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principal / ECJ decision about penalties on reverse charged VAT
Following the opinion of the advocate general published last November, the ECJ gave its decision in Farkas case (C-564/15). This judgement has reduced the powers of Member States to impose penalties on reverse charge transactions that are incorrectly reported. This case is important for non-established companies registered for VAT in other EU countries, as these businesses are often involved in reverse charge transactions.
In summary, the ECJ position is as follows:
This ECJ decision gives an opportunity for businesses who receive penalties for not reporting reverse charge purchases in due time in the VAT return. You can find more information on scenarios where reverse charge apply in our article Reverse charge scenarios in Europe.