When it comes to VAT
In the Netherlands, directors of a legal entity can be held jointly and severally liable with regard to a number of taxes. One of those taxes concerns VAT. If there is to be any chance of success in avoiding this, the director must notify the tax authorities of the inability to pay taxes in a timely manner. If the notification is made on time, the director is only liable if it is established that the non-payment of the tax is the result of manifestly improper management attributable to that director.
If the notification of inability to pay is not made (in a timely manner), it is presumed (on the basis of a legal fiction) that the failure to pay the tax is the result of improper management by the director. In other words, the liability claim is then in principle a fact. Moreover, in this situation one only has the opportunity to refute this suspicion if the director first proves that the failure to report the inability to pay (in a timely manner) is not his fault. In such a situation, a director is often faced with a completely impossible assignment. Especially given the case law of the Supreme Court on this point.
On this point, the Supreme Court has now seen reasons in a new case to ask questions to the Court of Justice in Luxembourg. It wants to know whether this legal system is in accordance with the principle of proportionality under EU law.
The outcome of this case could be of great importance for directors in the Netherlands. If it is established that directors in the Netherlands are in fact too limited in their ability to provide counterevidence, joint and several liability can be avoided.
The Supreme Court asked the questions to the Court of Justice in October 2023 and the Court of Justice recently published the case on the website.
Before the Court of Justice decides on the case, the Advocate General will probably first be asked to give an opinion. We expect this advice in the spring of 2024. This will be followed by the decision of the Court of Justice.
We will keep you informed of this case via news items on our website.
If you have any questions about this topic or if you would like to discuss the topic further, please do not hesitate to contact us at info@vatpartners.com
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