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TAX & BUSINESS
Liability of Managing Directors in Insolvency
A managing director of a GmbH can be held liable for taxes assessed through a tax audit even if those taxes were already due before the insolvency.
Managing directors of a GmbH are liable for the company’s obligations only where statutory provisions expressly require it or where the director fails to fulfil his duties of care properly. This also applies in the event of insolvency.
Decision of the Federal Fiscal Court (Bundesfinanzgericht, BFG)
The Federal Fiscal Court (BFG) has held in a recent ruling that, under the above conditions, managing directors are also liable for taxes that were already due before the GmbH’s insolvency but were only assessed by the tax office after the insolvency was opened.
After the insolvency proceedings of a GmbH had been concluded, the tax office informed a managing director of the GmbH that he would be held liable for the company’s outstanding wage taxes. He contested the liability claim on the grounds that the additional payments of wage tax, social security contributions (DB) and health insurance contributions (DZ) should not be included in the liability notice, because these tax liabilities were based on an assessment made after the opening of insolvency due to audit findings, even though the tax claims had arisen before the insolvency proceedings were opened.
Insufficient Evidence
The BFG’s decision is based on the fact that the managing director did not provide sufficient evidence that he had no funds available to settle the taxes. Furthermore, he could not demonstrate that he had treated the GmbH’s creditors equally. The file also contained no indications of complete assetlessness at the respective tax due dates. Because there was no detailed quantification and assertion of the extent of the insufficiency of available funds at the due dates, the BFG concluded that a limitation of the director’s liability to part of the tax debt was not permissible.
In addition, the court pointed out that a managing director can be held liable for taxes assessed through a tax audit even if those taxes were originally due before the insolvency. The timing of the assessment after the opening of insolvency does not change the obligation to pay the taxes when due nor the director’s liability.
Conclusion
The decision makes clear how important it is for managing directors to monitor and document the financial and legal obligations of the GmbH they represent. Without the appropriate evidence, liability for the GmbH’s outstanding taxes can quickly become a personal responsibility.
Decision of the Federal Fiscal Court (Bundesfinanzgericht, BFG)
The Federal Fiscal Court (BFG) has held in a recent ruling that, under the above conditions, managing directors are also liable for taxes that were already due before the GmbH’s insolvency but were only assessed by the tax office after the insolvency was opened.
After the insolvency proceedings of a GmbH had been concluded, the tax office informed a managing director of the GmbH that he would be held liable for the company’s outstanding wage taxes. He contested the liability claim on the grounds that the additional payments of wage tax, social security contributions (DB) and health insurance contributions (DZ) should not be included in the liability notice, because these tax liabilities were based on an assessment made after the opening of insolvency due to audit findings, even though the tax claims had arisen before the insolvency proceedings were opened.
Insufficient Evidence
The BFG’s decision is based on the fact that the managing director did not provide sufficient evidence that he had no funds available to settle the taxes. Furthermore, he could not demonstrate that he had treated the GmbH’s creditors equally. The file also contained no indications of complete assetlessness at the respective tax due dates. Because there was no detailed quantification and assertion of the extent of the insufficiency of available funds at the due dates, the BFG concluded that a limitation of the director’s liability to part of the tax debt was not permissible.
In addition, the court pointed out that a managing director can be held liable for taxes assessed through a tax audit even if those taxes were originally due before the insolvency. The timing of the assessment after the opening of insolvency does not change the obligation to pay the taxes when due nor the director’s liability.
Conclusion
The decision makes clear how important it is for managing directors to monitor and document the financial and legal obligations of the GmbH they represent. Without the appropriate evidence, liability for the GmbH’s outstanding taxes can quickly become a personal responsibility.