France confirms fine for failure to reverse charge
France confirms that 5% fine for failure to reverse charge VAT is constitutional.
24 October, 2022
France confirms that the 5% fine for failure to reverse charge the VAT is constitutional, as the French Constitutional Council ruled from 22 September 2022 (Décision n° 2022-1009 QPC du 22 septembre 2022). Consequently, not reporting a reverse charge transaction correctly in the VAT return when the taxpayer is allowed to deduct input VAT is a vital failure subject to a 5% penalty.
Despite the understanding of the State’s Council concerning this 5% penalty, the recent decision from the French Constitutional Council is considered constitutional because:
- The fine aims to ensure the fulfillment of the reverse charge reporting obligation. Although the VAT impact is usually nil, the self-assessment of VAT in reverse charge transactions is essential for monitoring and collecting the VAT at each economic stage.
- By fixing the fine in proportion to the amount the taxpayer is allowed to deduct, the penalty is linked to the nature of the infringement.
- The 5% penalty shall not be considered disproportionate given the nature of the severity.