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The EU Court of Justice and Directors Personal Exposure to Unpaid Company VAT
EU Member States may adopt measures to ensure the collection of VAT, including rules that can make company directors personally liable for unpaid VAT. For directors and senior management, this means that VAT errors, underpayments or non-payment can create a direct personal financial exposure beyond the company itself.
The joint and several liability of directors comes directly from these provisions, meaning that the tax administration can require directors to personally settle the VAT debts of their company.
This makes accurate VAT reporting, timely payment and effective oversight of the company's VAT compliance a management-level risk, not only an accounting issue.
Joint and Several Tax Liability in Luxembourg
Under Luxembourg's VAT Law (Articles 67-1 and 67-2), directors in charge of day-to-day management must ensure that the company's tax obligations are fulfilled and paid. Otherwise, they face personal, joint, and several liability for the company's unpaid value-added tax.
The risk is not theoretical: in Luxembourg, a director was personally pursued for three years of unpaid company VAT through a guarantee claim, creating a substantial personal financial exposure.
The director could not challenge these decisions for two main reasons. First, the company failed to dispute the VAT assessment within the statutory deadlines. Second, the director could not challenge the decision personally because the initial tax assessment was issued to the company rather than to the director as an individual.
Case C-158/25, Directors' Right to Challenge VAT Assessments
The European Court of Justice confirmed that the right to an effective remedy and a fair trial under Article 47 of the EU Charter applies when a director is pursued personally for company VAT liabilities.
Consequently, national law cannot prevent a director facing a guarantee claim from challenging the company's final tax assessment.
The ruling does not remove directors' potential personal liability. It confirms, however, that they must have a genuine opportunity to challenge the underlying assessment, including its factual and legal basis, when that assessment is used against them.
To keep in mind
Member States retain the right to hold company directors jointly and severally liable for unpaid VAT, exposing management to serious financial risks in the event of errors or delayed payments.
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