At Resitax, a leading law firm in Mallorca specializing in tax and insolvency law, we help companies and directors prevent and manage situations involving the transfer of tax liability. This procedure, regulated by the General Tax Law, can jeopardize the personal assets of directors in cases of tax insolvency. In this article, we explain how voluntary insolvency proceedings can become an effective legal strategy to protect assets and ensure the continuity of the company.
What is the transfer of tax liability and how does it affect Mallorca?
The transfer of tax liability is an administrative procedure that allows the Tax Agency to demand payment of tax debts from individuals other than the primary debtor.
This mechanism can particularly affect directors and managers of companies experiencing financial difficulties.
Types of liability according to the LGT
- Subsidiary liability (art. 43 LGT): applies to de facto or de jure administrators who, upon leaving office, have not settled tax debts, or who, through negligence or fraud, have failed to comply with tax obligations such as withholdings or payments on account.
- Joint and several liability (art. 42 LGT): falls on those who succeed to the ownership or exercise of an economic activity, assuming the debts generated.
The most serious consequence is that the company's debt becomes a personal obligation of the administrator, who will be liable with all of his assets.
Voluntary insolvency proceedings: a key tool for protecting assets
At Resitax Mallorca we advise companies on how to use voluntary insolvency proceedings not only as a solution to insolvency, but also as a strategy for protecting assets.
Suspension of proceedings and protection against the Tax Authorities
According to Article 142 of the Insolvency Law, the declaration of insolvency suspends executions and administrative procedures, including those for the transfer of tax liability for previous debts.
Integration of public debt into the insolvency process
The insolvency proceedings centralize all debts, including those owed to the Tax Agency. Although the Tax Agency is a preferred creditor, its claim is still subject to the proceedings.
The insolvency agreement: viability and legal protection
The insolvency agreement allows the debtor company to propose to its creditors a payment plan with debt forgiveness (reduction of debt) and payment deferrals (postponement of due dates).
Tax debt restructuring
Terms and reductions are agreed upon that facilitate compliance with tax obligations.
Extinction of the cause of referral
Once the agreement is fulfilled, the original debt is considered settled and the basis for the Tax Agency to continue with the transfer of liability against the administrators disappears.
Anticipation and specialized advice in Mallorca
Voluntary insolvency proceedings not only aim to safeguard the company's financial viability but also protect the personal assets of its directors . At Resitax Mallorca , we recommend taking a proactive approach, analyzing your financial and tax situation before the Tax Agency's actions jeopardize your personal wealth.
If you need a lawyer specializing in tax and insolvency law in Mallorca, at Resitax we offer comprehensive advice tailored to your case.