Comments on ECJ C-418/22: A penalty of 20% of the output VAT is permissible

• A company in Belgium was fined 20% of the output VAT assessed by the tax authority for failing to file VAT returns and pay the tax due.
• The question posed to the Court was whether such regulations were permissible.
• The Court stated that Member States have the power to choose penalties for VAT non-compliance, but must exercise this power in accordance with the principles of proportionality and neutrality.
• In this case, the penalty was deemed proportional as the company’s infringements were not due to an error, they had refused to declare or pay VAT despite previous interventions, and Belgian law provides for a graduated scale of fines.
• The penalty also did not undermine the company’s ability to exercise its right to deduct input VAT.

Source Pawel Mikula

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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