The offence of non-payment of debts to the State (Article 25 of Law 1882/1990)

Legal Insight

August 2021

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

Summary: 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 frequently encountered in court. In the following lines we will try to summarize some of the most basic supporting claims of the defendant for this offence, indicating also some problematic ones.

The crime of non-payment of debts to the State is provided for in Article 25 of Law 1882/1990 and is one of the most common crimes in court. This is explained by the fact that any debt to the State can form part of the debt table 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 amounts owed to the State but which are derived from tax evasion offences (Article 66 of the Code of Fiscal Procedure - tax evasion mainly in income tax and VAT). 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 100,000 euros (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 phrasing 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 that have been certified to the Tax Administration shall be punished by imprisonment:

 a) 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 point (a) above, exceeds the amount of "two hundred thousand (200,000) euros".

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

1. Unenforceable act - Article 469 of the Civil Code

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 for the purpose of determining the person's liability, debts arising from the non-execution 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 below EUR 100,000, the act is now considered unenforceable and the accused is acquitted. However, the issue is not so simple. The Supreme Court has so far held, in most cases, that all amounts relating to taxes that could support a tax evasion category under Article 66 of the Code of Fiscal Procedure, i.e. mainly income tax, VAT, FMI, ENFIA etc., are deducted from the list of debts, regardless of their amount (see e.g. AP 1519/2019 --> accepts that the following entries fall within the scope of the article: VAT debt by court decision, debt from income by court decision, VAT fine, debt from income by court decision), AP 1616/2019 --> accepts that the following entries fall within the scope of the article: contributions and business tax, income of legal persons provisionally confirmed by a declaration, income tax declaration of legal persons according to Article 45 of Law No. 4174/2013, KBA fine by court decision, KBA fine final confirmation, income final confirmation of income not withheld, VAT regular check due to finalisation), AP 1652/2019 --> accepts that the following entries fall within the scope of the article: fines for accepting and issuing fictitious tax information by virtue of numerous decisions imposing fines), AP 1820/2019 --> accepts that income taxes fall within the scope of the article), AP 257/2020 --> accepts that the following entries fall within the scope of the article: contributions and business tax n. 3986/2011, EATC, income from special contributions under Law no. 3986/2011, GIRO - GETA, FAP - FP, ENFIA).

However, there are also some decisions, mainly of the courts of substance and especially of the courts of first instance, which accept that in order for these amounts to be deducted from the list of debts, they must exceed EUR 100,000 per year and, especially for 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 Fiscal 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 a criminal prosecution has been brought for the offence of tax evasion, sometimes they write it off even without a criminal prosecution 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 Article 25: 'The provision of a facility for payment by instalments in accordance with the provisions in force suspends criminal proceedings for as long as the arrangement lasts and the debtor complies with the terms of the arrangement and the offence is finally extinguished in the event 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. Payment in full 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 act may be declared unpunishable if the amount due is repaid by the time the case is tried to any extent". 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, decisions to the contrary (see e.g. Thessaloniki Trial Plenary Court 20/2021). 

4.  No Legal Representative

When the establishment of debts takes place in the name of a legal person, the offence is committed by its legal representative, as more specifically defined by 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. In the absence of all the above persons, the penalties shall be imposed on the members of the boards of directors of such companies, provided that they actually perform, 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 managing director 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  in Athens Plenary Court 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, the debts 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. Athens Plenary Court decision 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 the course 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. After 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. Trial Court of Athens decision 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 limited liability company based in Sindos Thessaloniki with the name "...", but the unpaid debts of another natural person (i.e. B.P.)").

6. Statute of Limitations on Crime

There are recent positions in case law and a relevant opinion of the Advocate General of the Supreme Court 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 have finally 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 Debt

The disputing of the debt by the debtor, as well as the claim that the debt 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 73 of the KEDE (Law No 356/1974) in order to eliminate the debt. However, according to the Supreme Court decisions No 1565/1999 and No 873/2004, if it is proposed and proven that the debt is time-barred, 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 also 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 witness statement on the fact that appeals were rejected in 2012), 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)