Successfully ward off the tax office’s application for insolvency – use the discretionary control of the tax courts

Anyone can apply for insolvency against a debtor if the minimum requirements of the Insolvency Act are met and complied with. The health insurance companies and the tax offices make the most use of this option.

In contrast to private individuals and companies, however, the public sector and thus also the tax office must observe their own special rules in the respective administrative law in addition to the provisions of the insolvency law; the tax offices the rules in the Tax Act (AO).

If someone applies for insolvency against a debtor, the insolvency court will check whether the insolvency law requirements are met and then make a decision.

However, if the tax authorities file an insolvency petition, if the insolvency debtor acts wisely, not only the insolvency court but also the tax court will determine whether the respective requirements have been met.

I will not deal with insolvency law issues today, but with financial law issues which must be dealt with by tax offices when they apply for insolvency. If things go wrong here, a tax debtor can take very effective action against the tax office, which has a quick and lasting effect and forces the tax office to withdraw the insolvency petition.

Illegal bankruptcy filing

A request for insolvency from the financial authority is unlawful from a financial procedural law point of view if the general enforcement requirements are not met (§ 249, subsection 1, § 251, subsection 1, § 254 AO), a justification for opening is, among other things . not credible (section 16 InsO) or the application despite the Existence of a justification for opening is an error of judgment (cf. FG Köln, judgment of 9 November 2004 – 15 K 4934/04 -, EFG 2005, 372; FG Sachsen , decision of 1 June 2007 – 1 V 990/07 -, paragraph 5, juris; FG Hessen, decision of 25 April 2013 – 1 V 495/13 -, juris; FG Munich, decision of 23 July 2009 – 14 V 1869/09 -, juris; Finanzgericht Rheinland-Pfalz, judgment of 29 June 2021 – 4 K 1032/21 -, paragraph 50, juris).

discretionary control

Since the filing of the bankruptcy petition is a so-called simple administrative act, the tax office has used its discretion in the necessary manner. The tax courts are obliged to carefully examine the tax office’s considerations. To do this, they must consider whether the tax office has sufficiently considered the effects of the insolvency petition on the debtor’s interests and how significant the effects of the insolvency petition are in relation to the principle of insolvency. equal taxation.

And this is where the crowbar comes in:

Any argument relevant to the processing must appear in the insolvency petition (according to the Tax Court of Niedersachsen-Anhalt), at least in a written note from the tax office made before the application is submitted (Sachsen-Anhalt Tax Office, decision of September 24, 2015 – 3 V 916/15 -, EFG 2015, 2194; Rhineland-Palatinate Financial Court, judgment of 29 June 2021 – 4 K 1032/21 -, paragraph 54, juris).

Although the tax office can improve its discretion slightly in the event of a legal dispute, the tax office cannot change them completely or even reconsider for the first time (it is consistent jurisprudence, rather than many: BFH, judgment of 11 March 2004 – VII R 52 /02 -, BFHE 205, 14, BStBl II 2004, 579; BFH, decision of 9 November 2004 – VI B 39/02 -, BFH/NV 2005, 378; BFH, judgment of 1 July 2008 – II R 2 /07 -, BFHE 222, 68, BStBl II 2008, 897; BFH, judgment of 24 April 2014 – IV R 25/11 -, BFHE 245, 499, BStBl, 82914, II.; BFH, judgment of 27 November 2019 – XI R 56/17 -, BFH/NV 2020, 775; Finanzgericht Rheinland-Pfalz, judgment of 29 June 2021 – 4 K 1032/21 -, paragraph 55, juris).

The tax court then checks whether the tax authority has seen and assessed all matters of importance for the decision, which entails the need for legal protection for a tax court treatment of an insolvency petition submitted by the tax office. In the course of its investigation, the financial court has in particular the forecast of a change in a basic decision that is favorable to the judgment debtor, the prospects of being successful in an application for exemption or postponement that is still open, the cooperation of the previous judgment debtor, the prospect that the tax debt will be paid by another co-debtor, to consider the prospect of paying the tax arrears – possibly in installments – and taking into account the tax consequences of a petition for insolvency, e.g. the case of an existing tax group (BFH, decision of 25 February 2011 – VII B 226/10 –, BFH /NV 2011, 1017; BFH, decision of 31 August 2011 – VII B 59/11 -, BFH/NV 2011, 59 , juris).

The documentation must be correct at the tax office

Especially when a large number of declarations and applications are submitted to the tax office in good time, the tax office must process them in documented way (in an archive note or in the insolvency petition itself) must be written down beforehand, in a “proper way”, that is to say that the individual considerations in the decision-making process can be understood by the financial court.

This documentation must then show how much and with what exactly the tax office has checked to take less drastic measures towards the debtor in relation to the insolvency petition and why these failed or should not have been considered from the start.

Shortly said: It must be documented in advance in writing why the insolvency petition should have been the last opportunity for the tax office to act before the petition was actually filed. It must therefore be written down in advance why less onerous measures for individual enforcement have been exhausted or promise no prospect of success (Köln District Court, decision of 19 March 2009 – 15 V 111/09 -, EFG 2009, 1128; Hessen District Court , decision of 25 March 2013 – 1 V 495/13 -, juris; FG Saxony, decision of 2 July 2013 – 6 K 813/13 -, juris).

The Tax Office must consider the taxpayer’s individual applications and remedies thoroughly in this assessment note and assess their chances of success thoroughly. If something is missing, it is a discretionary loss and the tax court can therefore order the tax office to withdraw the application for insolvency.

I have been helping my clients fight for their rights for many years, and I am always surprised at how vulnerable administrative action often is. If such mistakes can be existentially devastating, action must be taken quickly, even in advance. There is an opportunity to use tactically clever actions to force the tax authorities to make mistakes or at best deter them from going to insolvency court at all due to the error proneness of filing an insolvency petition.

But whatever the case may be: You have to quickly check what concretely can still be enforced – the possibilities for this exist even in seemingly hopeless situations and can be used.

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