Timely notification of inability to pay

The current economic climate is one in which it is not uncommon for companies not or no longer to be able to see to the timely payment of their outstanding taxes, such as wage tax and value-added tax. It is crucial that the (executive director of the) company in question should notify the Tax and Customs Administration accordingly in good time, as tardy notifica­tion may result in the executive directors each being held liable in private for reasons of appar­ent mismanagement. The executive director’s only hope of escaping liability is by prov­ing that the failure to effect (timely) notification of the company’s inability to pay has not been due to him and the non-payment of the taxes has not resulted from mismanage­ment on his part.

As it is always tricky in cases such as this to produce evidence to the contrary, it is advisable to see to the timely notification of any inadvertent inability to pay. The notification of the Tax and Customs Administration is required to be made “forthwith”, which means within two weeks of the date as at which the payment should have been made. A notification form is available for downloading from the Tax and Customs Administration’s web site.

The timely notification of the company’s inability to pay stops the executive director(s) being held personally liable. It should be noted, however, that separate steps are required to be taken to obtain a time extension where the actual payment of the outstanding taxes is con­cerned.