"ABC" OF THE ENTREPRENEUR – CRIMINAL LIABILITY OF THE ENTREPRENEUR FOR NON-PAYMENT OF TAXES

Non-payment of taxes may result in a financial penalty for the entrepreneur. This penalty is usually proportional to the amount of overdue taxes. The amount of the penalty is determined on the basis of tax law and may include interest on overdue payments.

What does persistent non-payment of tax mean?

Persistent non-payment of tax is regulated in Article 57.1 of the Fiscal Penal Code, which states that a taxpayer who persistently fails to timely pay tax is liable to a fine for a fiscal offence. In turn, a persistent behaviour of a taxpayer is considered to be that that is for a long period of time or is a repeated behaviour. Non-payment of tax means, firstly, that the taxpayer has some tax obligation that has not been fulfilled and, secondly, that the tax should be paid within a certain time limit set by tax law. Unfortunately, the law does not specify what persistence in non-payment of taxes is to consist of. On a case-by-case basis, non-payment of tax can be considered to be persistent when the numerous and repeated behaviour of the taxpayer consisting in failure to pay on time is also failure to pay for a longer period of time.

Imprisonment?

In some cases, specifically in the cases of serious tax fraud, the entrepreneur concerned may be sentenced to imprisonment. This type of penalty is used as a last resort, only when a serious tax crime has been committed, and is usually the result of proceedings by law enforcement authorities such as the police and the public prosecutor's office.

Consequences under civil law

In addition to financial and criminal penalties, businesses may also face civil law consequences. These may include compensation claims from the tax office to recover outstanding taxes and interest. In addition, there may also be civil claims from other parties, such as creditors and contractors.

Loss of repute – (important also from the point of view of compliance)

Improper accounting with the tax authorities can lead to a loss of trust from customers, business partners and other entities. The loss of repute can negatively affect the business and lead to a loss of customers and difficulties in establishing new business relations, and this usually translates into a real loss of profit for the sole trader.

Control and audits

It is possible that not everyone reckons that, but everyone knows that the Tax Office has the right to conduct tax audit of businesses to check the accuracy of tax accounts. Irregularities detected during an audit may result in penalties and additional tax charges.

In summary, to avoid criminal liability for non-payment of taxes, entrepreneurs should keep accounts accurate and compliant with law, submit tax returns regularly and pay outstanding payments on time. It is also advisable to use the services of a tax advisor or an experienced attorney/legal advisor who will assist in maintaining tax compliance and mitigating the risk of criminal liability, as well as in conducting business according to the principles of compliance.

Finally, it is worth taking account of  the fact that not paying taxes is not only illegal, but also unfair in from of other citizens and entrepreneurs who diligently fulfil their tax obligations. Therefore, it is important to be a responsible taxpayer and comply with the applicable tax laws.