- Spain’s VAT law imposes a penalty of 10% of the VAT amount not included in the tax return for non-declaration of VAT due to reverse charges, regardless of the circumstances.
- However, the Spanish Supreme Court recently ruled that this penalty is not admissible under EU law as it does not respect the principle of proportionality.
- The principle of proportionality has been highlighted by the Court of Justice of the European Union as a requirement for respecting the principle of VAT neutrality.
- Penalties that do not consider the behavior of the offender or the result for the administration have no place in EU law.
- While member states have the power to impose penalties, they must still respect certain provisions of EU community law.
Source International Tax Review
See also ECJ cases on the principle of proportionality is seen by the CJEU as a requirement for respecting the principle of VAT neutrality
- C-210/91 (Commission vs. Greece) – Penalty on Temporary importation arrangements for travellers’ personal effects
- C-284/11 (EMS-Bulgaria Transport) – Limitation period for the exercise of the right to deduct is permitted, if it does make the exercise of this right impossible
- C-259/12 (Rodopi-M 91) – Heavy Fine For Belated VAT Adjustments
- C-272/13 (Equoland) – VAT exemption on imports to be subject to the condition that the imported goods are actually stored in a tax warehouse
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