The Supreme Court handed down a landmark ruling on 20 May 2025 clarifying when and how company directors can be held liable for their companies’ tax debts. This decision has important implications for those in management positions in companies, as it sets clear limits on when such liability can be enforced.

The General Tax Law provides for two ways in which a director may be liable for their company’s tax debts:

• Joint and several liability: when the administrator has actively participated in a tax offence.
• Subsidiary liability: when, without having directly committed the offence, the administrator failed to take the necessary steps to prevent it, allowed others to commit it, or made decisions that facilitated it.

In both cases, the law allows not only the debts but also the penalties imposed on the company to be claimed from the administrator.

The Supreme Court ruling focuses on a case of subsidiary liability, in which the Tax Agency held an administrator liable for the debts of a company that had committed tax offences. The administrator appealed, arguing that this liability is punitive in nature and must therefore respect the fundamental rights that protect any person from penalties.

The Supreme Court agreed with him on several key points:

1. It is punitive liability

This means that it is not enough for someone to have been a director at the time of the offence. In order for them to be held liable, it must be proven that they acted culpably: for example, that they were negligent, that they failed to act when they should have done so, or that they knowingly allowed tax obligations to be breached.

2. There is no automatic liability

The Court rejects the idea that a director can be held liable simply for having held that position. The Tax Agency must prove that there was a specific action that contributed to the infringement.

3. The burden of proof lies with the Administration

It is the Tax Agency that must prove both the infringement committed by the company and the culpable involvement of the director. The director cannot be required to prove his innocence. In case of doubt, the principle of presumption of innocence must be applied.

This decision by the Supreme Court reinforces the legal guarantees of directors against proceedings that, in some cases, were based solely on their position without analysing their actual conduct. The ruling requires the Administration to act rigorously and respect the principles of punitive law.

Furthermore, although the Court does not rule on other issues raised in the appeal, such as the right to defence or the order in which claims must be addressed, it leaves the door open to future rulings that could further clarify the legal framework.