The Offence of Non-Payment of Debts to the State after the changes of Law 5090/2024

Legal insight

April 2024

George Psarakis, LL.M. (mult), PgCert

Abstract: The crime of non-payment of debts to the State is provided for by Article 25 of Law 1882/1990 and is one of the most commonly encountered in courtrooms. In the following lines we will try to summarize some of the most basic supporting claims of the defendant for this crime, indicating also some problematic ones.

The crime of non-payment of debts to the State is provided for by Article 25 of Law 1882/1990 and is one of the most commonly encountered in courtrooms. This is explained by the fact that any debt to the State can form part of the list of debts which ultimately supports the category: debts from assigned rents, from loans guaranteed by the State, from contracts with the State, from tax debts, etc. Based on the provisions of the new Penal Code, however, a fundamental change has been introduced in this provision: now the list of debts does not include the amounts owed to the State but arising from tax evasion offences (Article 66 of the Code of Fiscal Procedure - tax evasion mainly in income tax and VAT). In other words, in other words, if a person has evaded tax, as the relevant legislator understands tax evasion, he cannot be convicted for the same amounts and for the offence of non-payment of debts to the State, since he reasonably expects to be prosecuted for the offence of tax evasion (the crime of tax evasion is distinguished from that of non-payment of debts to the State). The crime of non-payment of debts is committed if the total amount reflected in the debt schedule is more than EUR 100,000 (including fines, surcharges, etc.) and if the debtor delays payment for more than 4 months from the time the debt is established. Indeed, now witnesses on behalf of the State do not attend the hearings but only the competent D.O.Y. in sending an information note with the amounts of money due at that time (sometimes the sending is done on the same day of the discussion of the case in the hearing or sometimes even after it, which of course lacks practical effect -see. The appearance of the witness at the hearing is not mandatory, provided that the competent prosecutor or the court has been informed in writing by the Public Prosecutor's Office on the procedural development of the debt, at least three days before the hearing"). Also rarely does the State proceed with a representation in support of the accusation in cases of the specific offence (i.e. a representation by a court representative). This is because this offence is considered to be of lower gravity than the offences of tax evasion, which usually involve the element of misleading the tax authority.

The wording of the provision in question, which standardises this offence, is as follows:

"1. Any person who fails to pay debts to the State, legal persons under public law, enterprises and organisations of the public sector for a period of more than four (4) months, which have been certified to the Tax Administration, shall be punished with imprisonment:

α) At least one (1) year, if the total debt from any cause, including interest or surcharges of any kind and other charges up to the date of drawing up the list of debts, exceeds the amount of one hundred thousand (100,000) euros.

b) At least three (3) years, if the total debt, as defined in case a' above, exceeds the amount of two hundred thousand (200,000) euros.

The criminal prosecution shall be carried out following a request by the Head of the Tax Office or the Audit Centres or the Customs Office to the Prosecutor of the Court of First Instance of their headquarters, which must be accompanied by a list of debts, including any kind of interest or pre-increases and other charges.

The application and the schedule of debts submitted in accordance with the previous subparagraph shall not include and shall not be taken into account for the determination of the person's liability the debts arising from the offences standardised in Article 66 of the Code of Fiscal Procedure, together with the related surcharges, interest and other charges.

The act may be declared unpunishable if the amount due is paid by the time the case is heard at any stage".

In the following lines we will try to summarize some of the most basic supporting allegations of the defendant for this offence, indicating some problematic ones.

1. Article 469 of the NPC

According to a relevant provision introduced by Article 469 of the New Penal Code, "In the application and the schedule of debts submitted in accordance with the preceding paragraph, the following shall not be included and shall not be counted in determining the person's liability, debts arising from the non-enforcement of financial penalties imposed by a criminal court and the related surcharges, interest and other charges, as well as debts arising from the offences standardised in Article 66 of the Code of Fiscal Procedure, together with the related surcharges, interest and other charges. Therefore, as already mentioned above, the amounts potentially related to tax evasion offences should be deducted from the list of debts and if the remaining amount is less than 100,000 euros, the act is now considered unenforceable and the accused is acquitted. However, the issue was not so simple in the end. The Supreme Court in several decisions to date had ruled that all amounts relating to taxes that could support a tax evasion charge under Article 66 of the Code of Tax Procedure, i.e. mainly income tax, VAT, FMI, ENFIA, etc., regardless of their amount, are deducted from the list of debts.

However, by SC Plenary Desicion n. 1/2023 it was held that in order for these amounts to be deducted from the list of debts, they must exceed EUR 100,000 per year and, especially with regard to VAT, more than EUR 50,000 per year. This is because only then is the relevant tax evasion offence established (under Article 66 of the Code of Tax Procedure). Even in this case, however, non-payment may not constitute tax evasion but merely non-payment of tax already declared. Therefore, even then, the court will have to check whether these amounts were declared in the relevant tax returns and simply not paid, because if the latter is the case, it is not tax evasion (and therefore misleading the tax authorities) but simple tax evasion and therefore non-payment of the debt.

The competent tax authorities, which send the relevant information sheets to the public prosecutor's offices with a view to discussing the cases concerned, deal with the issue as follows: sometimes they write off the debt only if criminal proceedings have been brought for the offence of tax evasion, sometimes they write it off even without criminal proceedings having been brought, but only if the basic tax is above the above quantitative levels (EUR 100 000 for income tax and EUR 50 000 for income tax). 000 for VAT per use, etc.); for this reason, neither the fines nor the additional taxes of the old fiscal code (Law 2523/1997) are included in these amounts. 000 euros, but the competent tax office may not accept its deletion because the basic debt amounts to, for example, 50,000 euros and the other amounts are additional taxes (which are sanctioned according to the prevailing view). The issue naturally requires a great deal of attention and elaboration since, among other things, the schedule of debts can in no way give the required picture in the way it is drawn up (acronyms and abbreviations etc.).

2. Suspension of prosecution due to partial facilitation

According to paragraph 5 of the relevant Article 25: "By providing a facility for the partial payment of the debt in accordance with the provisions in force, the prosecution is suspended for as long as the arrangement lasts and the debtor complies with the terms of the arrangement and the criminal offence is finally eliminated in the case of full payment. For the same reason, the execution of the sentence imposed shall be suspended or the execution of the sentence which has begun shall be interrupted and shall be extinguished in the event of full repayment. The provision of partial relief therefore suspends the prosecution for the duration of the arrangement. Full payment eliminates the offence. Therefore, if the repayment is proven in court, a judgment of acquittal will be issued.

3. Full payment

The provision of the law provides: "The offence may be declared unpunishable if the amount due is repaid by the time the case is tried at any stage". Of course, this is in contrast to full repayment after regulation (see above) and therefore it is proposed to apply the mandatory extinction provision also in this case of repayment without being subject to any regulation.

A question that sometimes arises in courtrooms is whether the partial repayment of the debt, so that it ultimately "falls" below the threshold of merit, results in the acquittal of the defendant. If, for example, the debt, as reflected in the debt schedule, amounted to EUR 110,000 and the debtor eventually paid EUR 11,000 so that he now owes EUR 99,000, and therefore below the EUR 100,000 merit threshold, what will the court do? In this case the courts rarely accept a claim of incompetence and therefore acquit the offender, on the grounds that when the act was committed the amount was above the merit threshold. There are, however, some decisions to the contrary (see, for example, T.P.L.T. 20/2021).

4. Absence of the status of a legal representative

When the certification of debts takes place in the name of a legal person, the offence is committed by its legal representative, as more specifically defined in the law. The provision in question reads as follows (par. 2 a. 25 of Law 1882/1990), for domestic public limited liability companies, to the chairmen of the boards of directors, or to the managing directors or appointed or co-managing directors or general managers or managers thereof, or to any person appointed either directly by law or by private will or by court order to administer or manage them, whether or not cumulatively, or by court order. In the absence of all of the above persons, the penalties shall be imposed on the members of the boards of directors of such companies, provided that they actually exercise, temporarily or permanently, one of the functions referred to above [...]'. While paragraph 3 provides as follows: "For the persons referred to in paragraph 2 of this Article, criminal prosecution shall be brought for debts to the State and to third parties other than private individuals which were ascertained at the time of acquiring the above status or were ascertained during the period in which they held that status, regardless of whether they subsequently renounced that status in any way or for any reason, as well as for debts ascertained regardless of whether or not the legal persons were dissolved, but which arose or date back to the time in which they held that status". Any resignation of a board member may be invoked for any discharge before the court if it has been duly published in the General Register of Companies or notified to the competent tax authority (by a bailiff, for example).

Therefore, if the defendant held the position of CEO of e.g. the SA during the period after the time the debt was incurred but before it was established, he should be acquitted. For a relevant example, see TrPlAθ 29395/2017: 'The defendant was elected as an executive member of the Board of Directors of the limited liability company named "..." on 6.8.2010, serving as the company's second managing director from 6.8.2010 to 21.10.2010 and as the company's sole managing director from 22.10.2010 to 31.8. 2011, when he resigned, as is evident from the above-mentioned Official Gazettes read as mentioned above (.../13.8.2010, .../3.11.2010, .../15.9.2011 Official Gazettes of Companies and Limited Liability Companies). However, thedebts in dispute were established, as is evident from the debt schedule, on 30.3.2015, and their origin dates back to the 2004 financial year. Therefore, both at the time of birth and at the time of certification of the impugned debts, the accused did not possess any of the qualities required under the Act and particularly the provision of Section 25(1)(b) of the Act. 2 and 3 of Law 1882/1990, so that he has no criminal responsibility for the non-payment of these debts to the State'.

If the defendant proves that he had a formal position in the company and did not receive knowledge of its financial transactions and obligations and so on, he may be acquitted with the possibility of the prosecutor to prosecute the concealed representative on the charge of instigating the crime. See e.g. TrPlAθ 28738/2015: 'However, it was proven that the accused at the relevant time (2.11.2012) formally had only the status of Managing Director of the limited liability company named "N.R. S.A.", based in [...] Attica. During that period, she was deprived of any management authority or decision-making power in any matter, including the company's tax affairs. The Court's judgment is reinforced by the fact that she was not physically present at the company's registered office, she had no access to the company's treasury and she never represented the company in transactions with third parties or exercised managerial authority over its employees. Moreover, as a high school graduate, she did not have the scientific knowledge and training in business administration"; see also and TrEfLar 1603/2015: "During thecourse of this trial, it was not proven beyond doubt that the defendant, who participated in the above company with a 5% share in the company, had the authority and ability to manage the affairs of the company and to unilaterally decide on the repayment of the above debts or to influence the other partner of the company, D.T. of D., who participated in the above-mentioned company with a 95% share in the company, in order to co-decide on the repayment of the above-mentioned debts. On the contrary, during the course of this trial it was presumed that the defendant was not involved at all in the management of the corporate affairs of the above company and that his participation in this company was entirely formal' (cf. and 65118/2021 IO in relation to the lack of liability of representatives for debts to social security funds: "For this case, elements such as the lack of remuneration to this person, the lack of a shareholding or partnership relationship with the legal person or legal entity, the non-performance of banking transactions, the non-management of the corporate bank accounts (a certificate from the banks cooperating with the company, proving that there is no specimen signature of this person, so that this person can sign on behalf of the legal person), the non-signing of minutes of the Board of Directors

5. Invalidity of a writ of summons

The question of the invalidity of a writ of summons rarely arises. In order for the writ to be valid, there must, inter alia, be a detailed record of the individual debts, specifying their nature and, in the case of legal debtors, the relevant status of the natural persons at the time of the alleged offence. Following the adoption of Article 469 of the NPC (see above), the requirement for detailed recording of individual debts is even stronger in order to enable the separation of debts relating to tax evasion offences (so that they can be deducted from the table - cf. 110/2020 AC where an appeal decision was annulled due to insufficient clarification of the identity of debts that were simply described in terms of "CBA fine", "FMAAP completion", etc.). When, of course, an error of the prosecutor has been committed and a summons has been issued without mentioning the specific debts concerning the defendant, the question of invalidity arises (see e.g. T.P.L.M.A.T. 9314/2012: "In the present case, from the copy of the summons of 22.3. 2012 of the summons of the Prosecutor of the I.K. District Court. which was served to the accused and is attached to the case file, it is clear that the said indictment does not mention in detail in kind the debts not paid to the Greek State by the accused as President and Managing Director of the Sindos Thessaloniki-based limited company with the name "...", but the unpaid debts of another natural person (i.e. B.P.)".).

6. Statute of limitations of crime

There are recent positions in case law and a relevant opinion of the Deputy Prosecutor of the SC on the nature of the crime as a peculiar cumulative crime with the consequent special determination of the time of its commission. According to the 25/9/2015 opinion of the Advocate General, since the crime in question is characterized as a cumulative crime, the time of commission in the case of several unpaid debts is the time of non-payment of the last debt. Therefore, as the opinion points out, in this case, the individual acts lose their autonomy and what matters is the sum of the sums as a whole: "Consequently, what has been accepted by case law, with regard to the interpretation of Article 16(2) of Law 2576/1953, is also valid here, with the main assumption that the debts in the schedule accompanying the application for prosecution lose their independence, and therefore the start of the limitation period in the case of this offence begins from the commission of the last partial act, that is, four months after the last debt in the schedule becomes due".

The crime is time-barred 5 years after it has been committed, provided that the writ of summons has not been served by that time. This can happen if the 4 months after the debts were finally established has elapsed and the relevant prosecution has not proceeded to draft the indictment and serve it. These cases will be rare and will be mainly related to a delay by the competent tax authority in submitting the corresponding request for prosecution to the competent prosecution.

7. Limitation of the State's Claim - Contestation of the Debt

Disputing the debt by the debtor, as well as his claim that it is time-barred and therefore wrongly ascertained, has no influence since the debtor - public debtor in this case must exercise the legal means, i.e. the opposition provided for by Article 65 of the CEDE, to have the debt eliminated. However, according to the Supreme Court decisions No 1565/1999 and 873/2004, if the limitation period for the debt is proposed and proven, there is no criminal offence. The recent decisions of the Supreme Court reiterate the original position that i.e. the defendant's claim that the debt is time-barred and therefore wrongly ascertained is not influential, since the debtor-debtor of the State has the right to contest the debt only in the competent administrative courts; however, even in these cases, the case law does not accept that the appeal/interruption can have an effect on the criminal offence (cf. (e.g. SC 206/2013: '...any appeal/appeal ... has no legal influence on the punishability of the above-mentioned crime'). Of course, any appeal/appeal may result in the suspension of the criminal proceedings until at least a final decision is issued by the administrative courts, which may be accelerated by a corresponding preference request.

It is possible that the administrative suspension of the payment of the debts may result in the acquittal of the accused, as for example, it was held in MIPP 469/2013: 'In particular, it was proven that, with regard to the debts in question to the State, the accused had filed appeals and applications for suspension of the relevant administrative acts, and by virtue of the administrative decisions no. 2285, 2286 and 2287/2006 decisions of the Trim.Dr.Ath had been granted, with the result that he was not responsible for the non-payment of the debts referred to therein. It should be noted, of course, that after the rejection of the appeals by the relevant administrative courts, the defendant's obligation to pay the said debts to the State was re-emerged. However, in view of this, the act attributed to the accused is alleged to have been committed during the period from 1/8/2006 to 1/3/2011, i.e. during the period when the suspension of the enforcement of the authorities in question was in force (see relevant case law of the Court of First Instance of the Republic of Moldova (see relevant case law of the Republic of Moldova). witness testimony that the appeals were rejected in 2012), the defendant must be declared innocent of the act attributed to him, as set out in particular in the operative part" (see, by contrast, CP 1362/2015 with the reasoning that administrative suspension prevents enforcement actions and does not cease to be due and payable debt - of course, a claim of legal error here could be argued on the merits).

8. Inability to pay debts

The courts do not accept the inability to pay as a reason for not fulfilling the objective substance of the crime, although since it is a genuine crime of omission the unobjective objective inability to pay should ultimately result in the acquittal of the perpetrator (see e.g. AP 1927/2016: "The inability to pay the debt for objective reasons is not an element of the objective substance of the offence of Article 25 of Law No. 1882/1990 so that even in case of its substantial basis it neutralizes the objective substance of the offence...")). Indeed, in the original version of the law, before it was passed by the Parliament, the financial difficulties of the debtor supported the suspension of the criminal prosecution. In practice, the courts use similar claims to justify the mitigating circumstance of "non-humiliating causes" resulting in a reduction of the sentence (Article 84(2b) of the Criminal Code). Rarely have such claims been accepted by the courts (see e.g. TrEfthes 273/2000: "...the violation is not due to his fraudulent intent but to his financial weakness, which is real...").

In fact, recently published was also the decision of the Supreme Court, No. 1927/2019, in which it was held that: "With what the Court of the merits accepted, the Court of the merits did not dispose in its contested decision of the, from the provisions of articles 93 par. 3 of the Constitution and 139 of the Code of Civil Procedure, required by Article 93(93) of the Code of Criminal Procedure and Article 139(93) of the Statute of the Court of First Instance, since the position of this Court on the negative allegation of the accusation, which was put forward in the hearing by both the accused and her counsel, is not set out in full, that the non-payment of the amount due to the State is not due to her fraud but to the fact that the latter did not take the necessary steps to expedite the auction of her seized property, from which she could have collected the amount due to it, a claim in support of which she submitted the acknowledged out-of-court summons of 23-5- 2016 statement of her to her supervisor . ...D.O.Y. ....".

9. Bankruptcy of the Debtor

The courts accept in several cases the bankruptcy of the debtor as a ground for removing the imputation or lack of fraudulence and ultimately acquit the latter. This is because it is held that (a) he is deprived of the administration of his property after bankruptcy due to bankruptcy expropriation and (b) the bankruptcy law prohibits preferential payments after the cessation of payments (however, there are also decisions to the contrary). What matters is whether the debt is ascertained at a time after the "cessation of payments". The time of cessation of payments is determined by the bankruptcy court and cannot be more than 2 years after the declaration of bankruptcy. The New Bankruptcy Law (Law 4738/2020) introduced a presumption on this point, whereby if the court cannot rule on an earlier time of cessation, it sets it 30 calendar days before the filing of the bankruptcy petition (Article 81). Of course, it is in the debtor's interest in dealing with this offence to set the suspension period as early as possible, so that the period between the suspension of payments and the declaration of bankruptcy covers the longest possible period of time (however, a long corresponding period may have adverse consequences in other areas, e.g. However, a lengthy period of time may have a negative impact on other aspects, such as the question of revocation of legal transactions within the suspect period, etc.). TrEfPliMath 5246/2019: "In particular, since for the debts of the two schedules the bankruptcy of each company took place before they were certified and before they became due, the defendant was unable to pay them to the State, and therefore, in the absence of the subjective element of fraudulent intent, she is not criminally liable for these debts, totalling EUR 1,921,155.95"; cf. and AP 2115/2018: 'It is clear from the minutes incorporated in the original judgment that the appellant - defendant, through his counsel, admissibly raised the independent claim of the removal of his fraudulent intent in the payment of the debts owed by him to the State, on the grounds that the debtor company under the name "... O.E.', in which he was a general partner, had been declared bankrupt by decision 1235/2003 of the Athens Court of First Instance, which set the date of cessation of payments at 20-4-2003, and that the debts in question were established and became due and payable at a time after the cessation of payments (1-3-2014) and therefore, in accordance with the provisions of Articles 537 and 679(1) and (2) of the Greek Constitution, the debts of the debtor company, the company 'O.E.', were declared bankrupt. 4 of the Commercial Law in force at that time (and already of the new Article 17 of Law 3588/2007), there was no legal possibility to pay the debts, since it was automatically deprived of the administration of the assets of the bankrupt general partnership'.

10. Winding up of the company

A further practical issue that arises in the criminal courts is the effect of the reorganisation of the company on the offence of non-payment of debts. Under Article 106c(3) of the Old Bankruptcy Code, the ratification of the reorganisation agreement suspended the prosecution of the misdemeanour if the act had been committed before the filing of the application under Article 106b. If the debtor's obligations arising from the reorganisation agreement were fulfilled in full and on time, the criminal offence was eliminated. Nowwith the current Article 60 of the New Bankruptcy Law (Law 4738/2020): [...] b) The prosecution of the misdemeanour of issuing a bounced cheque under Article 79 of Law No. 1882/1990 (Α΄43)...". The repayment of the debt will lead to the elimination of the offence (Article 61 of Law 4738/2020). The AADE in a relevant circular clarified: "It is reminded that even if the above conditions for the suspension of criminal prosecution are met, the supervisor responsible for pursuing the collection of the debt is obliged to submit a request for criminal prosecution for the offence under Article 25 of Law 1882 /1990, informing the Public Prosecutor, primarily with the application but also at subsequent stages of the criminal proceedings, of the aforementioned critical elements on which the suspension of the criminal prosecution or the termination of the suspension depends by law (time of submission of the application for ratification of the reorganisation agreement, issuance of the ratification decision, debts falling within the scope of the agreement, delay in the payment of instalments or non-fulfilment of any other condition of the agreement, etc.). etc.)' (C 2117/2021)' (C 2117/2021).

11. Out-of-court Settlement Mechanism

It is also possible to suspend criminal prosecution under the Extrajudicial Mechanism of the New Insolvency Law (Law 4738/2020). There it is provided that (Article 18of Law 4738/2020). 1882/1990 (A 43) and Article 1 of the Act on the enforcement of judgments in civil and commercial matters. 86/1967 (A 136) in respect of the debts whose adjustment is sought. If the restructuring agreement is finally approved, a further suspension of prosecution is foreseen and the offence is finally extinguished upon repayment.

12. Discharge of a natural person under Articles 192-194 of the New Bankruptcy Law

The new Bankruptcy Law introduced the possibility of discharge of the bankrupt from his debts after 3 years (or conditionally 1 year) from the date of declaration of bankruptcy. In this case the bankrupt is discharged from all his debts, having of course already lost his assets. According to Article 194: "The debtor is not discharged from debts created after the filing of the bankruptcy petition (in the case of debts to the State, the relevant time is the time to which the obligation relates and not the time of creation of the legal title)". Therefore, the discharge will be granted for debts dating back to a time prior to the filing of the bankruptcy petition. In its circular 44510 EX 2021, the AADE clarified that the legal consequences of the exemption include the non-recognition of the amounts written off for the prosecution for the offence of non-payment of debts to the State under Article 25 of Law No. 1882/1990. If criminal proceedings had been brought in the meantime, the court would have to rule that the offence has been eliminated since, following the write-off, due to the bankruptcy discharge, there is no longer any debt.