Richard Knobloch | 29.11.2024
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Lenka Kočerová | | October 8, 2024
We would like to inform you about an important judgment of the Supreme Administrative Court (SAC) No. 10 Afs 4/2024-38 of18 June 2024, which was published in the Collection of Judgments of the SAC. The court here confirmed for the first time the authority of the tax administrator to independently assess the conditions for the liability of members of elected bodies for tax debts of a company on the grounds of breach of due care under Section 159(3) of the Civil Code.
In the case in question, the sole managing director of the company, together with other persons, was finally convicted of the offence of tax evasion, which he committed by knowingly allowing the fictitious operation of the company in which he acted as managing director, as a result of which he extracted from the state budget an excessive VAT deduction of approximately CZK 13 million. The company was subsequently dissolved with liquidation and the tax administrator did not receive any funds from the liquidation balance. The tax administrator therefore addressed the sole managing director with a guarantee call issued in accordance with the Tax Code and asked him to pay the company’s arrears.
The SAC upheld the tax administrator’s procedure:
It should be emphasised that committing a criminal offence is not a prerequisite for liability. The fact that the guarantor, as the statutory body of a legal entity, had been convicted of a tax offence only had an impact on the assessment of the time limit for issuing the summons. A guarantee call can generally only be issued within the time limit for tax assessment, however, in the present case the expiry of this limitation period does not prevent the creation of guarantee, since Section 148(6) of the Tax Code applies and the call can be issued until the end of the second year following the year, in which the court decision on committing the tax offence became final. However, according to the conclusions of the Supreme Administrative Court, the tax administrator is entitled to independently assess the occurrence of guarantee in the event of any breach of the performance of the duties of a member of an elected body consisting in a breach of due care.
It should be added that the judgment of the SAC followed a recent judgment of the Supreme Court (SC) of 27 March 2024, no. 27 Cdo 1993/2023-454, in which the Supreme Court concluded that in cases where the tax administrator believes that a member of an elected body of a legal entity is liable for a public debt of the company in the nature of tax arrears (in the given case, it was a fine for a gambling offence imposed by the customs office) and wishes to recover such a debt from him by virtue of the statutory liability, it must proceed in accordance with Section 171 of the Tax Code and call upon him to pay the arrear. This notice is in the nature of a decision, which is an enforceable title under the Tax Code.
In the opinion of the Supreme Administrative Court, the tax administrator is entitled to assess the question whether the objective circumstances provided for by law for the liability to arise have been fulfilled (in particular, whether the liability under Section 159(3) of the Civil Code also applies to debts in the nature of tax arrears, whether due care has been breached and whether the company has suffered damage in a causal connection with this breach) as a preliminary question under Section 99 of the Tax Code.
Thus, it can be summarized that the Supreme Administrative Court (SAC) in this judgment, in which it formulated the rules for the tax administrator’s procedure when deciding on the guarantor liability of a member of an elected body of a legal entity for its tax arrears, outlined further negative consequences of a breach of due diligence.