The personal liability of managing directors for tax debts of the GmbH
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It is one of the duties of a prudent businessman to prepare the bookkeeping and annual financial statements of the company he manages regularly, punctually and carefully or to have them prepared by qualified specialists. These can be people employed internally for this purpose or external, e.g. tax consultants. However, very few managing directors are aware or conscious of the fact that there are also personal liability risks when managing a GmbH. It is usually tax consultants and not law firms who advise their clients to set up a GmbH. Often, however, they only advise them about the tax advantages and the general limitation of liability. What often falls by the wayside? The risks associated with the management of a GmbH. The following article provides you with an overview of the most important aspects of the personal liability of managing directors for tax debts: What tax law risks await you and when are you affected as a managing director? What happens if the authorities initiate criminal proceedings? How should you react?
When am I affected as a managing director?
Internal managing directors, for example sole shareholder managing directors, as well as external managing directors are liable for tax debts of the GmbH.
The same applies to de facto managing directors. In practice, the latter have the functions of a managing director of the GmbH, although they are not officially appointed to this position and are entered in the commercial register as the legal representative of the company. In doing so, they take on actions that usually fall within the remit of the management. However, in order for a de facto managing director to be held liable for any tax debts, they must fulfil certain requirements. For example, it is crucial that they exert a significant influence on the management and make or influence key decisions. Further details can be found in the case law of the Federal Fiscal Court. This emphasises the importance of the duty of care that all managing directors, whether internal, external or de facto, must exercise with regard to the financial obligations of the GmbH.
Risks relating to the liability of managing directors for tax debts
In addition to numerous civil and criminal law risks that can trigger personal liability on the part of the managing director, there are also tax law risks in particular. This is because § 69 in conjunction with §§ 34, 35 AO provides for extensive personal liability claims. This is the case if claims arising from the tax liability cannot be determined or fulfilled, or cannot be determined or fulfilled in good time, as a result of the managing director’s intentional or grossly negligent breach of the GmbH’s obligations. This also applies if the GmbH is unlawfully favoured by refunds due to corresponding breaches of duty.
Therefore, if the tax authorities are harmed by misconduct on the part of the managing director, the latter is personally liable for the GmbH’s tax debts to the full extent. It should be noted here: The liability includes any late payment penalties! This applies to all types of taxation (turnover tax, trade tax, corporation tax, wage tax, etc.). This can add up to considerable amounts over the years. In addition, such liability of managing directors for tax debts can also affect the personal creditworthiness of the managing director and have long-term financial consequences. It is therefore crucial that managing directors continuously inform themselves about their tax obligations and ensure that they fulfil them conscientiously.
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Hearing procedure and liability notice:
It is not uncommon for people to panic when the tax office or the municipal treasury contacts them to conduct a so-called “hearing procedure”. This regularly precedes a liability assessment notice, which makes the managing director personally liable for the GmbH’s tax debts. This hearing procedure gives the managing director the opportunity to comment on the reason for and amount of the tax debts.
This request for a statement by the tax office or the municipal treasury should always be taken seriously. Legal assistance should be sought. It is not uncommon for the worst to be averted at this stage and for an agreement to be reached with the tax office on the amount of the tax debt and the terms of payment. At best, personal liability can be completely averted. What to do if a liability assessment has already been issued? With the support of a lawyer, you can now lodge an appeal. Alternatively, you can also negotiate deferrals and instalment payments.
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However, it is even better if you seek advice on the risks and responsibilities of a managing director position in a GmbH in good time in order to avoid personal liability from the outset.
Conclusion: Liability of managing directors for tax debts
The role of the managing director therefore involves much more than just running the day-to-day business. It also entails significant responsibilities and legal obligations, particularly with regard to tax matters. The personal liability of managing directors for tax debts is a serious risk that should not be underestimated. It is crucial to be aware of this responsibility and take proactive measures. In this way, you minimise potential risks. Conscientious bookkeeping, compliance with all tax regulations and regular consultation with lawyers are therefore important. Please contact our law firm LLP Law|Patent in Munich.
Patricia Lotz | Rechtsanwältin (Lawyer)
Ms. Lotz focuses mainly on court proceedings. For over fourteen years, she has primarily represented industrial clients and SMEs in the IT and technology sector. She is also experienced in private construction law, employment law, commercial administrative law in disputes with trade offices amongst others and in the special case of “company audits and pseudo self-employment” in social law on behalf of companies.
Her primary goal is to avoid legal disputes wherever possible. However, if this is not possible or reasonable, she develops a suitable litigation strategy with her clients based on her many years of experience throughout Germany before civil, labor, administrative and social courts. Ms. Lotz also provides legal advice on employee invention law and foreign trade law, particularly on the export of dual-use goods.
