One of the group's companies incurs tax debts. Should the holding company of the concern take responsibility for them? And what consequences can the concern have for these tax debts?
Who should take responsibility?
According to the Law "On Taxes and Duties" (Law on NN), the company that has incurred tax debts is responsible for tax debts, that is, in this case, the responsibility for paying tax debts is assumed by the company belonging to the concern, not the controlling company of the concern.
In addition, in accordance with Articles 26 and 26.1 of the Law on NN, the tax administration has the right to collect overdue tax payments in an undisputed manner by applying security measures for the execution of the collection decision to property or money belonging to the debtor.
For example, within the framework of recovery of overdue tax payments, the tax administration is entitled to perform the following actions:
- seize the debtor's funds in bank accounts;
- withdraw cash from the legal entity's cash register or other place of storage;
- carry out collection in an undisputed manner on the property of the taxpayer (movable and immovable property, also on property owned by the debtor that is with third parties).
So also in the case of tax debt collection, financial consequences are directed against the tax debtor himself.
Consequences that may occur
However, if compensation of overdue tax payments is not possible from a specific company, then the responsibility for the tax debts of the legal entity can be transferred to the members of the board, during whose term of office the overdue tax payments occurred, if the amount of the tax debt exceeds 50 minimum wages (620 euros in 2023). and other preconditions mentioned in Chapter 11 of the Law on NN "Reimbursement of overdue tax payments of legal entities" have occurred.
Likewise, if the state or local government has suffered large losses (the amount of tax debts is greater than 31 thousand euros, i.e. 50 minimum monthly wages), then the criminal liability for tax evasion provided for in Article 218 of the Criminal Law may arise.
The fines set for administrative violations in the field of taxation (for evasion of taxes and payment of payments equivalent to them) are applicable to natural persons and board members in accordance with Article 135 of the Law on NN.
Taking into account the above, it can be concluded that, in the general case, the leading company of the group should not have the obligation to compensate the tax debts of other companies belonging to the group.
However, it should be taken into account that according to Latvian judicial practice, unpaid taxes as a result of tax evasion may be recognized as criminally obtained funds within the framework of money laundering prevention regulations. Therefore, as a result of the discovery of cases of money laundering, financial consequences may arise for all involved persons/companies.
Source: iBizness