Although the CJEU held that the provisions of the VAT Directive do not preclude national rules and practices under which a third party who may be held jointly and severally liable for a legal person’s tax liability (e.g., a current or former member of a company’s management board) cannot be a party to the tax proceedings conducted against that legal person (i.e., the assessment proceedings), the CJEU simultaneously ruled that it is necessary to ensure that, in proceedings brought against that third party regarding joint and several liability, the person is given the opportunity to effectively challenge the factual findings and legal characterisation made by the tax authority in the proceedings concerning the legal person (i.e., the assessment proceedings), and to be granted access to the case file of those proceedings.

Relying also on the general principles of law - such as the right to a defence and the principle of proportionality - the CJEU therefore questioned the validity of attributing tax liability to a third party (a member of the legal person’s management board, including a former member) in circumstances where that person is deprived of the ability to defend their interests (in particular by challenging the conclusions contained in the VAT assessment decision issued with respect to the legal person).

The CJEU’s ruling directly concerns only VAT matters; however, since the Court referred in its Judgment to the discussed general principles, there is reason to believe that its impact may be broader and could contribute to a general shift in the approach of Polish authorities and courts toward third parties (individuals), which has so far been extremely unfavourable (as reflected, for example, in the Supreme Administrative Court judgments of 23 February 2024, ref. no. III FSK 4522/21, and 10 November 2021, ref. no. III FSK 4172/21). This approach deprives jointly and severally liable persons not only of the right to challenge the findings contained in the decision issued with respect to the legal person (the company), but also of the opportunity to even access that decision or the materials from the proceedings that led to its issuance.

Nevertheless, the statements contained in the Judgment should at the very least provide grounds for the immediate discontinuation by Polish courts and authorities of a practice that flagrantly infringes the interests of persons held jointly and severally liable for the tax liabilities of legal persons in VAT cases.

At the same time, in cases already concluded in this area, the Judgment may be relied upon as a basis for reopening tax proceedings or judicial-administrative proceedings, where it affects the substance of the decision or judgment (i.e., where the outcome was rendered in proceedings in which the third party was denied the right to challenge the factual or legal findings made regarding the legal person for whose tax liabilities they are held liable). The time limit for filing an application or complaint to reopen the proceedings is one month for final administrative decisions or three months for final court judgments, and runs from the date of publication of the operative part of the CJEU judgment in the Official Journal of the European Union, which has not yet occurred.

In light of the above, we will monitor this matter and provide you with relevant information once the Judgment is published in the Official Journal of the European Union. However, we already encourage you to contact us if the conclusions set out in the Judgment may affect decisions issued in your cases.