business taxation

The tax authorities' invoking of directors' liability

A company director must be diligent and prudent, failing which they may be held personally liable.

In tax matters, a company director is responsible for the tax returns and the payment of tax debts of the legal entity they represent. They must therefore ensure that the company makes its declarations and has sufficient funds to honour its debts. Otherwise, they may be held personally liable for the tax debt.


In public limited companies, (SAs) the directors manage the company. The directors may also appoint a management delegate (managing director) to perform this function. The directors must nevertheless supervise the management carried out by the delegate. The directors are liable in the event of the delegate failing to fulfil their obligations, since they are required to keep themselves informed in order to avoid such failures or otherwise to ensure that the delegate regularises the situation.

A director who does not carry out their duties (a "straw director") is considered to be committing "serious misconduct" because they do not fulfil the requirements of their mandate with diligence and prudence. The director's liability applies for the entire duration of their term of office as well as for the previous non regularised period. A newly-appointed director must therefore check that all the obligations of the company are met and, if necessary, take corrective action.

The manager of a limited liability company (SARL) can also have their liability invoked in the same conditions as a director of a public limited company (SA).


If the company fails to comply with its tax obligations, the directors must first report such failures to the delegate, who must take the necessary steps. If the situation is still not regularised, the directors must demonstrate their opposition to the management of the company, and only as a last resort may they submit their resignation.

For evidentiary purposes, it is preferable that all steps be taken in writing and it is essential that the resignation be published in the TCR. The directors may also decide to sue the delegate for mismanagement.


A director's liability is invoked when the company fails to meet its tax obligations and the directors have failed in their duty of supervision. The tax authorities may then decide to demand payment by the directors from their personal funds.

The company's tax obligation consists of submitting tax returns within the legal deadlines and paying the taxes due from its funds1.

This tax obligation is not sufficient to invoke the liability of a director: "culpable non-performance" is cumulatively required2. This categorisation will be applied insofar as that the director has prevented the collection of the tax legally due in a passive manner.

Example: The managing director has not filed the necessary tax returns, has not paid the tax or withholding tax. The director, for their part, did not demonstrate their opposition and did nothing to regularise this situation.

The directors are joint and several co-debtors and the tax authorities have a discretionary power as to the choice of the director(s) invoked as guarantor(s). It must nevertheless give reasons for its decision and demonstrate its fairness (3). In other words, the reasoning must include a justification as to the designation of the responsible representative(s) and the amount of their liability. Joint and several liability among directors is an advantage for the administration since allows it to recover its debt more easily.


The director may exercise their mandate without remuneration or compensation. Similarly, while remuneration is provided for, a director may never receive it for various reasons. The director's liability is not mitigated in this case. They are subject to the same obligations as a director for valuable consideration, and may also have their liability invoked.


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(1) §103 of the General Tax Act (AO)

(2) §109 of the General Tax Act (AO)

(3) §2 of the Tax Adjustment Act (StAnpG)