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Admissibility of combining administrative sanctions of a penal nature for the same deed in VAT

Court of Justice of the European Union, C-97/21

Ruling: Article 273 of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax and Article 50 of the Charter of Fundamental Rights of the European Union must be interpreted as precluding national legislation under which a financial penalty and a measure involving sealing of business premises may be imposed on a taxpayer for one and the same offence relating to a tax obligation at the end of separate and autonomous procedures, where those measures are liable to challenge before different courts and where that legislation does not ensure coordination of the procedures enabling the additional disadvantage associated with the cumulation of those measures to be reduced to what is strictly necessary and does not ensure that the severity of all penalties imposed is commensurate with the seriousness of the offence concerned.

Explanation: A Bulgarian court made reference to the Court of Justice in a case concerning two distinct administrative sanctions on a taxpayer, who hadn’t recorded one transaction on his cash register. The Bulgarian tax administration issued a fine and sealed the taxpayer’s premises for 14 days, stating that it is necessary for protecting the Treasuries’ interests. The referring Court doubted, whether such a combination of punitive measures are in line with the principles of proportionality and ne bis in idem.

The Court of Justice found the national legislation allowing such situation as precluded by the VAT Directive and the Charter of Fundamental Rights. Apart from noting, that the used measures are out of proportion compared to the deed of the taxpayer, the Court disapproved the procedural aspects of those measures. Appealing against them was supposed to be made to different types of courts, so none of them could coordinate and control the overall harshness of the penalties. In effect, the taxpayer was vulnerable to additional unjustified disadvantage.

Impact: The ruling may be an advice for national tax authorities as for the degree of penalties imposed on tax law offenders. The key conclusion for the CJEU’s ruling is that in order to contain multiple sanctions from becoming unproportional bodies imposing them should coordinate their actions, whilst the procedures on imposing them shouldn’t be completely autonomous.