At Resitax, a leading law firm in Mallorca specializing in tax and insolvency law, we help companies and directors prevent and manage tax liability claims. This procedure, regulated by the General Tax Law, can put directors’ personal assets at risk in cases of fiscal insolvency. In this article, we explain how voluntary insolvency proceedings can become an effective legal strategy to protect assets and ensure business continuity.
What Is Tax Liability and How Does It Affect Businesses in Mallorca?
Tax liability is an administrative procedure that allows the Spanish Tax Agency to demand payment of tax debts from individuals other than the main debtor.
In Mallorca, this mechanism can particularly affect company directors and managers facing financial difficulties.
Types of Liability under the General Tax Law
- Subsidiary liability (Art. 43 LGT): applies to de jure or de facto directors who, upon leaving their position, fail to settle outstanding tax debts, or who, through negligence or fraud, fail to meet tax obligations such as withholdings or payments on account.
- Joint liability (Art. 42 LGT): applies to those who take over a business or economic activity, assuming any tax debts generated.
The most serious consequence is that the company’s debt becomes a personal obligation of the director, who must respond with their entire personal estate.
Voluntary Insolvency Proceedings: A Key Tool for Asset Protection
At Resitax Mallorca, we advise companies on how to use voluntary insolvency proceedings not only as a solution to insolvency but also as a strategic asset protection measure.
Suspension of Proceedings and Protection Against the Tax Agency
Under Article 142 of the Insolvency Law, the declaration of insolvency halts enforcement and administrative proceedings, including tax liability procedures for debts incurred before the declaration.
Integration of Public Debt into the Insolvency Process
The insolvency process consolidates all debts, including those owed to the Tax Agency. Although the Tax Agency is a privileged creditor, its claims are still subject to the insolvency process.
The Insolvency Agreement: Viability and Legal Safeguard
The insolvency agreement allows the debtor company to propose a payment plan to creditors, including debt reductions (quitas) and payment extensions (esperas).
Restructuring of Tax Debt
New terms and reductions are agreed upon, making it easier for the company to meet its tax obligations.
Elimination of the Grounds for Liability
Once the agreement is fulfilled, the original tax debt is considered settled, removing the basis for the Tax Agency to continue with tax liability proceedings against the directors.
Planning Ahead: Expert Legal Advice in Mallorca
Voluntary insolvency proceedings are not only aimed at restoring a company’s financial viability but also at protecting directors’ personal assets.
At Resitax Mallorca, we recommend acting proactively, assessing the company’s financial and tax situation before Tax Agency actions threaten personal assets.
If you need an expert lawyer in tax and insolvency law in Mallorca, Resitax offers you comprehensive, tailored legal advice.
