Comments on ECJ C-418/22: Penalty for failure to submit returns – whether input tax should be taken into account – validity of penalty – taxpayer loss

A taxpayer failed to submit VAT returns and justified it by claiming the Belgian tax authorities had refused to clear its VAT debts. The penalty raised was a flat rate of 20% of the output VAT. The taxpayer challenged the validity of the penalty, but the Court ruled that Member States have the power to choose appropriate penalties, as long as they comply with EU law and its general principles. The penalty in this case was not considered excessive given the prolonged period of non-compliance by the taxpayer. The Court noted that Member States must take measures to ensure collection of all VAT due and prevent fraud.

Source KPMG

See also

• 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
• ECJ C-418/22 (Cezam) – Judgment -Authorities are allowed to impose penalties on underpaid VAT without considering input VAT

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