VAT sanction - legislative changes

VAT sanction - legislative changes

Adam Sękowski, Tax Manager, Crowe
VAT sanction - legislative changes
The Ministry of Finance has been working for several months on a package of amendments to the VAT legislation (the so-called SLIM VAT 3). One of the key elements of this package is the modification of the rules for imposing VAT sanctions.

According to Polish VAT regulations, any irregularities in VAT settlements may lead not only to the payment of interest for late payment, but also to the imposition of an additional penalty, the so-called VAT sanction. Current regulations specify that the amount of the sanction may vary between 15 and 100 per cent of the value of the incorrectly settled tax.

VAT sanction - CJEU judgment

In April 2021 the Court of Justice of the European Union stated that the above provisions are incompatible with EU law as they do not provide for the possibility to vary the amount of sanctions depending on particular circumstances of each case. In particular, the equal treatment of unintentional VAT errors as well as irregularities resulting from tax fraud is contrary to EU law.

The amendments proposed by the Ministry of Finance are intended to adapt Polish sanction regulations to EU law. They provide that tax authorities will have flexibility in determining the amount of the sanction and, when imposing it, will be obliged to consider the circumstances of a particular case.

Consequences for taxpayers

Although the amendments in question have not yet been adopted, taxpayers already have the right to point out the non-compliance of the current legislation with EU law and demand that the tax authorities follow the guidelines contained in the aforementioned 2021 judgment of the Court of Justice of the EU when imposing sanctions.

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Adam Sękowski
Adam  Sękowski
Tax Manager