- The Belgian company Cezam failed to file its VAT returns and pay the VAT due from 2013 to 2018 because the tax authorities had refused to grant a clearance plan relating to VAT debts.
- As a sanction, the administration imposed a proportional fine of 20% of the VAT that should have been paid. Cezam contested the amount of the fine imposed, claiming that it breached the principles of fiscal neutrality and proportionality.
- The Court of Justice was asked whether calculating the tax fine on the totality of the VAT due, and not on the difference between the VAT due and the deductible VAT, violated these principles. The Court found that penalties must be effective and dissuasive to protect the Union’s financial interests, subject to compliance with the principles of proportionality and fiscal neutrality. The principle of proportionality is respected if the penalties imposed are strictly necessary for combating fraud and collecting the full amount of the tax.
- Belgian legislation provides for a system of gradation of fines, and it does not appear that a proportional fine of 20% of the unpaid VAT, without taking into account the deductible VAT, is disproportionate.
- The principle of fiscal neutrality requires granting a taxable person the right to deduct input VAT paid when the basic conditions for the exercise of this right are met, notwithstanding the omission of certain formal requirements. Article 70 CTVA and Royal Decree no. 41 do not preclude a taxable person from exercising his right to deduct, it follows that these provisions do not violate European law.
- Therefore, such a fine complies with the principles of proportionality and fiscal neutrality.
Source Aurelie Soldai
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
