On 22 July 2024, the Official Journal of the European Union published a preliminary ruling request submitted to the ECJ by the Provincial Administrative Court in Wroclaw, Poland. The court seeks to determine whether the sole member of a Company’s management board can actively participate in the procedure for determining the Company’s VAT liability.
On 22 August 2022, an applicant requested to be admitted as a party to the tax proceedings for verifying the Company’s VAT returns from June to October 2016. The applicant argued that, as the Chairperson of the Company’s Management Board from 2014 to 2018, it had the most comprehensive knowledge of the Company’s operations during that period and its role as the sole member of the Management Board would provide crucial knowledge for the proceedings.
The first-instance authority refused to grant the applicant’s request claiming that only a liquidator can replace a party in cases where it lacks any organ to perform legal actions. The second-instance authority pointed out that the attribution to a person or entity of the status of a party to tax proceedings is determined by the tax authority objectively. Additionally, in the opinion of the second-instance authority, the applicant does not belong to any of the categories of persons or entities listed as a party in tax proceedings according to article 133 of Tax Code.
The applicant filed a complaint with the Provincial Administrative Court on the ground that it was the sole member of the Management Board of the Company during the period for which the proceedings were pending.
In this case, the individual contends that it has been denied a proper way to effectively challenge previous findings and assessments by the tax authority, which were made without its involvement and now set a precedent in separate proceedings to determine its joint and several liability for the Company’s VAT debt.
The referring court, in relation to the above case, seeks clarification on the interpretation of Articles 205 and 273 of the VAT Directive, in conjunction with Article 2 of the Treaty on European Union, as well as Articles 17, 41, and 47 of the Charter of Fundamental Rights of the European Union, and the principles of proportionality, the right to a fair hearing, and the rights of the defence.
The case highlights a significant issue regarding the legal protection of board members from joint and several liability for a Company’s VAT debts. It questions whether denying a board member the opportunity to participate in proceedings and challenge prior decisions infringes on their rights and fairness. This situation raises broader concerns about whether national practices are consistent with EU principles of proportionality, fair hearing, and effective remedy.
The preliminary ruling request of the Court of Justice of the European Union is available here.
The information contained in the alert are general and do not represent the tax opinion and do not cover all changes resulting from the proposed regulation. Before making any decision or action, as well as in case of any questions or concerns, please contact our tax advisers, tel.+48 22 250 31 00.
