VAT debt and a criminal offence: when a managing director risks prosecution

The company filed its VAT return on time, but EUR 25,000 is missing from the account. Customers are not paying and the managing director must choose whether to pay wages, suppliers or the tax. When is unpaid VAT merely a tax debt and when is it already a criminal offence for which the director is personally liable? We explain the thresholds that decide, how the matter reaches the police, and the steps that can prevent prosecution or extinguish criminal liability.

When unpaid VAT is just a tax problem

A VAT payer established in Slovakia must file a return within 25 days of the end of the tax period and, within the same deadline, pay its own tax liability (§ 78(2) of the VAT Act).

If the company files but does not pay, a tax arrear arises. The tax administrator charges default interest of four times the ECB base rate, at least 15 % a year, for up to four years of delay (§ 156(2) of the Tax Code), and may recover the arrear by tax enforcement.

As long as the company concealed nothing and the debt does not reach the thresholds of the Criminal Code, this is an expensive but merely tax problem. Criminal law applies only under the conditions described below.

When a VAT debt becomes a criminal offence

With VAT, four tax offences mainly come into play. They differ in what the company did, from what amount they are punishable, and whether criminal liability can be removed by paying the tax additionally (effective regret).

The thresholds follow § 125(1) of the Criminal Code: a small extent means over €700, a larger extent over €20,000, a considerable extent over €250,000 and a large extent over €650,000. Higher extents also raise the sentences. These amounts were introduced by Act No. 40/2024 Coll. and apply from 6 August 2024. For an offence committed before that date not yet decided, the court applies the law more favourable to the offender (§ 2(1)). An uncollected, unpaid VAT arrear of €15,000 from 2023 therefore no longer falls under failure to pay tax, although it did under the earlier thresholds.

Failure to pay tax: the €20,000 threshold

A person who fails, to a larger extent, to pay a due tax is liable to up to two years’ imprisonment (§ 278(1)); for a considerable extent six months to three years, for a large extent one to five years. This typically concerns a company that declares VAT correctly but does not pay it because it did not receive it from customers.

An arrear over €20,000 is not enough by itself. The Supreme Court of the SR (judgment of 24 September 2025, ref. 3Tdo/33/2024) repeated that the mere arising of a debt does not fulfil the elements of the offence — the offender must fail to perform the duty knowingly. A key precondition is solvency: if the company objectively had nothing to pay with when the tax fell due, the director is not criminally liable for non-payment. If it had money only for part of the tax, the intent covers only that part; non-payment is an offence only once the intent covers an amount above €20,000 (decision ref. 5Tdo/45/2020).

Tax evasion: already from €700

Where the company did not declare the tax at all or declared it lower (for example for unreported sales), it risks being assessed as tax evasion — an offence already in a small extent, i.e. over €700, with a base sentence of six months to three years (§ 276(1)). This usually also covers an unlawful VAT deduction where it merely reduces the tax the company must pay. The gap between €700 and €20,000 is why it pays to file on time and correctly even when the company cannot pay.

Failure to remit tax: collected VAT already from €700

Failure to remit tax is committed by a person who, in a small extent, withholds and fails to remit a due tax that he deducts or collects, with the intent to obtain an unlawful benefit for himself or another (§ 277(1)). For VAT the Supreme Court (judgment 6 Tdo 62/2011) distinguished: VAT collected and not remitted falls under failure to remit tax (§ 277), VAT not collected and not paid under failure to pay tax (§ 278). Where both occur, concurrence comes into play.

The Regional Court in Košice (judgment of 12 January 2026, ref. 8To/76/2025) upheld a conviction for failure to remit tax where the company collected €10,625.11 of VAT from customers, had enough money when it fell due, but did not remit it — as failure to pay tax such a sum would not be an offence. A director should therefore safely assume that VAT the company collected from customers and did not remit can be an offence already from €700. Do not use such VAT for other payments.

Several smaller debts may cross the threshold

The threshold need not be assessed month by month. If the offender continues the same offence and the individual acts are linked by time, manner, object and a unifying intent, they are assessed as a single continuing offence (§ 122(10)). A company that fails to pay €9,000 three months in a row can thus reach €27,000 — above the larger-extent threshold.

Tax fraud: a VAT refund claim

If an unlawful deduction leads the company to claim a VAT refund (an excess deduction), it may be tax fraud — an offence where a person unlawfully, to a larger extent (over €20,000), claims a VAT refund with the intent to obtain an unlawful benefit (§ 277a(1)). The offence is committed already by making the claim, not only on payment. Effective regret does not apply to tax fraud.

Why the director is personally liable for the company’s debt

The company owes the tax, but offences are committed by people. An s. r. o. acts through its managing director (§ 133(1) of the Commercial Code). If an offence requires a special status of the offender (the status of a taxpayer), it is enough that the legal entity in whose name the offender acts has it (§ 128(8) of the Criminal Code). Criminal proceedings therefore target whoever decided on the payments; if someone else in fact decided, they may be liable too, possibly as a co-offender.

The tax, however, remains the company’s debt. The Supreme Court (6 Tdo 62/2011) held that a court cannot order a director to pay the company’s VAT debt; the Regional Court in Košice (4To/22/2026) confirmed this even after the amendment effective 6 August 2024. Alongside the director, the company itself may be prosecuted — Act No. 91/2016 Coll. on the criminal liability of legal entities also covers tax evasion, failure to remit and failure to pay tax, and tax fraud (§ 3).

No offence without intent

These offences require intent (§ 17). It need not be a plan to defraud the state — it is enough that the director knew his conduct could harm a protected interest and was reconciled to it (§ 15(b)). In assessing intent it matters whether the company had the means to pay, what it used the money for, and whether the director communicated with the tax administrator. For failure to remit (§ 277) the law additionally requires the intent to obtain an unlawful benefit.

How a tax debt reaches the police

State authorities must report without delay facts suggesting an offence (§ 3(2) of the Code of Criminal Procedure); for the tax administrator this is limited by tax secrecy. The prosecutor, and with his consent the police officer, may however request the protected data, and the tax administrator discloses them (§ 3(5) CCP, § 11(4) of the Tax Code).

How this looks in practice is shown by the Supreme Court judgment of 31 July 2019, ref. 6Tdo/31/2019: the tax office reported the audit result to the police, prosecution began in 2013, but charges were brought only at the end of 2016 and the indictment filed in 2018. The court called such length a breach of the right to have the matter heard within a reasonable time. For the director this means prosecution may begin long before charges, and the first evidence is usually the tax-audit result.

Tax and criminal proceedings run side by side

Prosecution does not stop the tax proceedings — the tax administrator keeps charging interest and recovering the arrear. Fines in tax proceedings usually fall on the company, prosecution targets mainly the director. Concurrence of the two is not automatically excluded even where both fall on the same person.

Cooperate in a tax audit, but as a defendant you may remain silent

During a tax audit the company must provide information, submit documents and give explanations (§ 45(2) of the Tax Code). In criminal proceedings the position is different: the defendant may refuse to testify and consult defence counsel (§ 34(1) CCP). If it is clear the audit result points to a criminal complaint, it is worth consulting counsel before the director says anything to the police.

What the director faces

Besides imprisonment, the court may impose a disqualification — a ban on a given profession or office for one to ten years (§ 61). For an entrepreneur this may bite harder than prison itself. In case 6Tdo/31/2019 the regional court imposed four years and eight months unconditionally and a six-year disqualification; the Supreme Court quashed it for insufficiently weighing mitigating circumstances (confession, remorse, partial payment). A sentence need not mean prison — in another case a director received a €2,000 financial penalty and a 60-month disqualification for VAT evasion.

When a director prevails and when not

Strong arguments arise mainly where:

• the company did not receive the VAT from customers, the sum is below the larger-extent threshold and the arrears are not linked by a unifying intent,
• the director did not in fact decide on payments and had no knowledge of the arrear,
• he can prove the company had nothing to pay with when the tax fell due — solvency is, per the Supreme Court, a precondition of criminal liability (3Tdo/33/2024),
• the tax and its accessories are paid in time (effective regret) and it is not tax fraud under § 277a.

The defence is hard mainly where:

• the company had money for the VAT too, but the director knowingly used it for other payments — an insolvent company must satisfy creditors proportionally; the state is not a preferential creditor, but preferring others may be creditor favouritism (§ 240),
• the company did not report sales or declared the tax lower (tax evasion is an offence already over €700),
• he used the collected VAT for other purposes,
• the company unlawfully claimed a VAT refund (for tax fraud effective regret does not apply),
• he was convicted for a similar offence in the last 24 months or his prosecution was discontinued for effective regret (§ 86(2)).

Three examples from a company’s life

• Company one. Filed on time but did not pay €14,000 because a large customer did not settle invoices. The sum is below the threshold and the company did not receive the VAT — failure to pay tax (§ 278) does not apply. It deals with interest, not prosecution.
• Company two. For a year it pays wages and suppliers, leaves VAT aside, and the debt grows to €60,000; customers paid most invoices including VAT. For the collected VAT, failure to remit (over €700) looms; for the rest over €20,000, failure to pay tax.
• Company three. Does not report part of its sales to save €5,000 on VAT. The sum is small, but it is tax evasion — an offence already over €700.

Effective regret for VAT: when payment removes criminal liability

Criminal liability for tax evasion (§ 276), failure to remit (§ 277) and failure to pay tax (§ 278) is extinguished if the due tax and its accessories are paid additionally, at the latest on the day after the day the offender could learn of the results after the investigation ended (§ 86(1)(d)). Effective regret therefore also covers VAT the company collected and did not remit. Payment may also be made earlier, and the law does not require the director himself to pay. If criminal liability is extinguished, the prosecutor discontinues the prosecution (§ 215(1)(h) CCP).

Paying the VAT, however, does not always help. Effective regret does not apply:

• to tax fraud (§ 277a) — § 86 does not mention it, and with an unlawful deduction the offender has nothing to pay additionally,
• where the offender acted as a member of a criminal group,
• where he was convicted for a similar offence in the last 24 months or his prosecution was discontinued for effective regret (§ 86(2)),
• where only part of the tax is paid, or it is paid later than the law allows.

If only part can be paid, criminal liability is not extinguished, but payment matters for the sentence — since 6 August 2024 the court expressly has regard to the offender’s efforts to make good the damage (§ 34(4), § 36(k)).

What to do when the company cannot pay the VAT

• File on time and correctly even when you cannot pay — for VAT the company did not receive, the threshold for non-payment is far higher than for undeclared tax.
• Ask for a deferral or instalments — the tax administrator may grant them for up to 24 months, even retroactively (§ 57 of the Tax Code); interest applies and the decision cannot be appealed, so prepare the request carefully.
• Keep collected VAT aside — money received from customers as VAT must not go on wages or suppliers.
• Document why you did not pay — non-paying customers, a drop in sales and communication with the tax administrator may matter when intent is assessed.
• Assess insolvency — a bankruptcy petition must be filed within 30 days of learning, or being able to learn with due care, of insolvency (§ 11(2) of the Bankruptcy and Restructuring Act).
• Do not wait if summoned — effective regret has a statutory cut-off; timely defence helps decide when and how much to pay.