The Tax Disputes Commission referred to the Court of Justice a question concerning the coordination of procedures for imposing penalties and criminal prosecution
The Court of Justice of the European Union (hereinafter referred to as the CJEU) accepted for consideration a request from the Tax Disputes Commission under the Government of the Republic of Lithuania (hereinafter referred to as the Commission) for a preliminary ruling on the coordination of late payment interest and criminal prosecution procedures.
The dispute in the case arose from a decision by the State Tax Inspectorate under the Ministry of Finance of the Republic of Lithuania (hereinafter referred to as the Inspectorate) not to exempt the Company from late payment interest on value added tax (hereinafter referred to as VAT) and a VAT fine.
The Inspectorate found that the Company had violated the provisions of the Law on Value Added Tax of the Republic of Lithuania by participating in transactions related to VAT fraud, which were also the subject of a pre-trial investigation in a criminal case. The Company, challenging the Inspectorate's decision, requested to be exempted from paying part of the VAT late payment interest calculated for the Company, taking into account the punitive nature of the late payment interest.
After assessing the possibility of exempting the Company from VAT late payment interest, the Inspectorate concluded that the requirement to pay late payment interest for late fulfillment of a tax obligation should not be considered a criminal sanction, and that the late payment interest was calculated for the Company in accordance with the requirements of the Tax Administration Act (hereinafter referred to as the TAA). If the Company fails to pay the VAT calculated during the audit, the tax administrator has the right to calculate late payment interest at a rate of 0.03%. By choosing to apply a late payment interest rate of 0.01% to the Company, the tax administrator would violate the principle of equality of taxpayers before the law (Article 7 of the TAA).
The Company stated that there is no dispute that the basis for calculating VAT late payment interest stems from the same acts for which the Company is subject to criminal prosecution and criminal penalties. In the company's opinion, the severity of all the sanctions imposed (the portion of late payment interest calculated on the basis of the violations identified during the inspection by the Inspectorate that exceeds the tax interest rate and the criminal penalties imposed for the same violations for which late payment interest is calculated) must correspond to the severity of the criminal offense, and the automatic portion of late payment interest exceeding the tax interest rate established by the Tax Administration Act must correspond to the severity of the criminal offense. criminal penalties are imposed) must correspond to the severity of the criminal offense, and the automatic application of the part of the late payment interest exceeding the tax interest rate, as established by the MAĮ, is contrary to the principle of double jeopardy (non bis in idem).
Having assessed the conflicting positions of the parties to the dispute and the practice of the ECJ, the Commission seeks to clarify whether the provisions of Articles 96-99 of the MAĮ, insofar as they do not ensure the coordination of administrative late payment interest and criminal prosecution procedures, would, to the extent strictly necessary, the additional burden arising from the accumulation of these measures is reduced and that the severity of all penalties imposed is commensurate with the seriousness of the infringement in question, where the Company is subject to criminal prosecution and criminal penalties for acts that automatically give rise to the calculation of late payment interest exceeding the tax interest rate, and at the same time criminal prosecution and criminal penalties are being imposed, are compatible with Article 325 of the Treaty on the Functioning of the European Union, Article 273 of Council Directive 2006/112/EC of 28 November 2006 Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax, Article 49(3) and Article 50 of the Charter of Fundamental Rights of the European Union, and the principles of ne bis in idem and proportionality.
Last updated: 20-11-2025
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