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When do directors have joint and several or subsidiary liability to the tax authorities?

In some instances, directors may be liable to the tax authorities for the tax debts of their companies. This liability may be joint and several or subsidiary:

  • In the case of joint and several liability, the tax authorities may declare the director jointly and severally liable if they have directly caused a tax infringement.

Here, guilt is more significant, as the person responsible must prove intent comparable to that required in the criminal sphere.

Example: There is active participation if, for example, the company participates in a scheme to avoid declaring VAT, or if, after committing the offense, operations are carried out to empty the company of its assets, or if the company sells a property and the administrator decides not to account for or declare the profit obtained.

  • Whether liability is subsidiary if the company commits an offense, but the director is not the cause.

The tax authorities can only claim against the administrator after declaring the company’s insolvency and the possible jointly and severally liable persons.

Expressly, this liability can be declared in the following cases:

  • When the administrator has not acted within their competence to comply with the tax obligations.
  • When he has consented to non-compliance on the part of those who report to him.
  • He has adopted agreements that make the infringements possible.

In this way:

  • The director who was the director when the company infringed will be declared liable (for these purposes, it will be irrelevant who the director is when the procedure to demand liability is initiated).
  • Proceedings against the administrator can only be initiated when all avenues of collection against the company have been exhausted and, therefore, the tax authorities have declared the principal debtor and any possible jointly and severally liable parties to be in default.

Remember that you can count on Leialta as your consultancy to help protect and grow your business assets.

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