Section 96 of the Taxation Act allows the tax authority to issue a liability decision to recover a company's tax debt directly from a management board member.
This has prompted mistaken assumptions, including that board members personally guarantee company taxes or are automatically liable for arrears.
Broadly, there are two principal conditions. First, the company has a tax debt that the authority has been unable to recover from it. Second, the member intentionally or through gross negligence breached the duty to organise proper fulfilment of tax obligations, causing that debt.
A board member is therefore not automatically personally liable. Tax obligations belong to the company. The member must organise their lawful fulfilment with the care normally expected of a prudent manager, establishing suitable management and supervision. Breach of care and loyalty may be relevant, but proper performance of duties does not create liability merely because other circumstances produce arrears.
Such circumstances may include realised business risks, losses and a liquidity crisis or insolvency. Depending on the situation, the source article discusses prioritising obligations necessary for the company's survival. Company interests and limited liability remain relevant. Nevertheless, financial difficulty does not justify passivity: returns must be filed, the authority engaged and payment arrangements explored.
The higher culpability threshold of intent or gross negligence can also exclude liability where a member acts in good faith according to the statute but the authority later interprets the taxable event differently.
Where tax rules are difficult to understand, obtaining specialist advice helps demonstrate due care. An advance ruling or written explanation from the authority may also be useful in a later liability dispute.