VATupdate

Flashback on ECJ Cases C-524/15 ( Menci) – Criminal prosecution possible in addition to fine for non-payment of VAT

On March 20, 2018, the ECJ issued its decision in the case C-524/15 (Menci).

Context: Reference for a preliminary ruling — Value added tax (VAT) — Directive 2006/112/EC — Failure to pay VAT due — Penalties — National legislation which provides for an administrative penalty and a criminal penalty for the same acts — Charter of Fundamental Rights of the European Union — Article 50 — Ne bis in idem principle — Criminal nature of the administrative penalty — Existence of the same offence — Article 52(1) — Limitations to the ne bis in idem principle — Conditions


Article in the EU VAT Directive

Article 2(1) and 273 of the EU VAT Directive 2006/112/EC.

Article 2
1. The following transactions shall be subject to VAT:
(a) the supply of goods for consideration within the territory of a Member State by a taxable person acting as such;
(b) the intra-Community acquisition of goods for consideration within the territory of a Member State by:

  • (i) a taxable person acting as such, or a non-taxable legal person, where the vendor is a taxable person acting as such who is not eligible for the exemption for small enterprises provided for in Articles 282 to 292 and who is not covered by Articles 33 or 36;
    (ii) in the case of new means of transport, a taxable person, or a non-taxable legal person, whose other acquisitions are not subject to VAT pursuant to Article 3(1), or any other non-taxable person;
    (iii) in the case of products subject to excise duty, where the excise duty on the intra-Community acquisition is chargeable, pursuant to Directive 92/12/EEC, within the territory of the Member State, a taxable person, or a non-taxable legal person, whose other acquisitions are not subject to VAT pursuant to Article 3(1);

(c) the supply of services for consideration within the territory of a Member State by a taxable person acting as such;
(d) the importation of goods.

Article 273

Member States may impose other obligations which they deem necessary to ensure the correct collection of VAT and to prevent evasion, subject to the requirement of equal treatment as between domestic transactions and transactions carried out between Member States by taxable persons and provided that such obligations do not, in trade between Member States, give rise to formalities connected with the crossing of frontiers.


Facts

  • Mr Menci was subject to administrative proceedings during which it was alleged that he had failed, in his capacity as proprietor of the sole trading business, to pay within the time limit stipulated by law, the VAT resulting from the annual tax return for the tax year 2011, amounting to a total of EUR 282 495.76.
  • Those proceedings gave rise to a decision of the Amministrazione Finanziaria (Tax authority, Italy) by which that authority ordered Mr Menci to pay the VAT due and also imposed on him, on the basis of Article 13(1) of Legislative Decree No 471/97, an administrative penalty of EUR 84 748.74, representing 30% of the tax debt. That decision has become final. Since the request made by Mr Menci to pay in instalments was accepted, the latter paid the first instalments.
  • After the final conclusion of those administrative proceedings, criminal proceedings were initiated with respect to the same acts against Mr Menci before the Tribunale di Bergamo (District Court, Bergamo, Italy) pursuant to a prosecution brought by the Procura della Repubblica (Public Prosecutor, Italy), on the ground that that failure to pay VAT constituted the offence provided for and punished by Article 10a(1) and Article 10b(1) of Legislative Decree No 74/2000.
  • The referring court states that, according to the provisions of Legislative Decree No 74/2000, the criminal and administrative proceedings are to be conducted independently and come within the competence, respectively, of the judicial and administrative authorities. Neither of those two proceedings could be suspended pending the outcome of the other proceedings.
  • That court adds that Article 21(2) of that legislative decree, in accordance with which administrative penalties relating to tax offences imposed by the competent administrative authorities are not enforceable unless the criminal proceedings have been finally concluded by dismissal of the case, acquittal or termination of the proceedings, which excludes criminal liability, does not prevent a person, such as Mr Menci, from being subject to criminal proceedings after having had a final administrative penalty imposed on him.

Questions

Does Article 50 of the Charter …, interpreted in the light of Article 4 of Protocol No 7 to the [ECHR] and the related case-law of the European Court of Human Rights, preclude the possibility of conducting criminal proceedings concerning an act (non-payment of VAT) for which a final administrative penalty has been imposed on the defendant


AG Opinion

Article 50 of the Charter of Fundamental Rights of the European Union:

–        Requires for its application the existence of the same material facts which, regardless of their legal classification, must be the basis for the imposition of the tax penalties and the criminal penalties.

–        Is infringed if criminal proceedings are commenced or a penalty of a criminal nature is imposed on a person who, in respect of the same act has previously had a tax penalty imposed on him by a judgment which has become final, where, despite its name, that penalty is in fact criminal in nature. The national court must establish that fact using the following criteria: the legal classification of the offence under national law; the nature of the offence, which is to be assessed by reference to the aim of the provision, the persons to whom it is addressed and the legal right which it protects; and the nature and degree of severity of the penalty.


Decision 

1.      Article 50 of the Charter of Fundamental Rights of the European Union must be interpreted as not precluding national legislation in accordance with which criminal proceedings may be brought against a person for failing to pay value added tax due within the time limits stipulated by law, although that person has already been made subject, in relation to the same acts, to a final administrative penalty of criminal nature for the purposes of Article 50 of the Charter, on condition that that legislation

–        pursues an objective of general interest which is such as to justify such a duplication of proceedings and penalties, namely combating value added tax offences, it being necessary for those proceedings and penalties to pursue additional objectives,

–        contains rules ensuring coordination which limits to what is strictly necessary the additional disadvantage which results, for the persons concerned, from a duplication of proceedings, and

–        provides for rules making it possible to ensure that the severity of all of the penalties imposed is limited to what is strictly necessary in relation to the seriousness of the offence concerned.

2.      It is for the national court to ensure, taking into account all of the circumstances in the main proceedings, that the actual disadvantage resulting for the person concerned from the application of the national legislation at issue in the main proceedings and from the duplication of the proceedings and penalties that that legislation authorises is not excessive in relation to the seriousness of the offence committed.


Summary

The Court of Justice of the EU has ruled that it is not contrary to EU law for Italy to initiate criminal proceedings against a person who has not paid the VAT on time, while this person has also already been subject to an administrative sanction of a criminal nature.


Source


Similar ECJ cases


Reference to the case in the other EU MS


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