VAT non-payment offence also exists in case of liquidity crisis

The Criminal Section of the Supreme Court, in its ruling No. 33430 filed on July 31, 2023, held that the crime of failure to pay VAT exists even if the taxpayer has a liquidity crisis. In this regard, it specified that in order to exclude the guilt by invoking the liquidity crisis, it is necessary to prove that crisis did not depend on the conscious choice not to fulfill the tax obligation. In addition, proof is required that the crisis was unforeseeable and that the taxpayer took all appropriate measures to avoid the failure to pay the tax.

The case

The accused M.S. was condemned by the Court of Appeals of Lecce for the crime of failure to pay VAT under Article 10-ter of Legislative Decree No. 74/2000.
Against this decision, the defendant appeals in the Supreme Court.

He challenged the contested decision for violation of Articles 10-ter of Legislative Decree No. 74/2000, 45 of the Criminal Code (fortuitous event and force majeure) and 54 of the Criminal Code (state of necessity) on the grounds that the liquidity crisis, which had led to the inability to pay the VAT, had not been caused by the defendant himself, depending on facts beyond his control and unforeseeable.

In particular, the defendant claimed that the decision not to pay the tax had been determined by the revocation of a subsidized loan and the inability to access new financing, as well as the loss of receivables amounting to hundreds of thousands of euros. To this was to be added even the delay in compliance by the same public administration in the payment of a credit. 

In this context, the fulfillment of the tax obligation would have irreparably jeopardized the company's operations and its ability to pay salaries to employees; therefore, the failure to pay VAT was to be considered excusable and not criminally punishable under Articles 45 and 54 of the Criminal Code.

The decision

The Supreme Court, in the decision under comment, declared the appeal inadmissible, leading to an obligation to pay trial costs.

The Court affirmed that the crime of failure to pay VAT involves a mixed conduct: a commissive component represented by the submission of the VAT return, by the obligated party, with a balance in excess of 250,000 euros; and an omissive component consisting of the failure to pay the self-assessed VAT. The subjective element is represented by the generic fraudulent intent, since the specific purpose of evading taxes is not required.

That said, the Supreme Court points out that, in order to exclude culpability by invoking a liquidity crisis, proof is required that said crisis did not depend on a conscious choice not to fulfill the tax obligation. Furthermore, proof is required that the crisis was unforeseeable and that the taxpayer took all appropriate measures to avoid the failure to pay the tax, having been unable to remedy it in a timely manner due to causes beyond his control.

The court affirmed that the company, faced with a liquidity crisis that had been going on for years, should have previously considered in its business policy choices the need to fulfill its tax obligation. It was also noted that the events relied upon - including the revocation of the loan - predated the criminal acts by as much as three years and, therefore, placed the defendant in a position to take appropriate action to deal with the financial crisis.

In particular, it was found that the defendant failed to provide evidence that he took actions to deal with the economic difficulties with appropriate measures, including measures unfavorable to his personal wealth. 

Force majeure, invoked by the taxpayer as a cause of non-punishability, exists only in those cases in which the realization of the criminal event is due to the absolute and unreasonable impossibility of the person to comply with the legislative provision. The mere difficulty of enacting the behavior required by the rule is not relevant for this purpose and the existence of a margin of choice always excludes force majeure.