The Constitutional Court found No 5 / 2025 Coll.
The Constitutional Court found sp. zn.
Valid
5
FIND
The Constitutional Court
of 20 November 2024
sp. zn.
On behalf of the Republic
On 20 November 2024, the Constitutional Court decided, under point Pl. ÚS 37 / 23, on 20 November 2024, in plenary composed of the President of the Court of Josef Baxy and judges and judges of Lucie Dolanská Bányai, Josef Fiala, Milan Hulmák, Jaromír Jirsa, Veronica Christian, Zdeněk Kühn, Tomáš Langášek, Jiří Brábán, Katřina Ronovské, Jan Svatona, Pavel Šámal (Judge of the Rapporteur), David Zahlíra, Jan Wintra and Daniela Zeman on the application of the Regional Court in Hradec Králové na on the abolition of Section 169 (1) (c) Act 182 / 2006 Coll.
as follows:
I. Proposal for the annulment of Section 169 (1) (c) of Act No. 182 / 2006 Coll., on the bankruptcy and methods of its resolution (Insolvency Act), as amended by Act No. 80 / 2019 Coll., in words "or the obligation to correct the deduction of the tax in the case of an immaterial claim under the law governing value added tax" is rejected.
II. The proposal to abolish part of § 169 (1) (c) of Act No. 182 / 2006 Coll., on the bankruptcy and methods of its resolution (insolvency law), as amended by Act No. 80 / 2019 Coll., in words "and claims by the State - the tax administrator of the tax arising under the obligation to correct the tax deduction in the case of reorganisation" is rejected.
Reasons
Definition of the case
1. By a proposal pursuant to Article 95 (2) of the Constitution of the Czech Republic (hereinafter referred to as "the Constitution") and Article 64 (3) of Act No. 182 / 1993 Coll., on the Constitutional Court, as amended, (hereinafter referred to as the Law on the Constitutional Court), the Regional Court in Hradec Králové (hereinafter referred to as "the applicant") seeks annulment under the heading of Section 169 (1) (c) of the Act No. 182 / 2006 Coll., on the bankruptcy and methods of its resolution (insolvency law), as amended by Act No. 80 / 2019 Coll.
(2) The applicant submits an application for annulment of the contested provision in the context of proceedings under point 15 of ICm 1122 / 2023 (KSHK 15 INS 22286 / 2021) in respect of the action of the Finance Office for the Králové Hradec Region (hereinafter referred to as the "Financial Office") on the determination of its claims in insolvency proceedings. According to the appellant, the contested provision must be applied in this main proceedings, but it considers it to be contradictory to Articles 11 (1) and 37 (3) of the Charter of Fundamental Rights and Freedoms (hereinafter referred to as the Charter).
3. Paragraph 169 (1) of the Insolvency Act, part of which the appellant contests, reads (highlighted):
"Claims assimilated to claims on property are
(a) the professional debts of the debtor's staff, unless otherwise provided by law in respect of some of them;
(b) claims by creditors for compensation for damage caused to health;
(c) claims by the State - the Labour Office of the Czech Republic for compensation of wages paid to employees, for replacement maintenance payments under another law and for funds paid under special legislation and claims by the State - by the tax administrator resulting from the obligation to make a correction of the deduction in the case of reorganisation or the obligation to make a correction in the case of a non-recoverable claim under the law governing value added tax;
(d) claims by participants in supplementary pension schemes with a State contribution;
(e) claims by creditors on maintenance by law,
(f) reimbursement of the costs incurred by third parties for the assessment of the assets, if they therefore have a claim against the debtor for unfounded enrichment;
(g) creditors' claims arising from the duration of the moratorium declared before the opening of insolvency proceedings under the contracts referred to in Article 122 (2), if the insolvency proceedings were initiated within 1 year of the moratorium's disappearance,
(h) other claims on which this law provides. "
Arguments of the appellant
4. The appellant contends that the tax office in the main proceedings is suing for the order of the claims claimed in such a way that, inter alia, the claim for the correction of value added tax for November 2022 in the amount of CZK 1 438 106 is a claim assimilated to claims for property. The appellant points out that the claims previously arising from the correction of the amount of the tax on the debts of the debtor in insolvency proceedings were governed by Paragraph 168 (2) (e) of the Insolvency Act, as amended by 31.3.2019. That provision was already criticised at the time because it unjustifiably established a better position for the State as a creditor than for other insolvency creditors. The appellant refers here to the judgment of 31 October 2017 in Case 98 / 2015 ICdo 29, in which the Supreme Court rejected the advantage of the tax correction claims as contradictory to the principle of equal status of creditors in insolvency proceedings; at the time, however, the law allowed such interpretation.
5. The legislature responded to that judgment by Act No. 80 / 2019 Coll., amending certain tax laws and certain other laws by which he introduced the contested provision into the insolvency law. The legislature has dealt with the fact that the correction of value added tax is often not a claim arising after a decision on bankruptcy. It therefore transferred these claims to the category defined in Section 169 of the Insolvency Act in which this temporal aspect is not applied. However, the legislature did not resolve the unfounded inequality of the State as a creditor compared to other insolvency creditors, which contradicts the right of creditors to the same legal scope and the protection of their ownership under Article 11 (1) of the Charter. The appellant also points out that it agrees with the Supreme Court, but the matter cannot be resolved by interpretation as this would interfere with the principle of division of power; The Constitutional Court must intervene.
Observation of the party and the intervener and reply of the applicant
6. The Constitutional Court, pursuant to Paragraph 69 (1) of the Law on the Constitutional Court, as amended by Act No. 18 / 2000 Coll., called on the Chamber of Deputies and the Senate, acting on behalf of Parliament as a party to the proceedings, to comment on the application to initiate proceedings. Furthermore, pursuant to Article 69 (2) and (3) of the Constitutional Court Act, he called on the Government and the Ombudsman to state within the legal period laid down by law whether they were entering the proceedings (as interveners) and, where appropriate, to comment on the proposal.
7. The Chamber of Deputies, in its observations by its President, Margaret Pekarova Adama, summarised the course of the legislative process of adopting Act No. 80 / 2019 Coll. That law was approved by the necessary majority of Members, signed by the relevant constitutional authorities and duly declared. The legislature acted in the belief that the adopted law was in accordance with the constitutional order of the Czech Republic.
8. In the opinion of its President Miloš, the Senate, after a detailed review of the legislative process in this Chamber of Parliament, stated that it followed the constitutional and constitutional procedure when discussing the draft law No 80 / 2019 Coll. was adopted.
9. The Government, through its authorised Minister of Legislation and the Chairman of the Legislative Council of the Government, stressed that the claims for property are a qualified group of claims arising during, in close connection with, or as a direct consequence of, insolvency proceedings. They shall be deemed to have preferential treatment necessary for the proper conduct of insolvency proceedings or for their economic sustainability and relevance. Tax claims are traditionally considered to be such claims (see paragraph 33 of the Supreme Administrative Court judgment of 19.9.2019 No 5 of Afs 266 / 2017-48).
10. The conflicting views appear in the case of the State's claims against the debtor on the correction of the tax in the case of an immaterial claim pursuant to § 46 of Act No. 235 / 2004 Coll., on value added tax, as amended. The legislature's intention was always to consider these claims as a priority, which is evidenced, inter alia, by the fact that Paragraph 168 (2) (e) of the Insolvency Act, in its version effective until 31 March 2019, contained for these priority claims the overriding term "tax ', which was rejected by the Supreme Court in its caselaw. That is what the legislator responded to by adopting an explicit regulation in the contested provision. According to the legislator, the classification of these claims as equivalent to claims for property is better suited to their nature. The satisfaction of these claims has priority fiscal reasons, specifically in the interests of the rapid and effective collection of tax in a situation where taxpayers are allowed to exempt themselves from the tax liability for their debtors, thereby fulfilling the principle of neutrality of value added tax.
11. The Government stresses that there is no "transformation" of the creditor's claim on the State's claim. The correction of value added tax is conditional on the circumstances of a particular insolvency proceedings. Once the creditor has corrected the tax base, the debtor is obliged to reduce the input tax applied (and reduce the tax deduction applied) in accordance with Section 74a of Act No 235 / 2004 Coll. to the amount corresponding to the tax correction made by the creditor. According to the Government, there is therefore a new claim by the State, even if it is also a tax claim for the previously carried out transactions. Basically, the original business transaction will be "committed" until it is known what the borrower will actually receive from the borrower. This constitutes a fundamental reason for the privileged position of this claim.
12. It is therefore not true, nor is it true, in the judgment of the Supreme Court in Case C-29 of ICdo 98 / 2015, that a claim of its kind is made because, if it is true, the creditor could directly claim the refund of the tax paid (from the creditor's point of view) or a reduction in the amount of the deduction applied (from the debtor's point of view). That concept improperly blends the private-law relationship between the creditor and the debtor together with their tax obligations. The State's claim for the correction of the tax base exists independently of the claim filed by the creditor, although its formation is intrinsically linked to the creditor's activity, since its continued existence is not related to its status.
13. Furthermore, the Government points out that, in breach of Article 37 (3), The Charter only takes place in the case of a more favourable position of the State's claims in insolvency proceedings if such priority satisfaction is not formulated explicitly, constitutionally or is not tenable [see the finding of the Constitutional Court of 7.4.2005 sp. zn. I. ÚS 544 / 02 (N 76 / 37 SbNU 75)]. The contested provision meets these criteria. More favourable status of the State's claims is expressly formulated by the law and can be defended for the reasons stated. It is also true that the principle of equality between parties in the proceedings is not absolute and can be derogated from in justified situations. The contested provision will pass the so-called proportionality test.
14. According to the Government, the suitability test is fulfilled because the contested provision is capable of meeting its legitimate objective of ensuring tax neutrality and maintaining revenue for public budgets. The same applies to the need, as it is the most gentle means. Any other would also lead either to a denial of the principle of neutrality or to the resignation of a proper collection of tax. As regards proportionality, the Government submits in the narrow sense that the State is not the only entity having a privileged position in insolvency proceedings. The purpose of insolvency proceedings is to balance the assets of creditors in a situation where it is impossible to fully satisfy everyone and to preserve all the rights of the debtor and the economic efficiency of the process. The legislators are left with some freedom to privilege certain groups against the background of political or social reasons. The State's intervention in the property rights of other creditors is also indirect as their assets are primarily threatened by the insolvency of the debtor, not by the activities of the State. The contested provision seeks to protect the creditor who has an irrecoverable claim and to preserve the principle of neutrality as far as possible.
15. The Ombudsman stated that he would not use his right to intervene.
16. The Judge-Rapporteur sent the observations received to the appellant in his notice and in his reply, if any. The appellant exercised his right and, in reply, stated that it did not consider the consequences of the contested provision to be "of its kind 'nor did it mix the relationship between the creditor and the debtor and their relations with the State. The point is, however, that the government itself admits that the creditor's claim and the State's claim to correct the tax base are linked together. The appellant draws out a contradiction with the constitutional order. There is a clear conflict between the interest of the State in the proper collection of taxes and the equality of the parties in the proceedings, which is expressed in insolvency proceedings by the equal status of the creditors. The answer to the resolution of this conflict is given by the explanatory memorandum to Act No. 294 / 2013 Coll., amending Act No. 182 / 2006 Coll., on the Decrease and Methods of its Resolution (Insolvency Act), as amended, and Act No. 312 / 2006 Coll., on Insolvency Managers, as amended, according to which it is clear that there is a trend in limiting the number of privileged claims, particularly abroad. An example is Germany, which had already abandoned the principle of the priority claims of unsecured creditors in 1999. Finally, the Government marginalizes that the insolvency law is in relation to tax laws in relation to a special law (see Supreme Court judgment of 27.6.2018 sp. zn. 29 ICdo 23 / 2017).
Proceedings before the Constitutional Court
17. The proposal fulfils all the statutory requirements and is admissible under Section 66 of the Constitutional Court Act. In assessing the conditions of the procedure, the Constitutional Court was further obliged to examine whether the application was made by a legitimate appellant. In accordance with Article 95 (2) of the Constitution and Article 64 (3) of the Law on the Constitutional Court, the active legitimacy of the Court of First Instance is given only if the court concludes that the law (or part thereof) to be applied in the resolution of the case is contrary to the constitutional order.
18. Proceedings initiated pursuant to Article 95 (2) The Constitution is not an abstract review of constitutionality, but it is conducted in a narrow framework of judicial decision-making of a particular case [see for example point 32 of the Found of 24.7.2012 sp. zn. Pl. ÚS 34 / 10 (N 130 / 66 CollNU 19; 284 / 2012 Coll.)]. Therefore, the active legitimacy of the court to file an application for annulment or its provision depends on the subject matter of the proceedings and the legal qualification of the case. The Court of First Instance may apply for annulment only of a law (or its partial provisions) which is to be used directly (immediately) in order to resolve the pending proceedings. The condition of direct (immediate) use is fulfilled if the application of the law (or its individual provision) is necessary, necessary, not only hypothetical or given by the broader context of the case [see e.g. Resolution of 23.10.2000 sp. zn. Pl. ÚS 39 / 2000 (U 39 / 20 SbNU 353) or the finding of 28.2.2006 sp. zn. Pl. ÚS 20 / 05 (N 47 / 40 SbNU 389; 252 / 2006 Coll.]].
19. On the basis of the file submitted, the Constitutional Court verified the facts raised by the appellant in the application in favour of its active legitimacy, namely that the tax office seeks, in the proceedings brought by the appellant, an action for a preferential determination of the claim in insolvency proceedings, alleging the effects of a part of the contested provision relating to the correction of the deduction of value added tax on an immaterial claim. Therefore, the appellant must apply the contested provision directly, which justifies its entitlement to submit a request for review, but only partially. The contested provision concerns not only the correction of the deduction of value added tax on an inalienable claim, but also the correction of the tax in the case of reorganisation. In this part, the contested provision in the proceedings before the appellant does not apply because the claims of the tax office in the main proceedings do not concern the reorganisation. Therefore, the appellant is not entitled to an application for annulment of this part of the contested provision [see, for example, paragraphs 23 and 24 of the judgment of 6.9.2011 sp. zn. Pl. ÚS 11 / 10 (N 148 / 62 CollU 277; 314 / 2011 Coll.) or point 26 of the judgment of 30.7.2019 sp. zn. Pl. ÚS 32 / 18 (N 141 / 95 CollU 213; 232 / 2019 Coll.)].
Review of the procedure for the adoption of the contested provision
20. According to Article 68 (2) of the Law on the Constitutional Court, as amended by Act No. 48 / 2002 Coll., it is first necessary to consider whether the contested provision was adopted within the limits of the Constitution laid down by competence and by the constitutional procedure. The contested provision was inserted into the insolvency law by Act No. 80 / 2019 Coll. Parliament had the power to adopt this law pursuant to Article 15 (1) of the Constitution.
21. The two chambers of Parliament described in detail the course of the legislative process, which corresponds to public information. Neither the appellant nor the interveners indicated any shortcomings in the legislative procedure nor raised any doubts as to the constitutionality of the adoption of the contested provision in the proceedings before the Constitutional Court.
A substantive review of the contested provision
22. The contested provision determines, in insolvency proceedings, the position of the particular claims of the tax administrator as being equivalent to claims for property. According to Section 169 (3) of the insolvency law, these claims are satisfied in full at any time after the bankruptcy decision. The contested provision expresses the type of preference of these claims compared to those of the worse ranking, in particular those applied for in insolvency proceedings (Resolution of the Supreme Court of 30 November 2011, Sen. zn. 29 NSCR 16 / 2011 and judgment of 29.4.2020, sp. zn. 29 ICdo 68 / 2018). The contested provision therefore establishes, in insolvency proceedings, the privileged position of the State's specific claims vis-à-vis other insolvency creditors.
General considerations
23. The fundamental purpose of the insolvency law provided for by the insolvency law is to address the property relations of the debtor who is bankrupt and to satisfy the creditors' claims on the debtor's property [point 30 of the decision of 1.7.2010 sp. zn. ÚS 14 / 10 (N 133 / 58 SbNU 67; 241 / 2010 Coll.]]. It is a procedure in which the procedural guarantees under the title of the fifth Charter are applied [cf. the finding of 11.7.2017 sp. zn. Pl. ÚS 23 / 14 (N 117 / 86 SbNU 25; 283 / 2017 Sb.)] and, from the point of view of its material, also affects ownership rights protected, inter alia, by Article 11 of the Charter, even if creditors are only mediated. In particular, in terms of the protection of property rights, the way in which bankruptcy will be dealt with is crucial and, consequently, the extent to which the debtor's assets will be distributed among the individual creditors; In this respect, the principle of debt satisfaction (cf. § 1 (a) of the Insolvency Act) should be crucial, which is precisely the expression of the State's positive obligation to ensure the protection of the right of ownership of the property under Article 11 (1) of the Charter in the form of such a principle of proportional satisfaction of creditors' claims against the debtor. The State also fulfils this obligation in the form of insolvency proceedings. Only a possible deviation from the principle of proportional satisfaction of claims can then be regarded as (justified or not) interference with property law as this would result in a breach of the principle of equality of owners in the protection of their right granted by the State [see point 61 of the judgment of 7.11.2017 sp. zn.
24. It is therefore true that the status of creditors in insolvency proceedings concerns guarantees of sound legal proceedings under Title Five of the Charter and the constitutionally guaranteed right of individual creditors to protect their ownership under Article 11 (1) of the Charter. According to the finding, sp. zn. I. ÚS 544 / 02 the unequal position of the parties created by the legal interpretation of the bankruptcy proceedings and the privileged position of the tax administrator in relation to other creditors limits the possibility of proportional satisfaction of the other creditors as well as the possibility of the insolvency administrator to obtain remuneration from the bankruptcy proceedings. Such an unjustified advantage to the creditor sui generis constitutes an infringement of Article 37 (3) of the Charter guaranteeing equal status to all parties in the proceedings, as well as of Article 36 (1) of the Charter and Article 11 (1) of the Second Charter guaranteeing all the same legal scope and the protection of their property rights. At that time, the Constitutional Court also added that, if a more favourable position of the financial authorities as tax authorities in meeting their claims (representing a certain public interest) should be adopted, such an advantage would have to be formulated by the legislator explicitly, constitutionally and should also be "defensible '.
25. A number of other decisions on the breach of the constitutional rights of the former complainants [cf. 28 / 7 / 2005 sp. zn. III. ÚS 648 / 04 (N 145 / 38 SbNU 135), of 24.11.2005 sp. zn. III. ÚS 24 / 05 (N 212 / 39 SbNU 255), of 20.12.2005 sp. zn. II. ÚS 35 / 05 (N 232 / 39 SbNU 457), of 18.1.2006 sp. ÚS 41 / 05 (N 19 / 40 SbNU 147), of 18.1.2006 sp.
26. In its subsequent plenary case-law, the Constitutional Court concluded that Article 11 of the Charter does not provide any interpretation of the increased protection of the rights of the State as owner in tax matters represented by the tax administrator, which prohibits its unjustified advantage from bankruptcy creditors. In the decision of 2.7.2008 sp. zn. The Constitutional Court therefore preferred a constitutional conformal interpretation according to which the State, as owner, does not have a privileged position over bankruptcy creditors. In the decision of 9.12.2008 sp. zn.
27. Therefore, if the Constitutional Court is based on an interpretation of the findings made so far in connection with the mutual position of creditors in insolvency proceedings, it must respect that the principle of proportional satisfaction, which is a legal expression of the constitutional principles of equality in the protection of the right of ownership and equality of parties in proceedings, applies in principle to insolvency proceedings. However, these principles do not work in absolute terms, as the existing case law shows. Although the findings of sp. zn. Pl. ÚS 12 / 06 and sp. zn. Pl. ÚS 48 / 06 may appear categorically in the sense that the State, as owner, cannot under any circumstances have a privileged position compared to other creditors, but, in the context of the previous case-law, in particular in that sense, the "pilot 'finding of sp. zn. I. ÚS 544 / 02, it is clear that such a privileged position is permissible in the sense of constitutionally guaranteed rights and freedoms, if expressly provided for by law and from the point of view of intervention into constitutionally guaranteed rights and freedoms. The following plenary case law was based on the pilot Senate decision and was not defined against it.
28. Moreover, such a concept corresponds to the approach of the Constitutional Court in other contexts. The principle of equality means, in general terms, a prohibition of libel and is not an abstract, absolute or mechanical category [cf. point 27 of the finding of 22.1.2008 sp. zn. ÚS 54 / 05 (N 16 / 48 CollNU 167; 265 / 2008 Coll.)] and any interference with the property law guaranteed by Article 11 (1) The Charter is only (and currently) admissible from the point of view of constitutional order if it is carried out by law and provides for a proportionality test in relation to the competing legitimate constitutional protected interest in which it is engaged [Paragraph 122 of the decision of 7.12.2021 sp. zn. Nor is the principle of equality between the parties in the proceedings [point 30 of the decision of 28.1.2014 sp. zn. ÚS 49 / 10 (N 10 / 72 SbNU 111; 44 / 2014 Coll.) or point 37 of the decision of 28.6.2022 sp. zn. ÚS 104 / 20 (N 79 / 112 SbNU 193; 254 / 2022 Sb.)].
29. The same conclusions are also evidenced by the European Court of Human Rights's approach to similar issues. In its judgment of 12 December 2017 in case Acar and Others v Turkey, complaint 26878 / 07, the European Court of Human Rights did not consider it necessary to determine whether a system based on the ranking of creditors in insolvency proceedings itself constituted an intervention in the right to the protection of property, because the failure of creditors to recover their claims from a private debtor in insolvency does not result only from the order of claims, but also depends on the amount of property in property. Thus, the European Court of Human Rights has given the Contracting States wider discretion. Nevertheless, if a system based on the ranking of creditors could be regarded as an intervention, the European Court of Human Rights considered that this intervention would be justified because it was provided for by the law as a legitimate purpose. In the context of insolvency, the ranking of creditors is, in its view, a common feature of the national systems of the Contracting States, the aim of which is to strike a balance between the interests of competing creditors and the wider public interests in a situation where the debtor does not have enough assets to satisfy all creditors (see paragraphs 33 et seq.).
30. Similarly, the judgment of 9.2.2023 in the cases of Katona and Zavarský v Slovenska, Complaint No 43932 / 19 and 43995 / 19, is heard; At that time, the European Court of Human Rights, in the context of assessing the adequacy of the intervention in the right to peaceful use of assets consisting of the state-chosen bankruptcy proceedings, stated that the socio-economic phenomenon of the bankruptcy of individuals required a response from a State which may, in the public interest, seek to establish a special set-up of bankruptcy proceedings. This is reflected in the granting of wide discretion by the State. He specifically also stated at the time that, in general, the repayment of certain debts could be preferred to others, under the conditions of proportionality of such a solution (see paragraphs 54 to 59 of the judgment).
31. Nor does the Court of Justice of the European Union consider, at Union level, the advantage enjoyed by public creditors to be unjustified if their claims are excluded from debt relief. In its view, public institutional creditors are not in the same position as creditors in the commercial or private sector in view of the specific objectives of recovery (Case C-20 / 23 Instituto da Segurança Social and others). From a comparative point of view, it can also be pointed out that, although the principle of equality of creditors in insolvency proceedings generally applies in terms of the order of satisfaction of their claims, a number of exceptions are normally applied to this principle which are respected in order to justify the public interest and to pursue a legitimate objective.
32. In the domestic context, it is also the case that, under Paragraph 168 (2) (e) of the Insolvency Act, the privileged position of the State's claims is also determined, albeit with a time condition after the decision on bankruptcy: taxes, fees and other similar cash transactions, social security premiums and contributions to state employment policy and public health insurance premiums. In the case of these claims, neither the doctrine nor the case law with an expressly defined privileged status of the State has any problem. Moreover, the same rule already contained Article 31 (2) (d) of Act No 328 / 1991 Coll., on bankruptcy and settlement, as amended. It is therefore clear that these are in particular reasons for this privileged position of the State in insolvency proceedings and the scheme of the law which leads to a general acceptance of such a solution. Indeed, the problematic moment will not consist of the State's own advantage, but rather its reasons and its tolerable level.
33. Therefore, the absolute prohibition of the privileged status of the State in insolvency proceedings does not result from the constitutional order of the Czech Republic. However, State advantages must be expressly provided for by law and must be "defensible '. In the light of the above, this does not mean anything but that such an advantage must be obtained in the proportionality test, as it will be a question of limiting fundamental rights to the equality of parties in proceedings and the equality of protection of property rights.
34. The assessment of the admissibility of the intervention under the proportionality test shall consist of three steps. The first is the assessment of the suitability and suitability for the purpose. It shall be established whether a specific measure is capable of achieving the intended objective of protecting another fundamental right, a serious public interest or a public good. In addition, the need is assessed in the second step and it is examined whether the most respectful of basic law was used in the selection of funds. Finally, proportionality (in the narrower sense) is assessed, i.e. whether the injury to the fundamental right is disproportionate in relation to the intended objective. Therefore, measures limiting fundamental human rights and freedoms may not exceed, in so far as there is a conflict of fundamental rights or freedoms with public interest, the positive effects of which constitute a public interest in the measures [cf. paragraph 93 et seq., of 18.12.2018 sp. zn.
35. In the context of insolvency proceedings, the specificities of which are the multiplicity of entities and the limited possibility of satisfying their property interests, which depend on the assets of the debtor and the position of other creditors, it is also decisive for the Constitutional Court to avoid the possibility of any State interference in a proportionate principle, representing equality in the content and protection of the right of ownership and equality of parties in proceedings, in the denial of the economic or social nature of insolvency proceedings itself. In other words, the legislator must have some scope to protect other constitutionally protected interests or legitimate public interest to modify the position of individual creditors in insolvency proceedings, including the position of the State. However, it must respect that this is an exception which must be duly justified and the application of which must be systemically sustainable. This is therefore an area in which, while respecting constitutional limits, the legislator has a wider margin of discretion.
Application of general bases to the present case
36. The privileged position of the State under the contested provision relates to the correction of the deduction of value added tax on an inalienable claim pursuant to Article 46 of Act No. 235 / 2004 Coll., paragraph 1 (c) of which determines, inter alia, the case of an inalienable claim of a creditor whose debtor is in insolvency proceedings (subject to other conditions specified there); This is precisely because of the consequences of insolvency. Therefore, it is not any claim by the State or any non-recoverable claim. The privileged position under the contested provision is linked to a specific situation in connection with insolvency proceedings in which the creditor is permitted to correct the tax base precisely because of the insolvency of the debtor.
Evaluation of the objective of the contested legislation, its legitimacy and the appropriateness of the chosen solution
37. The right of the creditor to correct the tax base of the claim against the debtor who is in insolvency also, in its present form, enshrined Act No 80 / 2019 Coll. According to the explanatory memorandum to the same Act, this legislation aims to harmonise more closely with Articles 90 and 185 of Council Directive 2006 / 112 / EC of 28.11.2006 on the common system of value added tax. According to the case law of the Court of Justice, that provision expresses, inter alia, the principle that the taxable amount is constituted by the consideration actually received and that the tax authority cannot recover an amount of value added tax in excess of that paid to the taxable person himself (paragraph 13 of the judgment of 23 November 2017 in Case C-246 / 16 Di Maura). On the basis of those provisions, Member States are obliged to reduce the taxable amount and thus the amount of value added tax due by the taxable person whenever the taxable person does not receive part or all of the consideration after the transaction has been concluded (judgment of 8 May 2019 in Case C-127 / 18 A-PACK CZ).
38. Similarly, the legislation of the creditor's right to rectify the value added tax on the debtor's debt in insolvency proceedings existed, inter alia, in Article 44 of Act No. 235 / 2004 Coll., as effective by 31.3.2019, which was inserted into the same Act by Act No. 47 / 2011 Coll., amending Act No. 235 / 2004 Coll., on Value Added Tax, as amended. According to the explanatory memorandum to Act No. 47 / 2011 Coll., the possibility of correcting the amount of output tax for debtors (customers) in insolvency proceedings is introduced in the context of a negative development of the economic situation. responds to the economic situation and is an anti-crisis measure in order to help companies whose cash flow reduces irrecoverable claims on insolvent enterprises. The explanatory memorandum also states, inter alia, that "the proposal complies fully with Council Directive 2006 / 112 / EC, [Articles] 90 and 185. Similar arrangements apply in at least 12 EU Member States, this scheme is implemented in different forms in the following Member States: Belgium, Luxembourg, Denmark, Germany, France, Portugal, Ireland, Austria, Italy, Greece, Latvia and the United Kingdom '.
39. It is thus apparent that the objective or purpose of the State's privileged position in insolvency proceedings is to reduce the negative effects for the State in the context of ensuring fiscal neutrality in the performance of the State's obligations under Union law and the proper collection of tax. This is the legitimate objective of the contested provision [cf. point 78 of the decision of 12.12.2017 sp. zn. In so doing, the privileged position of such claims by the State in insolvency proceedings is capable of achieving this objective, since it is by transferring the tax liability to the debtor, or by failing to recognise the tax deduction previously applied, that tax is not based on a creditor whose claim the debtor fails to fulfil as a result of its insolvency, and at the same time the public budget is not burdened by the measure. In other words, the contested provision leads to the tax base being equal to the remuneration actually received and the cost of the transaction is not borne by the State on its own budget.
Evaluation of the need for the contested legislation
40. If there is an assessment of the second step of the proportionality test, that is to say the necessity, neither the appellant's argument nor the existing decision-making practice results in any other solution that is equally effective but more favourable to the position of other creditors in insolvency proceedings. In the absence of a privileged position in insolvency proceedings with the debtor, the tax burden would be borne by the State itself, which would significantly affect public budgets. Nor would it have the same effect on the creditor, since this would have denied the Institute the possibility of correcting the tax base for an immaterial claim and would therefore be a contradiction with the principle of value added tax neutrality.
Assessment of proportionality in the narrower sense
41. In this context, in particular, the systemic and economic sustainability of dealing with individual bankruptcy and the aspects of the lawmaking and comparison of the values concerned will be decisive if it is a third step, that is to say, an assessment of proportionality in the narrower sense, as indicated by the Constitutional Court above.
42. If it is about assessing the systemic nature of the solution adopted, the contested provision actually concerns the specific situation of the insolvency debtor's relationship, its creditor and the financial authorities (cf. the scheme in the explanatory note to Article XVII of Act No 80 / 2019 Coll.). It is therefore not a flat-rate advantage to the type group of claims of the State. This claim is also directly linked to the debtor's insolvency or is a direct consequence thereof.
43. As has also been outlined above, tax claims are traditionally considered to be typical of privileged claims if, following the bankruptcy decision [Paragraph 168 (2) (e) of the insolvency law]. The contested provision therefore does nothing other than that, on grounds of substance, it extends the application of this preferential position to a specific tax claim which originates before the decision on bankruptcy. Although the view of the moment when this claim arose is different between the case law of the Supreme Court (see Case C-29 of ICdo 98 / 2015) and the legislator (see the explanatory memorandum to Act No 80 / 2019 Coll.). However, from the point of view of the protection of constitutionally guaranteed rights, it is only decisive for the Constitutional Court that the legislature, by the contested provision, has extended the privileged position of claims by another expressly law, and has put forward, in addition, the defensible grounds which are in fact dealt with by the present Supreme Court Opinion. Therefore, it is not a systemic solution or an arbitrary doctrine turnover.
44. In addition, it is important that the insolvency law, as it stands at the present time, provides for similar "privileged 'state claims equivalent to those of assets. The Office of the Labour of the Czech Republic for the compensation of wages paid to employees, for the replacement of maintenance payments under another law and for the funds paid under special legislation and 2. the tax administrator resulting from the obligation to correct the deduction in the case of reorganisation [§ 169 (1) (c)]. Without assessing these measures, since they do not belong to the subject matter of the present proposal, it is clear that, even in the present wording, the full frequency of the privileged status of the State continues to be truly exceptional and linked to specific reasons.
45. Paragraph 305 (2) of the Insolvency Act, which determines the order of the pre-schedule satisfaction of the preferential claims among themselves, also deserves attention. That provision does not, in that "step ', provide for the advantage of the State's claims, even those under the contested provision. These facts also indicate to the Constitutional Court that it is not a non-systemic solution or an excerpt emptying the principle of proportional satisfaction.
46. In terms of value measurements, it is important for the Constitutional Court that the equal position of creditors in insolvency proceedings or insolvency proceedings itself is aimed at resolving the socio-economic problem of the debtor's bankruptcy. This is the relevant argument that the primary negative event in relation to claims of other insolvency creditors is the behaviour of their debtor who is in bankruptcy. Although this argument does not in any way diminish the relevance (constitutional) of the protection of the property rights of creditors of the insolvency debtor, it cannot be ignored that the State here acts as a sort of intermediary for resolving the conflict of these interests, which, by its nature (multiple entities and limited property options of the debtor in bankruptcy), can never be fully fulfilled. Therefore, if the legislator decides to modify the legal setting of the solution to this conflict and has strong reasons for doing so, a certain degree of restraint must also be chosen, because it is a matter of substance, for which legislators must be left with a wider discretion (sub-sub-35).
47. On the other hand, since it is not indeed a public benefit to the State, it does not seem likely that it would suffer significantly from the economic sustainability of the insolvency scheme as a whole as a result of the extension of this State advantage. Only then would the Constitutional Court be entitled to intervene. Moreover, the appellant's argument does not go that way either. The amount of the State's claim under the contested provision will also always depend on the specific circumstances of the case. It is, therefore, rather a matter of modifying legal nullities that are influenced by many variables and which need to be respected by the wider discretion of the legislator (see also the conclusions of the European Court of Human Rights, sub 29). The Constitutional Court has not found that the negative effects associated with the application of the contested provision exceed the positive effects resulting therefrom.
48. It can be added that, although the contested provision does not provide for a tax or charge obligation and therefore it is not a matter directly falling within the scope of Article 11 (5) of the Charter, the Constitutional Court also takes into account that the matter is closely related to the tax issue. On tax issues and the interpretation of constitutional requirements for the imposition of taxes and charges, the Constitutional Court is of the nature of the matter of restraint; consistently respects that Article 11 (5) of the Charter provides for an area for the constitutionally acceptable interference with property law on grounds of public interest, which is interested in the collection of funds for the provision of various types of public goods and services [see point 40 of the Found of 21.4.2009 sp. zn. The Court of First Instance's abstention in the area of tax laws is reflected in the lower intensity of the review of tax laws in the form of examination of only extreme disproportionality of tax burden (or tax impact) instead of the application of proportionality intensity in the form of an order for optimisation [cf. point 36 of the judgment of 27.2.2018 sp. zn. ÚS 15 / 17 (N 33 / 88 SbNU 457; 69 / 2018 Coll.]]. Even this closely related context will justify a higher degree of restraint in the present case.
49. It is also appropriate to add that, by this decision, the Constitutional Court does not actually diminish any importance and in particular does not contradict the reasons for the decision-making practice of the Supreme Court, which, in the previous state of the law, preferred the principle of proportional satisfaction of other creditors to the privileged position of the State as a creditor. This practice of decision-making must be seen as an expression of the interpretation of the legislation which made it possible, particularly from the point of view of the legality of such a solution. However, if the legislature has adopted a legal regulation that modifies this framework, the Constitutional Court must, of the nature of the case and bound by its (strictly limited) role in protecting constitutionality, judge the matter only through the optics of fundamental rights and freedoms, not by a "simple" law. It must also respect the constitutional principle of division of power; in a democratic rule of law, the wording of general rules belongs primarily to the competent legislative authorities. In addition, the Constitutional Court is obliged to take this into account in the performance of its tasks.
50. The contested provision therefore constitutes an appropriate intervention in the proportionate principle of satisfaction of creditors in insolvency proceedings, representing equality in content and the protection of property rights and equality of participants in proceedings pursuant to Articles 11 (1) and 37 (3) of the Charter.
Conclusion
51. For the reasons set out above, the Constitutional Court partially rejected the application for annulment of the contested provision as unfounded pursuant to Paragraph 70 (2) of the Constitutional Court Act and partly rejected as filed by someone manifestly illegitimate under § 43 (1) (c) of the same Law (sub 19 if.).
President of the Constitutional Court:
JUDr.
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Regulation Information
| Citation | The Constitutional Court found no 5 / 2025 Coll., sp. zn. Pl. ÚS 37 / 23 on the application for annulment of Section 169 (1) (c) of Act No. 182 / 2006 Coll., on the bankruptcy and methods of its resolution (Insolvency Act), as amended by Act No. 80 / 2019 Coll. |
|---|---|
| Regulation Type | - |
| Author | - |
| Collection | Code of Laws |
| Date of Promulgation | 09.01.2025 |
|---|---|
| Effective from | - |
| Effective until | - |
| Status | Valid |
The regulation text is for informational purposes only.
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