Rights of the European Union (hereinafter also ‘Charter’), and principle of proportionality can be interpreted as precluding national legislation which provides for a mechanism of joint and several liability of directors of legal persons for the VAT debts of such persons, without it being determined in advance whether those directors have acted in bad faith or that they could be accused of culpable error or negligence in connection with their conduct?
2. Should the provisions of the VAT Directive, including Articles 193, 205 and 273, read in conjunction with Article 325 TFEU, the principles of legal certainty and legitimate expectations and the principle of the right to governance, read in conjunction with Article 2 of the Treaty on European Union (principle of the rule of law and respect for human rights) and Article 47 of the Charter (effective remedy and the right of access to justice) , be interpreted as precluding a national practice requiring a director of a legal person with a single creditor to file an application for bankruptcy in order to avoid joint and several liability for that person’s VAT debts , even though such a request is devoid of purpose under the rules and practice of national insolvency law and therefore infringes the essence of the right to property (Article 17 of the Charter)?
3. Should the provisions of Articles 193, 205 and 273 of the VAT Directive, read in conjunction with Article 325 TFEU, and the principles of equality before the law and non-discrimination (Articles 20 and 21 of the Charter) be read in this way? interpreted as precluding national legislation [as referred to in point 1] under which directors of legal persons may be treated unequally in such a way that a director of a legal person with more than one creditor assumes liability for the debts of the company managed by him by submitting a request for bankruptcy, while a director of a legal entity with only one creditor does not have the opportunity to effectively submit such a request, so that he cannot escape his joint and several liability for the VAT debts of that legal entity and cannot claim the right to an effective remedy (Article 47 of the Charter)?

Source