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Provisions mitigating the existing rules on sanctions in VAT were introduced to the VAT Act. The changes providing mainly for the abolition of automaticity in imposing penalties are directly related to the judgment of the Court of Justice of the European Union. The new regulations were introduced as part of the broader Slim VAT 3 package.

Changes regarding VAT sanctions are related to the judgment of the Court of Justice of the European Union of April 15, 2021 (file reference number – C-935/19). According to experts, from the perspective of taxpayers, the change providing for the lack of automaticity in imposing sanctions is particularly promising.

The amendment provides for the resignation from the automatic application of sanctions in VAT. As a result, the head of the tax office or customs and tax office has the right to withdraw from its determination in certain cases. The assumption is that sanctions are to be imposed in accordance with the principle of proportionality in an individualized manner.

In practice, the current fixed amounts of sanctions at the level of 30 percent, 20 percent and 15percent changed into the upper limit up to which the tax authority may impose an additional tax liability. At the same time, preferential rates were reduced from 20 percent to 10 percent and with 15 percent to 5 percent.

The assumption of individualisation of the penalty and the possibility of varying the amount of the additional liability is a step in the right direction, which, at least in principle, is to promote greater justice. Another issue is how the tax authorities will use this option in practice. I am afraid that penalties “in the upper range” of the threat will still be the norm – comments the expert.

The regulation entered into force on July 1, 2023.