By interpretative Decision No 5 of 29.03.2021 the Supreme Administrative Court (SAC) ruled that the person under Art. 19, para. 1 and 2 of the Tax and Insurance Procedure Code (TIPC) also owes the interest which is established as the obligation of the principal debtor.
The decision can be found here, as with it SAC answered the following question:
Does the liability under Art. 19, para. 1 and 2 of the TIPC of the liable third party include the established interest liability of the principal debtor?
In order to answer this question, it is necessary to clarify the subject matter of the interpretative decision of the SAC.
Who is the third taxable person under Art. 19, para. 1 and 2 of the TIPC?
These are persons in their capacity of manager, member of a management body, procurator, commercial agent, business agent of the taxable person referred to in Article 14, para.1 and 2 of the TIPC.
A manager, a member of a management body, a procurator, a commercial agent, a business agent of the taxable person referred to in Art. 14 para.1 and 2 of the TIPC shall be liable for the outstanding obligations of the obliged legal person referred to in Art. 14 para.1 and 2 when he/she commits in bad faith one of the acts referred to in Art.19, para. 2, point1 and 2
The next important issue that needs to be clarified concerns Article 14, point 1 and 2 of the TIPC, namely, who are the persons taxable under this Article?
The taxable persons under Art. 14 of the TIPC are individuals and legal persons, namely:
- Persons obliged for taxes or compulsory social security contributions;
- Persons obliged to withhold and pay taxes or compulsory social security contributions;
- Persons liable for the obligation of the persons referred to in point 1 and 2.
The two opinions held in the legal practice are:
- The liability of the third party obliged under Art. 19, para. 1 and 2 of the TIPC shall not include the established interest obligation of the principal debtor. According to this opinion, Article 19 para. 1 and 2 of the TIPC are a private case of liability for another’s debts and should be strictly construed. These court judgments hold that the liability under Art. 19 of the TIPC is distinct from that of the liable third party under art. 14, point 3 of the TIPC and that its basis is in Art. 16, para. 1 of the TIPC.
- According to the other opinion, the liability of the third party under Art. 19, par. 1 and 2 of the TIPC includes the established interest obligation of the principal debtor. This group of decisions holds that the third party under Art. 19, para. 1 and 2 of the TIPC is the liable person under art. 14, point 3 of the TIPC – a person, who is liable for the obligations of legal persons under art. 14, p. 1 and p. 2 of the TIPC.
The SAC views the second opinion as correct, namely that the third taxable person under art. 19, par. 1 and 2 of the Tax Procedure Code also owes the interest which has been determined as the obligation of the principal debtor.
The arguments of the SAC in this regard are as follows:
- The systematic place of the above provisions, which at the same time regulate the liability of the third party as well as the types of taxable persons;
- Another argument for the opinion shared by the SAC is that in Art. 19, para. 1 and 2 of the TIPC, the definition of third parties corresponds exactly to the third type of obligated persons described in Art. 14 of the Tax Procedure Code;
- As the main argument in support of its thesis that the third party also owes the interest that is established for the obligation of the principal debtor, the SAC points out that the liability of the third party under Art. 19 of the TIPC doesn’t specify a specific type of ,“obligation”. It may be inferred from this that the legislator had in mind the definition in art. 162, par. 2 TIPC concerning public debts, which include both taxes and compulsory social security contributions and interest liabilities.
The answer given by the SAC is supported by legal scholars, too.
The decision was signed with the dissenting opinion of ten SAC judges.