On the 23.10.2020 a closed session of the General Assembly of Judges of the panels of the Supreme Administrative Court on interpretative case № 7/2019, which was formed on the proposal of the Chairman of the SAC Georgi Cholakov, has been scheduled. The case is initiated to consider the following issues:
- “Does the liability under Art. 19, para 1, para 2 of the Tax-Insurance Procedure Code (TIPC) of a third liable person include the established obligation for interest of the main debtor?”
- “Does the scope of the joint and several liability under Article 177 of the VAT Act also include the obligations for interest for delay and unpaid tax by another person?”
The answers to these questions are of key importance for the application of Art. 19 of TIPC and of Art. 177 of the VAT Act, as the appeal proceedings against the issued audit acts of tax authorities have been suspended until the issuance of the interpretative decision.
Briefly about the responsibilities that the provisions of Art. 19 of TIPC and Art. 177 of the VAT Act impose on the persons subject to audit:
The liability under Art. 19, para. 1, para. 2 of the TIPC concerns individuals who act in their capacity as a manager, member of a management body, procurator, commercial representative, commercial agent, majority partners or shareholders, in a company that has outstanding tax liabilities or obligations for social security contributions. In order to press charges under Art. 19 of the TIPC, specific conditions listed in the provision should be met. If the revenue authorities manage to prove that these conditions are met, they shall issue a AA to the persons mentioned above, by which they shall impose as a liability for the respective outstanding liabilities of the company. This raises the question of whether the third party should be charged as a liable in addition to the obligation not paid by the principal debtor and the accrued interest for delay.
The problem of liability under Art. 177 of the VAT Act is analogous, as it applies to recipients of supplies for which the supplier has not paid the tax due by him, but has exercised the right to a tax credit directly or indirectly related to this supply. Under certain conditions provided for in the provision, this liability may also apply to previous suppliers to the supplier who owes the unpaid tax or to any subsequent recipient under the supply arrangements. The liability under Art. 177 of the VAT Act is also committed to the issuance of RA, which in the performance of a certain factual composition, the above persons are liable for the unpaid tax by the supplier.
Exactly in these cases that the controversial question arises: do third parties, mentioned exhaustively in Art. 19 of TIPC and in Art. 177 of the VAT Act to impose a liability for interest on unpaid liabilities by the principal debtor.
The revenue authorities of the National Revenue Agency and part of the administrative courts in the country accept that the third party also owes interest, as these are persons referred to in Art. 14, point 3 of the TIPC, namely: persons responsible for the obligations for taxes and compulsory social security contributions. And by virtue of Art. 16, para. 3 of the TIPC, these persons are responsible for the taxes, the obligatory social security contributions, the interests and the expenses for their collection.
Some of the judges in the SAC advocate the thesis that interest is not due, because in a systematic interpretation of the provisions of Art. 177 of the VAT Act, the liability of this provision is sui generis, namely special and exclusive in itself, insofar as it deviates from the general rules for taxation. This distinguishes it from the hypothesis of liability of third parties under Art. 14, item 3 of the TIPC, contrary to the thesis advocated by the revenue administration.
An answer to this contentious question will be received with the decision of the General Assembly of Judges of the Chambers of the Supreme Administrative Court on Interpretative Case № 7/2019.
