The most important facts in brief:
- Representatives are liable like guarantors for the company's tax debts.
- In particular, managing directors, board members and personally liable partners are considered representatives.
- A breach of duty occurs when a tax is not paid or a tax return is not submitted.
What are the requirements of § 69 AO?
The prerequisite for liability under Section 69 AO is that the manager has breached a duty and a tax has not been assessed or paid as a result. Put simply, the following are liable Managing Director under Section 69 AO as a guarantor for the company's taxes. § Section 69 AO is intended to ensure that companies pay their taxes. If a company is unable to pay its taxes, the § 69 AO ensure that the management pays the taxes.
The following requirements must be met for representatives to be liable under Section 69 AO:
- Representative
- Breach of duty
- Tax damage
- Fault
- Damage
Who is a representative within the meaning of Section 69 AO?
Liability under § 69 AO applies exclusively to representatives in accordance with §§ 34, 35 AO. Who exactly counts as a representative depends on the legal form. In the case of the GmbH, the managing directors are the representatives and in the case of the association and the stock corporation, the board members. In the case of the GmbH & Co. KG, the managing director of the general partner GmbH is the representative. If a company is insolvent, the insolvency administrator is considered the representative. The background to this is that the insolvency administrator is regarded as an asset manager in accordance with Section 34 (3) AO, meaning that the insolvency administrator is subject in particular to the obligation to ensure that taxes are paid. The provisional insolvency administrator, on the other hand, who has no power of administration and disposal (so-called weak insolvency administrator), is not considered a representative as he does not assume any management function in the company.
When is there a breach of duty?
There must be a breach of duty. For liability under Section 69 AO, there is a breach of duty if the tax return is not submitted completely, correctly and/or on time (so-called Duty to declare). On the other hand, a breach of duty can be considered if due claims from the tax relationship are not fulfilled on time (so-called Obligation to pay).
- Time scopeIn principle, representatives are only liable for breaches of duty during their time as representatives. However, when taking on the role of representative, it must also be checked whether the tax obligations have been fulfilled to date. Any omissions must be made up for, otherwise the new representative is also in breach of duty.
- Provision of fundsIt is also part of the representative's duties to keep sufficient funds available to pay the taxes. However, it follows from Section 15 (8) InsO that there is no breach of duty if the taxes are no longer paid after a proper insolvency application has been filed. If there are several representatives, e.g. several managing directors, it is possible to divide responsibilities. If only one representative is responsible for the taxes, the other representatives "only" have the task of monitoring the responsible representative.
When does liability damage occur?
The breach of duty must result in the state incurring a tax loss. As a rule, tax damage is caused by the fact that the tax was either not assessed at all (in the case of a breach of the obligation to declare) or the tax was not paid (in the case of a breach of the obligation to pay). In exceptional cases, a tax loss may also arise if a tax refund is paid without justification.
When is fault present?
Fault exists if the representative has acted intentionally or negligently. The representative acts intentionally if he or she deliberately causes the breach of duty. Gross negligence exists if the representative acts with a particularly high degree of carelessness. However, according to the case law of the Federal Fiscal Court, in most cases the breach of tax obligations already leads to the representative having acted with gross negligence. The accusation of gross negligence is only waived in a few exceptional cases:
- ExampleIf a tax consultant, a lawyer or the tax office has provided incorrect information, the accusation of gross negligence does not apply.
- CounterexampleThe accusation of gross negligence does not cease to apply due to a lack of knowledge of tax obligations. If representatives have no knowledge themselves, they must either inform themselves or appoint advisors.
In principle, fault does not cease to exist even if the company has no money. There is no fault until the insolvency application has been duly filed.
What is the scope of liability?
The representative's liability under Section 69 AO covers the entire loss incurred by the state. In concrete terms, this means that the representative is liable for all unpaid taxes, late payment penalties and interest. For the scope of liability, it is irrelevant whether the representative acted with intent or gross negligence.
Overall, the representative is liable under Section 69 AO like a guarantor for the tax debts of the represented party (e.g. the GmbH).
When is the tax authority likely to take action?
The tax office may only take action if the assertion of the claim against the represented party (e.g. against the GmbH) has failed. The tax authority has discretion as to whether and against which representative the authority takes action. The question of whether the tax authority takes action against a representative depends on whether the tax claim against the company could be enforced. If the company settles the claim, there is already no loss. For this reason, the tax authorities generally only take action against representatives if the claim against the tax authorities has failed.