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Commercial Unreliability because of tax and contribution arrears as well as issuing an order of punishment
12. November 2018
At the same time, the Administrative Court of Munich dealt with the question of commercial unreliability. 1. with resolution of 05.10.2018 in the procedure Az. 22 ZB 18.841 the request for permission of the appeal was rejected by the VGH Munich.
In the underlying case, the plaintiff and operator of an ice cream parlour received a penalty order for withholding and embezzlement of wages in 37 factual majority cases with permission for a pub and food business, whereupon the responsible District Office revoked the permission under catering law. The decision was based on the order of punishment. The plaintiff no longer possesses the necessary reliability, since it had employed over a period of four years at least four persons in its ice cafe, without announcing this and by its misconduct a contribution damage of 51.056,83 ? had resulted.
The plaintiff raised the objection that he had been sentenced by way of an order of summary punishment and that the German Pension Insurance only spoke of a contribution loss of € 33,982.81 and a breach of the obligation to report immediately in respect of three employees known by name. The sum contribution answer is the subject of a social court procedure still pending.
Here the VGH Munich clarified that the administrative court rightly adjusted on the fact that the evaluation of the plaintiff as commercial-juridically unreliably does not depend crucially on a certain damage height. A persistent breach of social security obligations suggests unreliability under trade law, as this impairs the employee’s insurance claim and damages the insurer’s assets.
The violation of the social security reporting and contribution obligations occurred over a considerable period of four years. Furthermore, it weighs heavily for the Administrative Court that the plaintiff had demonstrably continued to hold on to the practice of not registering his employees in breach of duty until the business premises were searched in August 2013, even though a first customs inspection had already taken place at the ice cream parlour in May 2012 by the main customs office.
The plaintiff had also not substantiated the extent to which the calculation of the German pension insurance is incorrect in the notification of the sum contribution with regard to the amount of damages. 2. in the second procedure Az. 22 CS 18,1795 the VGH Munich decided likewise with resolution of 05.10.2018 to reject the complaint against the resolution of the administrative court on refusal of the re-establishment of the suspensive effect.
For the VGH Munich, there were no doubts as to the correctness of the contested decision. It could not credibly substantiate the applicant’s objection to the forecast made in the context of the evaluation as unreliable under trade law that it would not comply with its public law tax and contribution arrears at present and in the future. The Administrative Court had correctly pointed out that the improvement in economic conditions presented by the applicant at her hearing was merely claimed and not substantiated. Even under the pressure of the revocation proceedings, it had not succeeded in fulfilling its current tax obligations, in concluding repayment agreements or in submitting a viable restructuring concept.
Irrespective of this, the Administrative Court rightly assumed that the failure to submit tax returns can in itself constitute unreliability under trade law if the declarations are not submitted over a long period of time despite being persistently recalled.
In accordance with the case-law of the Constitutional Court, the Administrative Court assumed that the ordering of the immediate execution of the revocation of the restaurant permit presupposed that the continued operation of the restaurant during the duration of the legal dispute would give rise to fears of concrete dangers for important common property. A positive development with regard to payment arrears had not been discernible and a viable restructuring concept had not been submitted. On the contrary, the arrears had increased significantly since the issue of the contested decision. The applicant has not put forward any concrete, verifiable arguments against the negative forecast made by the Administrative Court regarding the further development of the debt level. 3. In such a constellation it appears exceptionally justified to prevent the further exercise of the restaurant trade already during the current main proceedings in order to avert probable massive payment defaults with public creditors.
The following conclusions can therefore be drawn from the two decisions of the Munich Constitutional Court of 5 October 2018:
If the unreliability under trade law is based on actual criminal findings, these can result both from a judgement and from an order of punishment.
Unreliability under trade law may result from a persistent breach of social security obligations.
Failure to submit tax returns may in itself constitute unreliability under trade law if the declarations are persistently not submitted for an extended period of time despite being remembered.
4. This results in the following recommendations for action to avoid unreliability under trade law and the revocation of the restaurant permit:
Submit your tax returns and tax returns in due time, but no later than after receiving a reminder to submit them.
Fulfil your obligations to report and pay tax and social security contributions in good time.
Immediately discontinue your practice of not declaring employees after customs checks.
If there is a considerable arrears of contributions at the tax office and collection agencies, repayment agreements should be made immediately with the authorities.
An increase in arrears must be avoided under all circumstances.
The authority verifying the unreliability under trade law must be presented with a promising restructuring concept with the aid of tax advice as soon as possible after the proceedings have been initiated. Its implementation goes without saying, so that the aim must always be to settle all premium arrears to zero.