While the legislator (reasonably) refrained from reintroducing the so-called “fiscal privilege” in the law of insolvency avoidance (here), after having abolished such privileges with the introduction of the InsO in 1999, he at least partially “re-instated” such a privilege by classifying certain tax claims as so-called “claims of the estate”. In the context of the introduction of the SanInsFOG (see fundamentally already here) in 2021, he revised the corresponding provision of § 55 (4) InsO. On the occasion of the “letter” the German Federal Ministry of Finance (BMF) published in January 2022 on the application practice of the norm, the effects of the regulation shall be briefly discussed below.
As early as 2012, with the reform of insolvency law by the ESUG, the legislator had reintroduced a (limited) fiscal privilege with the provision of § 55 (4) InsO (old version) by declaring tax claims that were established before the opening of the insolvency proceedings as so-called “claims of the estate” under certain circumstances. Accordingly, “liabilities of the insolvency debtor arising from the tax debt relationship that were established by a provisional insolvency administrator or by the debtor with the consent of a provisional insolvency administrator were deemed to be debts of the estate after the opening of the insolvency proceedings.” The privileged treatment of the claims of the tax authorities results from the fact that certain tax claims established before the start of the proceedings, which would actually be satisfied as so-called (simple) “insolvency claims” under § 38 InsO only with the so-called insolvency quota, are to be satisfied with priority over the insolvency claims due to their classification as so-called “claims against the assets of the insolvency estate” under the provisions of § 55 InsO.
Not only since the BGH (2018, here) and the BFH (2020, here, both in German) had established the lack of (analogous) applicability of the regulation to provisional self-administration, the resulting unequal treatment between self-administration and regular proceedings has been criticized. However, the legislator did not take this further point of criticism as an opportunity to reconsider its stance on the fiscal privilege in general, but rather – consistently in this respect – extended the provision to cover provisional self-administration, but in doing so limited the types of taxes covered so that, for example, income tax and corporate income tax are no longer covered. The provision of § 55 (4) InsO as amended by SanInsFOG reads as follows:
“Value added tax liabilities of the insolvency debtor which have been established by a provisional insolvency administrator or by the debtor with the consent of a provisional insolvency administrator or by the debtor after the appointment of a provisional administrator shall be deemed to be an estate liability after the opening of the insolvency proceedings. The following liabilities shall be deemed equivalent to VAT liabilities:
- other import and export duties,
- federal excise duties,
- aviation and motor vehicle taxes; and
- payroll tax.”
This regulation only entered the legislative process at all as a result of the resolution recommendation of the Bundestag Committee on Legal Affairs and Consumer Protection of December 15, 2020 (here, p. 92, in German) and the committee’s associated report of December 16, 2020 (here, in German) – i.e., one day before the final vote on the SanInsFOG (here, in German). Regardless of the reasonableness of this provision, this late introduction into the procedure should not be considered “good governanc” in a parliamentary democracy
The BMF letter
The twelve-page BMF letter – in addition to statements on tax liability and on the declaration obligations – only deals with questions of value added and wage tax in insolvency proceedings, but not with the other types of tax now regulated in § 55 (4) InsO.
As a general rule, § 55 (4) InsO does not change the legal status of the provisional insolvency administrator or the provisional administrator or debtor, and the tax relationship is therefore unaffected. The tax obligations thus remain with the debtor until the opening of the insolvency proceedings. The Federal Ministry of Finance does also not consider the provisional administrator as some kind of trustee pursuant to § 34 (3) of the German Fiscal Code (AO) and s/he is therefore not subject to any tax declaration obligations on behalf of the insolvency debtor. After the opening of insolvency proceedings, the insolvency administrator has a duty to cooperate and to notify the tax office of the tax bases covered by § 55 (4) InsO. In self-administration, this obligation continues to apply to the debtor in self-administration.
The comments of the Federal Ministry of Finance on the so-called “sales adjustment due to uncollectibility for legal reasons” (from margin no. 14) following the corresponding ruling of the Federal Fiscal Court (Bundesfinanzhof, BFH) from 2014 (BFH, ruling dated September 24, 2014 – V R 48/13, here, in German) likely gives rise to further legal disputes, as the VAT liability from such deliveries and services is now also to be qualified as a mass claim pursuant to § 55 (4) InsO, which are assumed to be already carried out prior to the appointment of a provisional administrator, if the receivables relating thereto are collected by the debtor in self-administration after the appointment of a provisional administrator. However, especially this opinion is still a controversial issue in the literature.
Irrespective of the question of whether the privileged treatment of the tax authorities complies with the principle of equal treatment under Article 3 of the German Constituion, the resulting depletion of the insolvency estate is likely not only to have a lasting negative impact on the prospects of individual creditors being satisfied, but also to have a lasting negative impact on the prospects of the debtor company being restructured (for an impressive example, see Ries, INDat Report 2/2022, reference here, in German). In this respect, the legislator, who expressly wanted to promote the restructuring of companies with the introduction and reform of the InsO through both the ESUG and the SanInsFoG, is thwarting itself.
Nevertheless, practitioners will have to come to terms with these regulations. The BMF’s letter, though, is unlikely to ensure legal certainty. Hence, the developing case law of the highest German courts remains to be seen.
BMF, Insolvenzordnung; Anwendungsfragen zu § 55 Abs. 4 InsO vom 11.01.2022 (in German)