In its decision, the Administrative High Court dealt with the liability of a managing director in connection with unpaid tax payments and thereby addressed the equal treatment obligation of creditors regarding tax debts and liabilities in the case of payments by third parties (Administrative High Court 23. April 2021, Ra 2020/13/0108).
The tax authorities issued a liability assessment addressed to a managing director to pay the entity´s existing tax debt pursuant to Sec 9 Federal Tax Code (“BAO”). In the subsequent appeal proceedings, the managing director argued that third parties had made the payments prior to the opening of insolvency proceedings. The Tax Appeals Court granted the appeal and annulled the decision because the managing director had no liquid funds at his disposal to cover the tax claims. Therefore, in the absence of liquid funds, the managing director did not violate any duties under tax law. As for the culpability of the managing director, it must be considered that he used funds from his private assets to pay the liabilities. As he did not use business funds for the pro rata payment of the tax debts the payments from his private funds should be disregarded. The tax authorities filed an appeal against the Tax Appeals Court´s ruling.
According to the previous rulings, it is the duty of the managing director to prove why she or he could not ensure that the entity's tax claims are paid. If the obligation is not fulfilled and no justification is provided, the tax authority may assume a culpable breach of duty, which is also the cause of the non-collectability. The managing director is therefore liable for the unpaid tax claims, unless she or he can prove that the debts were not treated differently in comparison to other liabilities (principal of equal treatment of creditors).
In its decision, the Administrative High Court differentiates with regard to the liability between the possibility of the manager to influence the use of the funds of third parties. If the payment to a creditor of the taxpayer is made by a third party and the manager cannot influence the use of the funds, she or he is no liability as it does not violate the principle of equal treatment of creditors. If a third party makes payments to a creditor as instructed by the manager, the manager can influence the use of the funds and is thus obliged to treat the liabilities equally. If she or he fails to fulfill this obligation, she or he can be held liable.
The same applies to payments made by the manager from her or his own assets: If the manager makes payments from her or his own funds to the entity's creditors in fulfillment of a liability owed to the entity, these funds are made available to the taxpayer. The obligation to treat creditors equally must be considered. The same shall apply in the case of funds that are merely provided by the managers without also fulfilling a liability owed to the entity.
To hold a representative liable in the case of payments by third parties, it is necessary to examine the extent to which the representative can influence these payments to creditors of the entity. If liabilities are settled by third parties and the representative has no right to influence the use of the funds, the representative cannot be held liable.
However, if the representative can influence the payments made by third parties (or makes payments herself or himself), funds are available to the company and the principle of equal treatment of creditors must be observed. If the creditors are not treated equally on a pro rata basis, the representative is liable for the tax claims and may be forced to pay them.
Madeleine Grünsteidl ist Steuerberaterin bei Deloitte Wien. Ihre Tätigkeitsschwerpunkte liegen im Verfahrens- und Finanzstrafrecht, in der Beratung von Privatpersonen (Private Clients) sowie Körperschaften und im internationalen Steuerrecht. Zudem ist sie spezialisiert auf Fragestellungen im Zusammenhang mit dem Wirtschaftliche Eigentümer-Registergesetz. Sie ist regelmäßig als Fachautorin und Fachvortragende tätig.