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European Court Case backs high VAT fines

  • Aug 14, 2013 | Richard Asquith

European Court Case backs high VAT fines

The European Court of Justice has recently backed the Bulgarian VAT authorities which imposed a VAT fine equal to the value of an adjusted invoice.  The ECJ found that countries were free to set their own fines, and it is not responsible for determining proportionality.

Bulgarian VAT authorities impose high fine

A Bulgarian firm included an VAT purchase invoice in its domestic return which proved to be incorrect.  It did make a correction and cancellation through a late VAT return, and remit the difference, with an interest payment.  However, it did so after the normal legal limit.

The Bulgarian VAT authorities raised a penalty equal to double the amount of the original VAT invoice.  The company challenged this through the Bulgarian courts and then the ECJ.  It argued that such a high penalty was in contravention of the EU VAT principles of proportionality and fiscal neutrality.

The ECJ agreed with the Bulgarian tax authorities as the above principles do not infringe on the national tax office’s ability to raise such penalties – even when the company had corrected the original problem itself.  It also held that it could not judge on the principle of proportionality – this was up to the Bulgarian legal system

VP Global Indirect Tax
Richard Asquith
VP Global Indirect Tax Richard Asquith
Richard Asquith is VP Global Indirect Tax at Avalara, helping businesses understand their compliance obligations as they grow globally. He is part of the European leadership team which won International Tax Review's 2020 Tax Technology Firm of the Year. Richard trained as an accountant with KPMG in the UK, and went on to work in Hungary, Russia and France with EY.