On May 5, 2022, the ECJ issued its decision in the case C-570/20 (BV).
Context: Reference for a preliminary ruling – Value added tax (VAT) – Directive 2006/112/EC – Fraudulent concealment of tax 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 49 – Article 50 – Principle ne bis in idem – Article 52(1) – Limitations to the principle ne bis in idem – Requirement to provide for clear and precise rules – Possibility of taking into account the interpretation of national legislation by national courts – Need to provide for rules ensuring the proportionality of all of the penalties imposed – Penalties of different kinds
Article in the EU VAT Directive
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.
BV has exercised the profession of accountant until June 14, 2011. Following audits over the years 2009-2011, the tax authorities filed a complaint for committing accounting irregularities and fraud in income tax and VAT. The criminal court has sentenced BV to twelve months in prison, mainly because between 01-01-2010 and 14-06-2011 he had fraudulently withdrawn transactions from the VAT determination and thus fully or partially from the VAT payment. BV has applied for an acquittal before the Court of Appeal and argues that his conviction is in breach of the ne bis in idem principle guaranteed by Article 50 of the Charter. For the same facts, additional recovery proceedings have already been initiated against him personally, which has given rise to tax fines of 40% of the tax avoided. According to BV, the overall severity of the penal system is disproportionate. By judgment of 13-02-2019, the Court of Appeal ruled out the application of the ne-bis-in-idem rule because:
– Article 1741 of the General Tax Code provides for the possibility of cumulating criminal and tax sanctions after criminal proceedings and an independent administrative procedure, each having a different object and purpose;
– this exclusion is compatible with Article 50 of the Charter, as the Constitutional Council has defined its scope as follows: (i) applies only to the most serious cases of fraudulent concealment of amounts subject to tax; (ii) in accordance with the principle of proportionality, the aggregate amount of any penalties imposed must not exceed the amount of the most severe penalty.
The Court of Appeal upheld the verdict in so far as it concerns BV’s conviction and sentenced him to eighteen months’ imprisonment. BV lodged an appeal in cassation with the referring court.
In the first place, according to the Court, the ne bis in idem principle can be restricted only if it is necessary and the national legislation to that end must contain “clear and precise rules, so that the individual can foresee for which acts and omissions a such cumulation of prosecution measures and sanctions is possible ”(C-524/15). Second, the French legislation on the one hand limits criminal prosecution to offenses of a certain seriousness, for which the national legislature, in particular, in addition to a fine, has also provided for imprisonment. On the other hand, the possibility of cumulating sanctions is limited because the highest amount of one of the sanctions imposed cannot be exceeded. However, this rule only applies to sanctions of a similar nature, namely financial sanctions. The correct application of EU law is not so obvious that there can be no reasonable doubt as to how the questions raised should be resolved.
1) Is the requirement of the clarity and the foreseeability of the circumstances in which concealments in returns relating to VAT payable may be the subject of a
duplication of proceedings and penalties of a criminal nature satisfied by national rules such as those described above?
2) Is the requirement of the necessity and the proportionality of the duplication of such penalties satisfied by national rules such as those described above?
In the light of the foregoing considerations, I suggest that the Court of Justice give the following reply to the Cour de cassation (Court of Cassation, France):
Article 50 of the Charter of Fundamental Rights of the European Union is to be interpreted as meaning that:
– It does not preclude national legislation which permits the duplication of administrative and criminal proceedings and penalties in situations defined on the basis of clear and precise criteria that are laid down by law and properly defined by case-law.
– It precludes national legislation which does not make it possible to ensure the required proportionality between the seriousness of the offence, on the one hand, and the severity of all the combined penalties, on the other, whether they be financial administrative penalties of a substantively criminal nature or prison sentences.
The fundamental right guaranteed by Article 50 of the Charter of Fundamental Rights of the European Union, read in conjunction with Article 52(1) thereof, must be interpreted as meaning that
– it does not preclude a situation whereby the limitation of the duplication of proceedings and penalties of a criminal nature in the event of fraudulent concealment or omissions from a return relating to value added tax (VAT) provided for by national legislation to the most serious cases is based only on settled case-law interpreting restrictively the legal provisions laying down the conditions for the application of that duplication, provided that it is reasonably foreseeable, at the time when the offence is committed, that that offence is liable to be the subject of a duplication of proceedings and penalties of a criminal nature, but
– it precludes national legislation which does not ensure, in cases of the combination of a financial penalty and a custodial sentence, by means of clear and precise rules, where necessary as interpreted by the national courts, that all of the penalties imposed do not exceed the seriousness of the offence identified.
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