On 16 July 2026, the Court of Justice of the European Union (the “CJEU”) delivered its decision in Case C-158/25 on the relationship between national mechanisms for the joint and several liability of company directors for unpaid VAT debts and the right to an effective remedy enshrined in Article 47 of the Charter of Fundamental Rights of the European Union (the “Charter”).
Facts of the case
On 17 March 2018, the Luxembourg VAT administration (Administration de l’enregistrement, des domaines et de la TVA) (the “VAT Administration”) issued VAT assessments against a Luxembourg company (the “Company”) for the years 2014 to 2016. The appeal lodged by the Company against those assessments was declared inadmissible for being out of time, with the result that the assessments became final. The Company subsequently failed to pay the amounts of VAT due for those years.
The appellant, who served as the director responsible for the day-to-day management of the Company from April 2013 to February 2019, was notified by the VAT Administration, on 16 May 2019, of a guarantee call decision based on Articles 67-1 to 67-3 of the Luxembourg Law of 12 February 1979 on value added tax (the “VAT Law”), holding him personally liable, in his capacity as director, for the outstanding VAT amounts.
Before the Luxembourg courts, the appellant contested the existence of the Company’s tax debt, arguing that, as a person called upon to guarantee payment of the tax assessments issued against the Company, the refusal to allow him to file a third-party objection against those assessments in his own name was incompatible with Article 47 of the Charter. The first instance court rejected this argument on the grounds that, in the absence of any action validly brought by the Company within the time limits laid down by the VAT Law, the tax assessments had become final and could no longer be challenged. It further held that the provisions of the VAT Law at issue did not constitute an implementation of EU law, and therefore Article 47 of the Charter did not apply.
On appeal, the Luxembourg Court of Cassation referred three questions to the CJEU for a preliminary ruling concerning :
the applicability of the Charter to the guarantee call mechanism at issue,
the ability for the director to challenge, incidentally, a final tax assessment notified to a company, and
the scope of the arguments on which he could rely.
Findings of the court
First question: applicability of the Charter to the guarantee call mechanism
The first step in the CJEU’s reasoning was to determine whether the Charter applies at all to the guarantee call mechanism. Under Article 51(1) of the Charter, its provisions apply to Member States only when they are implementing EU law, which presupposes a degree of connection between an EU legal measure and the national measure in question. The CJEU recalled that Articles 2 and 273 of Council Directive 2006/112 of 28 November 2006 on the common system of value added tax (the “VAT Directive”), read in conjunction with the relevant Treaty provisions, oblige each Member State to take all legislative and administrative measures appropriate for ensuring collection of all the VAT due on its territory and for preventing fraud. The Luxembourg guarantee call mechanism, which enables the tax authority to recover VAT unpaid by a taxable company from its directors, contributes to that obligation and therefore involves the implementation of EU law within the meaning of Article 51(1) of the Charter.
It follows that the requirements stemming from the right to an effective remedy, enshrined in Article 47 of the Charter, are applicable in proceedings brought by a company director against a guarantee call decision. This holds where national legislation provides that such a director is jointly and severally liable for payment of the VAT owed by the company in accordance with the provisions of the VAT Directive.
Second question: the right to challenge, as an incidental question, the company’s final tax assessment
A central issue in the case was the position of the director vis-à-vis the tax assessment issued to the Company. Under the applicable Luxembourg legislation, a person subject to a guarantee call has no personal action against that assessment. Moreover, once the assessment has become final, its finality prevents that person from challenging, as an incidental question, the VAT assessment and the amount of the taxable company’s tax liability for which he or she is held jointly and severally liable.
Against that background, the CJEU examined whether such a restriction is compatible with the Charter. Article 47 of the Charter requires that the holder of the right to an effective remedy be able to access a court with the power to consider all the issues of fact and of law that are relevant for resolving the case before it. Beyond the judicial stage, the rights of the defence must also be ensured in the course of the administrative procedure leading to the guarantee call decision: the addressee of a decision which significantly affects his or her interests must be placed in a position in which they can make known their views on the information on which the authorities intend to base their decision.
Nevertheless, the CJEU reiterated that the principle of respect for the rights of the defence is not an absolute prerogative but may be restricted, provided that the restrictions in fact correspond to objectives of public interest and do not constitute a disproportionate interference. As a general rule, respect for the rights of the defence does not preclude that tax authorities are bound by the findings of fact and the legal classifications which they have made in the context of a related administrative procedure initiated against a third person, as the finality of an administrative decision contributes to legal certainty.
The CJEU has, however, clarified that the situation is different where the person concerned is, de facto, fully deprived of the right to call into question, in a useful and effective way, those findings of fact and those legal classifications. Such a deprivation would adversely affect the very essence of that person’s rights of the defence.
Applying this principle to the present case, the tax assessment issued in the context of a related administrative procedure constitutes, for the purpose of the guarantee call procedure, evidence intended to establish the conditions for the director’s joint and several liability. The person subject to a guarantee call must therefore be able to challenge that evidence.
That said, this does not mean that the person subject to a guarantee call must be included, in a personal capacity, in the taxation procedure brought against the legal person for which he or she is jointly and severally liable regarding the tax liability, nor does it confer a direct legal remedy against the tax assessment. It is sufficient that a remedy enables the person subject to a guarantee call, incidentally, to obtain effective judicial review of the findings of fact and legal classifications on which the guarantee call decision is based, provided that those findings and classifications are decisive for the outcome of the proceedings.
In addition, the recognition of the ability to challenge, as an incidental question, the tax assessment does not have any impact on the binding effect of the tax assessment vis-à-vis the company to whom that assessment was issued and remains limited to the necessary arguments allowing the director concerned to effectively challenge his or her joint and several liability.
Third question: scope of the arguments that may be relied on
As regards the scope of the incidental challenge, the director may rely on all the findings of fact and legal classifications on which the competent authority based his or her joint and several liability, including those relating to the VAT assessment and the unpaid amount, provided that they are useful for his or her defence.
Scope of the decision
In this decision, the CJEU establishes a clear principle: a director held personally liable for unpaid VAT debts incurred by the company of which he or she was the director cannot be fully deprived of the right to call into question the findings of fact and the legal classifications on which his or her joint and several liability is based, even if the tax assessment containing these findings and classifications has become final vis-à-vis the company.
This decision confirmed that the Luxembourg guarantee call mechanism, as set out in Articles 67-1 to 67-3 of the VAT Law, is incompatible with the requirements of Article 47 of the Charter in so far as it does not allow the person subject to a guarantee call to challenge, as an incidental question, the findings of fact and legal classifications contained in the underlying tax assessment. This decision is likely to lead to an amendment of the Luxembourg legal framework to enable the person subject to a guarantee call to challenge, in support of his or her appeal, the findings of fact and legal classifications on which the competent authority relied, including those in relation to the VAT assessment and the unpaid amount for which that person is held liable.
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