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B Law & Tax
26 October 2023

Tax advisor: The Supreme Court rules that the subsidiary liability under Article 43.1.a) of the LGT has a punitive nature

In its recent ruling on October 2, 2023, the Supreme Court has declared the following doctrine:

“1. The subsidiary tax liability under Article 43.1.a) of the LGT has a punitive nature.

  1. Such punitive nature does not prevent the legislator, within constitutional limits, from modulating the inapplicability regime of punitive acts, including those based on the application of subsidiary tax liability under Article 43.1.a) of the LGT, without a law of parliamentary rank denying the automatic suspension of the tax debt subject to transfer – the derived part originating from strict debt – being contrary to the Constitution.
  2. The clause in Article 212.3.b), second paragraph, in fine, of the LGT, which prevents the automatic suspension of the tax debt subject to transfer, is compatible with the constitutional principle of equality, as outlined.”


Article 43.1.a) of Law 58/2003, of December 17, the General Tax Law (LGT), states:

“1. The following individuals or entities shall be subsidiary liable for the tax debt:

  1. a) Without prejudice to the provisions of paragraph a) of paragraph 1 of Article 42 of this law, the de facto or de jure administrators of legal entities who, having committed tax offenses, have not carried out the necessary acts within their competence to fulfill tax obligations and duties, have allowed non-compliance by those under their dependence, or have taken actions that made the offenses possible. Their liability shall also extend to penalties.”


On the other hand, Article 212.3 of the LGT states:

“3. The filing in a timely and proper manner of an administrative appeal or claim against a penalty shall have the following effects:

  1. a) The execution of penalties shall be automatically suspended during the voluntary period without the need to provide guarantees until they become final administratively.
  2. b) Late payment interest shall not be required for the time that elapses until the end of the payment period during the voluntary period opened by the notification of the resolution that concludes the administrative process, requiring late payment interest from the day following the end of said period.

The provisions of paragraphs a) and b) of this section shall apply for the purpose of suspending tax penalties subject to derivative liability, both in the case where the penalty is appealed by the infringing party and when, in accordance with Article 174.5 of this Law, said penalty is appealed by the responsible party. In no case shall the tax debt subject to transfer be subject to automatic suspension under this provision.

Responsibilities for the payment of debts provided for in Article 42.2 of this Law shall not be suspended in accordance with this provision either.”


In addition, according to Article 233.1 of the LGT:

“1. The execution of the contested act shall be automatically suspended at the request of the interested party if the amount of said act, the late payment interest generated by the suspension, and the surcharges that would be applicable in the event of the guarantee’s execution are guaranteed, in the terms established by regulations.

If the challenge concerns a tax penalty, its execution shall be automatically suspended without the need to provide guarantees in accordance with the provisions of paragraph 3 of Article 212 of this Law.”


Thus, the legal dispute centered on determining whether it is feasible to suspend the entire specified amount in a subsidiary liability transfer agreement based on Article 43.1.a) of the General Tax Law (LGT) without the need for guarantees, when said agreement covers not only penalties but also the tax debt, including the tax liability and late interest.

In the case under analysis, the corresponding Tax Administrative Court (TEA) had granted automatic suspension of the part considered a penalty in the liability transfer agreement but not of the part corresponding to the tax debt. However, the individual declared subsidiary responsible had maintained the suspension of the payment of the entire sums required in the agreement without the need to provide guarantees, arguing that the agreement had a punitive nature.


The Supreme Court (TS) determines that the punitive nature of the tax liability transfer agreement does not imply automatic suspension.


B Law & Tax International Tax & Legal Advisors.


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