Withholding tax and company VAT: Who is responsible?

When it comes to withholding tax and VAT, a major question may arise for an entrepreneur: is it just the company that is liable, or can the directors also be personally affected? Let us explore this issue in order to shed some light on the subject.

The subject is governed by Article 51 of the Code for the amicable and enforced recovery of tax and non-tax debts (CRAF/WMGI).

What is the main principle involved in the CRAF/WMGI?

Article 51 of the CRAF/WMGI stipulates that in the event of non-payment of withholding tax and value-added tax by a company (or other specifically related legal entities, such as non-profit entities), the directors may be held jointly and severally liable for payment together with the company if the failure to pay is due to a fault committed in their management.

Who is this joint and several liability applicable to?

This responsibility applies to all executives in charge of day-to-day management.

This joint and several liability may be extended to the company's other directors when a fault that led to non-payment of sums owed to the authorities is attributable to them.

When is fault presumed?

In principle, the burden of proof lies with the tax authorities, who should provide proof of the fault committed and show that this fault actually led to the non-payment of tax debts.

In some cases, however, executives are presumed liable, and will have to prove that non-payment is not due to their own fault.

More specifically, the presumption applies if there is repeated non-payment of withholding tax or value-added tax.

To rebut this presumption, the manager could, for example, demonstrate that a customer has failed to pay a large debt to the company, resulting in a temporary liquidity problem that makes it impossible to pay these tax debts.

How is "repeated non-payment" defined?

Repeated non-payment means the non-payment of at least:

• three overdue debts within one year for a monthly withholding tax or VAT payer, or
• two debts over one year for a quarterly tax payer.

When is the presumption of fault not applicable?

The presumption of fault does not apply if non-payment is due to financial difficulties leading to reorganisation, bankruptcy or dissolution proceedings.

What does joint and several liability cover?

It covers the payment of principal, late interest and ancillary tax liabilities.

How can you take legal action against the managers responsible?

Legal action can only be taken one month after a notification from the receiver.

However, protective measures (such as seizures) may be required during this period.

A few practical tips!

Check payment

Make sure your company complies with its withholding tax and VAT obligations. Repeated failure to comply may lead to legal consequences not only for the company, but also for individual managers. Check your deadlines regularly and make sure you meet them.

Understanding roles

Be aware that, as an executive, you are not immune from personal liability for tax debts. Make sure you are aware of what your responsibilities are, to avoid any unpleasant surprises.

Anticipating liquidity problems

If you foresee financial difficulties or cash flow problems, don't wait to act.

If there are payment difficulties due to a defaulting customer or other cause, consider alternative solutions to ensure payment of your tax obligations. Transparent communication with the tax authorities can also be beneficial. You could, for example, offer to settle the amounts due according to a reasonable payment plan.