First, it is important to note that when a tax payer is penalised with a VAT penalty, the tax payer must still request a waiver from this penalty as no automatic relief is granted.
However, what is new is that, once requested, a full waiver will in principle be granted when the following conditions are simultaneously met:
- The penalty relates to a first offence of the same nature, taking into account a 4 year period.
- The tax payer committed the offence in ‘good faith’ i.e. without fraudulent intent. ‘Good faith’ is presumed and it is for the tax administration to prove ‘bad faith’.
- The penalty does not relate to an action in which a VAT amount due has not been paid.
Generally-speaking the new policy relates to penalties imposed for not complying with VAT reporting obligations, such as: issuing a not fully correct invoice, or the late or non-filing of a European sales listing or annual sales listing, etc. The full list of errors can be found in the instruction. Nevertheless, it must be emphasised that the late filing or non-filing of the periodic VAT return is outside the scope of this new policy.
Another new item is that for transactions for which no VAT had to be invoiced, the penalty can also be lower than the minimum provided in Royal Decree nr. 41. Such transactions are imports of goods under the import deferral scheme (ET 14.000 licence), purchase of goods and services under the reverse charge mechanism, purchase IC services and goods, etc. Instead of penalties ranging between 5 – 20%, the following penalties apply:
- First offence: waiver
- Second offence: 2%
- Next offence: 5%
A last item that should be emphasised follows from the Court of Justice of the European Union’s case law (the Barlis and Senatex cases). In principle, input VAT recovery is only possible when a VAT compliant invoice is provided. If, during a VAT audit, an incorrect invoice is discovered, then input VAT recovery cannot be denied by solely referring to this fact. When the invoice is corrected, however, input VAT recovery should be granted. Before, it was unclear until when the invoice could be corrected. The new policy now states that this is possible until a legal warrant or court claim has been issued.
Finally, the instruction includes a detailed list of elements that could be used in a request for waiver or reduction of fines. If confronted with VAT penalties, taxable persons should verify this list in order to check the chance of success of such a request.
The new approach should be applied to all penalties that have been imposed from 1 January 2018 onwards and for which a request has been filed after 1 April 2018.
For any further questions about this matter, please do not hesitate to contact our VAT team.