A secondary tax liability arises when a person is responsible for the due tax liability of another taxpayer or for the due secondary tax liability of another taxpayer.
Persons subject to secondary tax liability are:
1) legal representatives who have, knowingly or without due care, failed to discharge their obligation to pay taxes on behalf of the taxpayer, even though the taxpayer in subject was able to do so – for the amount of unpaid tax;
2) persons contributing to or assisting in the evasion of payment of another person’s tax – for the amount of such person’s tax debt the payment of which was evaded;
3) persons responsible for calculating and paying tax – for the amount of the tax that has not been paid, in cases where it is determied that such person did not act with due diligence;
4) a natural person who is a responsible person in a legal entity, who calculates and pays tax and fails to pay tax – for the amount of that tax that has not been paid, in cases where it is determined that such person did not act with due diligence;
5) a person who has received monetary assets, items or rights from the taxpayer’s property through a transaction without compensation or with compensation that is lower than the price that could be achieved on the market, in the period of five years before the due date of tax liability that was not paid on behalf of the taxpayer – for the amount of unpaid tax, and up to the value of the funds received, reduced by the amount the person paid for it. These persons will be responsible for the secondary tax liability only if these persons received funds from the taxpayer – a legal entity if the direct or indirect interest of such person in the equity of the taxpayer is or was at least 10%.
In the tax practice so far, this institute was applied mainly to the legal representatives of taxpayers who did not pay the tax related to those taxpayers, although the taxpayer was able to fulfill his tax obligation in the given period.
The secondary tax liability shall include interest and the costs of enforced collection, and the tax based on the secondary tax liability shall be determined by the tax administration by decision.
We state that the tax authority will make a decision on determining the tax on the basis of the secondary tax obligation only if the tax has not been collected by the measures taken against the taxpayer.
In connection with the above, the secondary tax liability represents the liability of the previously mentioned persons for the due tax liability of a certain taxpayer and as such represents an additional guarantee that the due tax liability of that taxpayer will be settled, if the enforced collection against that taxpayer does not ensure the collection of the tax debt.
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