VGH Munich on tax debts as a reason for unreliability

The Higher Administrative Court [Verwaltungsgerichtshof, VGH] of Munich has ruled that outstanding tax debts of an insurance broker can lead to the revocation of the broker's licence (decision of 18 January 2022, 22 ZB 21.2643).

The factual situation:

An insurance broker had accumulated tax debts of more than 20,000 euros over several years and had already been entered in the debtors' register several times. The responsible Chamber of Industry and Commerce subsequently revoked his broker's licence. The broker took legal action against this, stating, among other things, that the tax debts and entries in the debtors' register were due to his temporary serious illness, which meant that he was not at fault. However, he was unable to present a financial rehabilitation plan to settle the tax debts.

The decision of the VGH Munich

The VGH Munich rejected the broker’s appeal against the preliminary ruling of the Administrative Court [Verwaltungsgericht, VG] of Munich (ruling of 21 April 2021, M 16 K 19.4052).

In order to make the relevant assessment of the reliability pursuant to Sec. 34d (5) sentence 1 No. 1 of the German Industrial Code [Gewerbeordnung, GewO], the senate drew on the jurisprudence for comparable licensing cases of the GewO (e.g. for the real estate brokerage and loan brokerage trades). Applying this to the case at hand, the court initially rejected the broker's reliability because of tax debts he had accumulated over years. Contrary to the view held by the broker, however, the decisive issue was not whether the debts were based on reproachable conduct. Rather, what mattered was whether there was a positive prognosis that the trader would be able to operate his business properly in the future. If the assessment of the overall picture were to result in a negative prognosis, then the criterion for unreliability would be fulfilled, irrespective of whether the person was or was not at fault. In the present case, the broker was unable to present a promising financial rehabilitation concept, despite having been given repeated opportunities to present a solution (e.g. instalment payment agreement) over several months.

In line with Sec. 34d (5) sentence 3 var. 2 GewO, the senate found that the entries in the debtors' register also led to the fulfilment of the standard presumption criterion of disorderly financial circumstances. Here, too, the court ruled that the circumstances that led to the fulfilment of the standard example (e.g. fault) were fundamentally irrelevant. In turn, it was only possible to refute the standard presumption criterion in individual cases with a positive prognosis for restoration (which did not exist here).

Further comments

The decision of the VGH Munich confirms the strict criteria that the law and jurisprudence place on the reliability of regulated trades. As part of the reliability check, objective indications are queried as standard practice and combined with a future prognosis. The senate's finding that the assessment of reliability for the various trades is based on comparable criteria is also consistent with administrative court jurisprudence.

Back to list