Summary of ECJ C-418/22: National legislation can penalize failure to declare and pay VAT with a flat-rate fine of 20% of the VAT amount due, after deducting deductible VAT, as long as the fine is proportionate.

Background

The applicant failed to submit VAT returns since June 2013.
A statement of adjustment was issued in 2015 for the year 2013 but received no response, so a formal record of assessment was sent.
No returns were submitted for 2014 and 2015 despite reminders, resulting in an ex officio assessment.
In 2017, a special account was set up due to non-submission of returns and non-payment of VAT. Sums due include VAT, penalties and interest. Penalties are 20% of the gross amount of VAT without considering deductible VAT.

Questions

Do provisions in national legislation, such as Article 70(1) of the VAT Code, which penalize errors in taxable transactions by imposing a flat-rate fine of 20% of the tax due without allowing for deduction of input tax paid, violate Articles 62(2), 63, 167, 206, 250, and 273 of Council Directive 2006/112/EC and the principle of proportionality, neutrality, and the interpretation in the EN.SA (C-712/17) judgment?
Does this answer change if the taxable person voluntarily or involuntarily pays the tax owed following an inspection?

Decision

National legislation can penalize failure to declare and pay VAT with a flat-rate fine of 20% of the VAT amount due, after deducting deductible VAT, as long as the fine is proportionate.
This is allowed under Article 273 of Council Directive 2006/112/EC.
The referring court must ensure that the fine imposed in the case in question is proportionate.