Solidarity for tax purposes, i.e. the possibility for the Tax Administration to demand from any of the debtors the totality of the obligation, is currently contemplated in Article 16 of the Code of Tax Rules and Procedures, but it applies only to existing debts and Article 22 establishes that the partners are jointly and severally liable, but only in the case of liquidated companies in which they were partners at the time of liquidation.
The main effects of solidarity are:
a) The obligation may be demanded in whole or in part from any of the obligors, at the option of the obligor.
b) Payment by one of the debtors releases the other debtors.
As part of the reforms proposed by the tax authorities to the Legislative Assembly last Thursday, it is proposed that the partners will now be responsible for the debts of the companies, a novel issue that clearly generates a high risk for the partners, many of them passive, who have no way to control the actions of the administrators that may have consequences before the tax authorities. Thus the proposed addition of Article 22 bis:
Article 22 bis. Joint and several liability of partners for partnership taxes.
The partners, co-participants, associates, cooperative members, co-owners and consortium members shall be jointly and severally liable for the taxes and interests of the legal person or collective entity without legal personality of which they are members, partners, co-participants, associates, cooperative members, co-owners or consortium members, pro rata to their contributions or participations, up to the limit of these, in cases where there is limited liability of its members, and of the time during which they have owned them in the respective taxable period.
In other words, the tax authorities can collect the debts of the company from a partner, but only up to the limit of his contributions. This applies to all types of business organizations, not only to partnerships.
But not only the partners, but also other companies of an economic group, a definition that is left to the regulations, could be jointly and severally liable, that is to say that the tax authorities can collect the debt from any of them, from any other person or company of the economic group:
"The persons, companies or entities that make up an economic group are jointly and severally liable for the tax debts generated by each of them."
Then, subsidiary liability is established, which applies if the principal debtor does not pay, as a new and non-existent assumption in our environment, so that if, for example, the partner does not pay his debts, the tax authorities could try to collect them from the company of which he is a partner:
"Subsidiary liability for the tax debt of the partners, associates, members or co-participants, the legal persons constituted by those in which they have effective control, total or partial, direct or indirect, or in which there is a common guiding will with them, when it is proven that the legal persons have been constituted or used in an abusive or fraudulent manner to evade the patrimonial liability before the Treasury." Article 25 bis of the draft.
This assumption applies in case the Tax Administration proves that the other companies or legal entities were created for the purpose of avoiding the payment of taxes.
Another novel issue introduced is the lifting of the corporate veil, which means that for tax purposes, and if it is proven that a case of fraud is involved, the existence of the companies is unknown and the individual partner is made jointly and severally liable for the company's obligations.
Likewise, the legal representative who is not a partner, usually the administrator or manager, could be held jointly and severally liable, to the extent and when so determined by the judicial authority in charge of the case.
Analysis: We are clearly facing changes that seek to discourage the creation of structures to avoid paying taxes, or rather, the impossibility for the tax authorities to collect the debts determined in their control actions. Until today, solidarity in the face of tax debts was something difficult to apply, but with these rules, if they become law, the perception of risk would increase and the partners could see their personal assets compromised by the taxes of the companies of which they are partners, even if they are minority shareholders.
Ehe message that the reform seems to send is that the partners should have more control over the good fiscal governance of the companies, although it seems negative to me that any company of an economic group should be held responsible for the debts of others when consolidation is not allowed for tax purposes and when clearly, economic groups are such for commercial and strategic and not fiscal reasons. Furthermore, such qualification, if not properly delimited, could give way to administrative arbitrariness.
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