C-544/24 Nekilnojamojo turto valdymas

JUDGMENT OF THE COURT (First Chamber)

30 April 2026 ( *1 )

(Reference for a preliminary ruling – Common system of value added tax (VAT) – Directive 2006/112/EC – Article 273 – Article 49(3) of the Charter of Fundamental Rights of the European Union – Obligations deemed necessary to ensure the correct collection of VAT and to prevent fraud – National legislation providing for a set of rules in respect of default interest relating to VAT arrears – Charging of default interest – Principle of proportionality)

In Case C‑544/24,

REQUEST for a preliminary ruling under Article 267 TFEU from the Mokestinių ginčų komisija prie Lietuvos Respublikos Vyriausybės (Tax Disputes Commission under the Government of the Republic of Lithuania), made by decision of 9 August 2024, received at the Court on 12 August 2024, in the proceedings

‘Nekilnojamojo turto valdymas’ BUAB

v

Valstybinė mokesčių inspekcija prie Lietuvos Respublikos finansų ministerijos,

THE COURT (First Chamber),

composed of F. Biltgen, President of the Chamber, T. von Danwitz (Rapporteur), Vice-President of the Court, and A. Kumin, Judge,

Advocate General: A. Rantos,

Registrar: A. Calot Escobar,

having regard to the written procedure,

after considering the observations submitted on behalf of:

‘Nekilnojamojo turto valdymas’ BUAB, by P. Gruodis, advokatas,

the Lithuanian Government, by K. Dieninis, V. Kazlauskaitė-Švenčionienė and E. Kurelaitytė, acting as Agents,

the Polish Government, by B. Majczyna, acting as Agent,

the European Commission, by P. Carlin and J. Jokubauskaitė, acting as Agents,

after hearing the Opinion of the Advocate General at the sitting on 13 November 2025,

gives the following

Judgment

Legal context and the dispute

1This request for a preliminary ruling concerns the interpretation of Article 325 TFEU and Article 273 of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax (OJ 2006 L 347, p. 1; ‘the VAT Directive’), read in the light of Articles 49 and 50 of the Charter of Fundamental Rights of the European Union (‘the Charter’).

2The request has been made in proceedings between ‘Nekilnojamojo turto valdymas’ BUAB, a company incorporated under Lithuanian law (‘the applicant in the main proceedings’), and the Valstybinė mokesčių inspekcija prie Lietuvos Respublikos finansų ministerijos (State Tax Inspectorate under the Ministry of Finance of the Republic of Lithuania) (‘the tax authority’) concerning the decision taken by the tax authority to refuse the applicant in the main proceedings the exemption which it had sought in respect of the payment of default interest relating to value added tax (VAT) and a penalty imposed on it for tax fraud.

Legal context

European Union law

The FEU Treaty

3Article 325(1) and (2) TFEU states:

‘1. The [European] Union and the Member States shall counter fraud and any other illegal activities affecting the financial interests of the Union through measures to be taken in accordance with this Article, which shall act as a deterrent and be such as to afford effective protection in the Member States, and in all the Union’s institutions, bodies, offices and agencies.

2. Member States shall take the same measures to counter fraud affecting the financial interests of the Union as they take to counter fraud affecting their own financial interests.’

The Charter

4Article 49(3) of the Charter provides:

‘The severity of penalties must not be disproportionate to the criminal offence.’

5Under Article 50 of the Charter:

‘No one shall be liable to be tried or punished again in criminal proceedings for an offence for which he or she has already been finally acquitted or convicted within the Union in accordance with the law.’

The VAT Directive

6Article 2(1) of the VAT Directive sets out the transactions that are to be subject to VAT.

7Article 273 of the VAT Directive is worded as follows:

‘Member States may impose other obligations which they deem necessary to ensure the correct collection of VAT and to prevent evasion, subject to the requirement of equal treatment as between domestic transactions and transactions carried out between Member States by taxable persons and provided that such obligations do not, in trade between Member States, give rise to formalities connected with the crossing of frontiers.

The option under the first paragraph may not be relied upon in order to impose additional invoicing obligations over and above those laid down in Chapter 3.’

Lithuanian law

Law of the Republic of Lithuania on value added tax

8Article 123 of the Lietuvos Respublikos pridėtinės vertės mokesčio įstatymas (Law of the Republic of Lithuania on value added tax), of 5 March 2002 (Žin., 2002, No 35-1271), in the version applicable to the dispute in the main proceedings, entitled ‘Non-compliance with the rules for the payment of VAT’, states, in paragraph 1 thereof, that persons who infringe the provisions of that law are required to pay default interest, in accordance with the detailed rules laid down by the Lietuvos Respublikos mokesčių administravimo įstatymas (Law of the Republic of Lithuania on tax administration), of 13 April 2004 (Žin., 2004, No 63-2243), as amended, with effect from 1 May 2023, by Law No XIV-1658 of 13 December 2022 (‘the Law on Tax Administration’).

Law on Tax Administration

9Article 7 of the Law on Tax Administration, entitled ‘Principle of equality between taxpayers’, provides, in paragraph 1 thereof:

‘Under the tax laws, all taxpayers shall be equal in the light of the conditions laid down by those laws.’

10Article 8 of that law, entitled ‘Principle of legality and general application’, provides:

‘1. Every taxpayer must pay the taxes laid down by tax legislation, in compliance with the rules for calculating and paying the taxes laid down by the tax legislation.

…

3. For the purpose of the administration of taxes, the tax authority shall respect the criteria of reasonableness and fairness.’

11Article 95 of that law, entitled ‘Methods of ensuring the enforcement of the tax obligation’, provides, in paragraph 1(1) thereof, that default interest is to form part of those methods.

12Article 96 of that law, entitled ‘Default interest’, provides:

‘1. Default interest shall be payable by the taxpayer in respect of:

…

in the event of non-payment or late payment of taxes not declared or not calculated … as determined by the tax authority in the course of a tax inspection;

…’

13Article 97 of the Law on Tax Administration, entitled ‘Commencement of the accrual of default interest’, states, in paragraph 2 thereof:

‘In the case provided for in Article 96(1)(2) of this Law, default interest shall accrue from the day following the date on which the tax had to be paid to the Treasury in compliance with the tax legislation in force, until the day on which the inspection report is completed and, in the event of non-payment of the tax within the time limit laid down in Article 81(2) of this Law, default interest shall continue to accrue from the day following the expiry of the aforementioned time limit.’

14Article 98 of that law, entitled ‘Duration of the accrual of default interest’, provides, in paragraph 2:

‘Default interest, which has begun to accrue in accordance with Article 97(1) or (2), shall accrue for a duration not exceeding 180 days from the date on which the tax arrears can be the subject of enforced recovery. In the event of non-payment by the taxpayer of a tax not subject to a return calculated by the taxpayer (by the tax authority where the law governing the tax concerned so provides), default interest shall accrue for a duration not exceeding 180 days from the deadline for payment of the tax provided for by the law governing the tax concerned.’

15Article 99 of that law, entitled ‘Rate of default interest’, provides, in paragraph 1 thereof:

‘The rate of default interest, which may not under any circumstances be less than zero, and the procedure for calculating it shall be determined by the Minister for Finance, taking into account the yield on the secondary market, on the last working day of the preceding quarter, of the government security, the redemption period of which is closest to a 12 month period. The rate of default interest shall be determined by increasing the aforementioned rate by seven percentage points.’

16Article 100 of the Law on Tax Administration, entitled ‘Exemption from the payment of default interest’, is worded as follows:

‘1. The taxpayer may be exempted from the payment, in whole or in part, of default interest accrued (calculated) but not paid (not collected) where:

…

a special tax law provides for that legal possibility;

one of the grounds provided for in Article 141(1) of this Law exists:

…’

17Article 141 of the Law on Tax Administration, entitled ‘Exemption from the payment of penalties’, provides:

‘1. The grounds for exemption from the payment of the penalties imposed under Articles 139 and 140 of this Law shall be where:

the taxpayer demonstrates that the infringement committed is not attributable to him or her as a wrongful act or omission;

the infringement of the tax law is on account of circumstances beyond the taxpayer’s control and which he or she had not foreseen and could not foresee. Acts or omissions of the taxpayer or his or her employees, as well as the taxpayer’s insolvency shall not constitute such circumstances;

an isolated act of the taxpayer, though contrary to the provisions of the tax law, does not result in loss to the budget;

the taxpayer infringed the tax law on account of an incorrect explanation or information extrapolated from the tax law, concerning the payment of taxes, provided by the tax authority in writing or by telephone, provided that the consultation was recorded in accordance with the procedure established by the national tax authority and that the caller may be identified as the taxpayer or his or her representative.’

The dispute in the main proceedings and the questions referred for a preliminary ruling

18The tax authority carried out an inspection of the accuracy of the calculation, declaration and payment of the VAT due by the applicant in the main proceedings in respect of the period from 1 December 2012 to 31 December 2016. Following that inspection, that tax authority drew up an inspection report in which it stated that the applicant in the main proceedings had infringed Article 58(1) and Article 64(2) of the Law of the Republic of Lithuania on value added tax, in that it had deducted the VAT appearing on invoices which were not legally valid from the tax due on its taxable transactions and that it had participated in transactions involved in VAT fraud.

19By decision of 4 September 2018, approving that inspection report, the tax authority set the additional amount of VAT payable by the applicant in the main proceedings at EUR 6 517 901.36 and default interest on the VAT payable by the applicant at EUR 2 431 505.31. It also imposed a tax penalty in the amount of EUR 1862257 on the applicant.

20The applicant in the main proceedings brought an action against that decision before the Mokestinių ginčų komisija prie Lietuvos Respublikos Vyriausybės (Tax Disputes Commission under the Government of the Republic of Lithuania), which, by decision of 10 December 2018, upheld that decision.

21By judgment of 30 May 2019, the Vilniaus apygardos administracinis teismas (Regional Administrative Court, Vilnius, Lithuania) dismissed the action brought by the applicant in the main proceedings against the decision of the Mokestinių ginčų komisija prie Lietuvos Respublikos Vyriausybės (Tax Disputes Commission under the Government of the Republic of Lithuania) of 10 December 2018.

22The applicant in the main proceedings then brought an appeal before the Lietuvos vyriausiasis administracinis teismas (Supreme Administrative Court of Lithuania) seeking annulment of that decision and of the decision of the tax authority of 4 September 2018.

23By judgment of 9 September 2020, the Lietuvos vyriausiasis administracinis teismas (Supreme Administrative Court of Lithuania) dismissed that appeal and upheld the judgment of the Vilniaus apygardos administracinis teismas (Regional Administrative Court, Vilnius).

24On 18 January 2021, the applicant in the main proceedings submitted a request to the tax authority in respect of an exemption from the payment of the default interest and the tax penalty which had been imposed on it.

25By decision of 16 March 2021, the tax authority refused to exempt the applicant in the main proceedings from the payment of the default interest on VAT, which amounted to EUR 2 835 125.75, and the tax penalty. It found that the applicant in the main proceedings did not satisfy any of the conditions laid down in Article 141(1) of the Law on Tax Administration and that it had also failed to establish the existence of exceptional circumstances justifying the application of the criteria of reasonableness and fairness, referred to in Article 8(1) of that law.

26Since the applicant in the main proceedings had not been able to meet its additional VAT obligations, the total amount of the default interest referred to by the decision of the tax authority of 4 September 2018 and that accrued throughout the tax inspection procedure and the judicial proceedings, namely between 26 January 2013 and 4 April 2021, was set at EUR 3 150 660.79 and the tax penalty at EUR 1 838 812.44.

27On 11 April 2024, the applicant in the main proceedings submitted a further request in respect of an exemption from the payment of the default interest and the tax penalty. In that regard, the applicant asked to be exempted from the payment of the ‘punitive part’ of that interest, namely the part which exceeded the amount compensating the Treasury and which represented two thirds of the total amount of that interest. According to the applicant in the main proceedings, the disproportionate nature of the default interest, as a penalty, is clear in a situation such as that of the applicant in which the default interest was calculated retroactively in respect of the entire period from the time when the tax should have been paid until 4 April 2021, thus during the tax inspection procedure and the judicial proceedings. In addition, that interest constitutes a criminal penalty as regards the application of its punitive component, namely the increase of seven percentage points applied to the rate of interest.

28By decision of 13 May 2024, the tax authority refused to grant that new request, maintaining, in essence, that the default interest had been determined in accordance with the requirements of the Law on Tax Administration. That law does not grant any possibility of exempting the applicant in the main proceedings from the payment of the default interest on grounds other than those provided for in Article 100(1) thereof. The detailed rules for calculating the rate of default interest are set out in mandatory terms by that law and the tax authority should adopt a decision on default interest within the limits laid down by that law. Furthermore, according to settled national case-law, default interest is a method to ensure compliance with a tax obligation and cannot be regarded as a penalty of a criminal nature. Moreover, in the event that that authority were to grant the request of the applicant in the main proceedings by applying to it a rate of interest different from that provided for by the Law on Tax Administration, that authority would infringe the principle of equality of taxpayers before the law, enshrined in Article 7 of the Law on Tax Administration.

29On 4 June 2024, the applicant brought an action before the Mokestinių ginčų komisija prie Lietuvos Respublikos Vyriausybės (Tax Disputes Commission under the Government of the Republic of Lithuania), the referring court, seeking annulment of the decision of the tax authority of 13 May 2024.

30The referring court observes that, according to the information provided by the tax authority, it was found during the tax inspection that it was necessary to bring criminal proceedings against the applicant in the main proceedings as a legal person. However, the criminal proceedings are still ongoing and no conviction has been rendered against that legal person. Thus, at that stage, no penalty was imposed on that legal person in the criminal proceedings.

31Relying on the settled case-law of the Lietuvos vyriausiasis administracinis teismas (Supreme Administrative Court of Lithuania), the referring court notes that the primary function of default interest is to ensure the enforcement of the tax obligation to pay a tax, and that that interest is intended above all to cover the expenditure of the State, and not to penalise the person concerned. However, that default interest also includes a punitive element, since its rate is calculated by increasing the compensatory part linked to the cost of public debt. That compensatory part is determined by taking into account the yield of a government security on the secondary securities market, which is increased by seven percentage points.

32In those circumstances, the referring court is uncertain as to whether, in particular, Articles 96 to 99 of the Law on Tax Administration are compatible with Article 325 TFEU and Article 273 of the VAT Directive, read in the light of Article 49(3) and Article 50 of the Charter, in so far as those national provisions do not ensure the coordination between the administrative procedure for the imposition of default interest and the criminal proceedings, so that the additional disadvantage resulting from the duplication of those proceedings is reduced to what is strictly necessary and that the severity of all of the penalties imposed is commensurate with the seriousness of the infringement concerned. In particular, those national provisions do not lay down any limitation, for the purpose of imposing criminal penalties, on the application of the punitive component of that interest, where the facts giving rise to that interest also give rise to criminal proceedings.

33In those circumstances, the Mokestinių ginčų komisija prie Lietuvos Respublikos Vyriausybės (Tax Disputes Commission under the Government of the Republic of Lithuania) decided to stay the proceedings and to refer the following questions to the Court of Justice for a preliminary ruling:

Are Article 325 TFEU, Article 273 of the VAT Directive and Article 50 of the Charter to be interpreted as precluding national legislation which makes it possible to impose interest on late payment of tax, a part of which has the effect of a penalty in respect of the same tax infringements which are the subject of a criminal prosecution, without laying down any rules ensuring coordination which limits to what is strictly necessary the additional disadvantage which results, for the persons concerned, from a duplication of proceedings or making it possible to ensure that the severity of all of the penalties imposed is limited to what is strictly necessary in relation to the seriousness of the offence concerned?

Are Article 325 TFEU, Article 273 of the VAT Directive and Article 49(3) of the Charter to be interpreted as precluding a procedure for applying interest on late payment of taxes which, irrespective of the nature and severity of the infringements, sets a fixed penalty part of interest on late payment of taxes, without making it possible to reduce that penalty part, that is to say, to impose a rate of late payment interest which is lower than the rate provided for by the law or to waive the penalty part of late payment interest?’

Admissibility of the request for a preliminary ruling

34The Lithuanian Government considers that the request for a preliminary ruling is inadmissible in its entirety, taking the view that the questions referred by the referring court bear no relation to the subject matter of the dispute in the main proceedings.

35In that regard, that government points out that the payment of default interest and the tax penalty imposed on the applicant in the main proceedings by the decision of the tax authority of 4 September 2018 was confirmed by a final judgment of the Lietuvos vyriausiasis administracinis teismas (Supreme Administrative Court of Lithuania) which was delivered on 9 September 2020. Accordingly, the tax liability of the applicant in the main proceedings was established by a final decision, which is incapable of being the subject of an appeal. Therefore, the subject matter of the dispute pending before the referring court relates only to the conditions for granting an exemption from the payment of default interest in accordance with the applicable national law.

36According to settled case-law of the Court, questions on the interpretation of EU law referred by a national court in the factual and legislative context which that national court is responsible for defining, the accuracy of which is not a matter for the Court to determine, enjoy a presumption of relevance. The Court may refuse to give a ruling on a question referred by a national court only where it is quite obvious that the interpretation of EU law that is sought bears no relation to the actual facts of the main action or its purpose, where the problem is hypothetical, or where the Court does not have before it the factual or legal material necessary to give a useful answer to the questions submitted to it (judgment of 12 October 2023, KBC Verzekeringen, C‑286/22, EU:C:2023:767, paragraph 22 and the case-law cited).

37In the present case, the referring court is hearing an action brought by the applicant in the main proceedings against the decision of the tax authority of 13 May 2024, by which the tax authority rejected its request for exemption from the payment of the default interest relating to VAT arrears and the tax penalty imposed on it. It is in that context that that court is uncertain, in essence, whether the mechanism in respect of the imposition of default interest provided for by the Law on Tax Administration is compatible with Article 325 TFEU and Article 273 of the VAT Directive, read in the light of Article 49(3) and Article 50 of the Charter.

38It should be noted, first, that a mechanism for the payment of default interest relating to VAT arrears, such as that established by Articles 95 to 99 of the Law on Tax Administration, constitutes an implementation of the provisions of the VAT Directive and, more specifically, Article 273 thereof, since it is intended to ensure the collection of the amounts of VAT which have not been paid in accordance with the other provisions of that directive.

39Second, it is not obvious from the documents in the file submitted to the Court that the interpretation of Article 273 of that directive which is sought bears no relation to the actual facts of the main action or its purpose or even that the problem is hypothetical. Since the second question referred for a preliminary ruling concerns, in essence, compliance with the principle of proportionality in the context of the calculation, by the tax authority, of default interest relating to VAT arrears and in view of the duration of the accrual of those arrears, that question appears to be relevant for the purpose of resolving the dispute in the main proceedings.

40In those circumstances, and in so far as the Court has before it all the factual and legal material necessary to give a useful answer to the questions referred to it, it must be held that the request for a preliminary ruling is admissible.

The first question

41The European Commission disputes the admissibility of the first question, stating that the application of the principle ne bis in idem, guaranteed in Article 50 of the Charter, presupposes the existence of a situation in which a final judgment or acquittal has been delivered in respect of the same offence. In the present case, the criminal proceedings in which the applicant in the main proceedings is being prosecuted are still ongoing and no conviction was rendered against the applicant. Thus, in the case at issue in the main proceedings, the ‘bis’ condition is not satisfied, with the result that the referring court does not need to obtain an answer to the first question in order to resolve the dispute in the main proceedings.

42As regards Article 50 of the Charter, it should be remembered, to begin with, that proceedings concerning offences relating to VAT which seek to ensure the correct collection of that tax and to avoid fraud, such as those at issue in the main proceedings, constitute implementation of the VAT Directive and, therefore, of EU law for the purposes of Article 51(1) of the Charter. Thus, the provisions of national law which deal with such proceedings come within the scope of application of the Charter (see, to that effect, judgment of 5 April 2017, Orsi and Baldetti, C‑217/15 and C‑350/15, EU:C:2017:264, paragraph 16 and the case-law cited).

43That said, it must also be remembered that the applicability of the principle ne bis in idem presupposes the delivery of a final judgment convicting or acquitting in respect of the same offence. According to the case-law of the Court, the principle ne bis in idem aims to prevent an undertaking from ‘being found liable or proceedings being brought against it afresh’, which assumes that that undertaking was found liable or declared not liable by an earlier decision that can no longer be challenged. Article 50 of the Charter specifically targets the repetition of proceedings concerning the same material act which have been concluded by a final decision (see, to that effect, judgment of 3 April 2019, Powszechny Zakład Ubezpieczeń na Życie, C‑617/17, EU:C:2019:283, paragraphs 29 and 32, and order of 20 May 2021, ENR Grenelle Habitat and Others, C‑88/20, EU:C:2021:407, paragraph 33).

44In the present case, it is apparent from the request for a preliminary ruling, first, that, following a tax inspection under an administrative procedure, the applicant in the main proceedings was required to pay default interest relating to VAT arrears, and a tax penalty. Second, the criminal proceedings which were brought against the applicant in respect of the same facts have not yet come to a conclusion and no final decision, involving a conviction or acquittal for the same offence, has been handed down against the applicant.

45In that regard, it should be noted that Article 50 of the Charter prohibits the imposition, with respect to identical facts, of several criminal penalties as a result of different proceedings brought for those purposes (judgment of 20 March 2018, Menci, C‑524/15, EU:C:2018:197, paragraph 35). Article 50 does not govern the situation of a person who is subject, for one and the same offence relating to a tax obligation, to an administrative procedure and to criminal proceedings, as long as no conviction or acquittal is rendered in respect of the same facts in the context of the second set of proceedings, which is distinct from and independent of the first, as in the present case. In those circumstances, Article 50 of the Charter is not applicable to the dispute in the main proceedings.

46In that context, it should be remembered that, where the provisions of EU law to which the question referred for a preliminary ruling relates are not applicable to the dispute in the main proceedings and are, therefore, irrelevant in resolving that dispute, it must be held that the question referred for a preliminary ruling is not necessary to enable the referring court to give judgment and that that question is, therefore, inadmissible in that regard (see, to that effect, judgment of 3 April 2025, Swiftair, C‑701/23, EU:C:2025:237, paragraph 28 and the case-law cited).

47Therefore, the first question referred by the referring court is inadmissible.

The second question

48By its second question, the referring court asks, in essence, whether Article 325 TFEU and Article 273 of the VAT Directive, read in the light of Article 49(3) of the Charter, must be interpreted as precluding national legislation which provides for the payment of default interest relating to VAT arrears and which, irrespective of the nature and seriousness of the infringement established by the tax authority, fixes the amount of that interest without that authority being able to reduce one of the components of that amount and to apply a lower rate of interest than that provided for by that legislation or to waive a part of that amount.

49In the present case, the doubts of the referring court as to the interpretation of EU law arise from the fact that the national legislation at issue in the main proceedings permits the imposition, cumulatively, of both default interest on VAT, part of which also includes a punitive element, and of a tax penalty in the event of non-payment or late payment of tax due.

50In that regard, the referring court seeks to clarify, first, the extent to which the default interest relating to VAT arrears that the applicant in the main proceedings was required to pay following a tax inspection under an administrative procedure is criminal in nature for the purpose of Article 49(3) of the Charter and, second, whether such national legislation complies with the principle of proportionality, as interpreted in the context of the application of Article 325 TFEU and Article 273 of the VAT Directive.

Applicability of Article 49(3) of the Charter

51In accordance with the Court’s settled case-law on the interpretation of Article 50 of the Charter and transposed in Article 49(3) thereof, three criteria are relevant for the purpose of assessing the criminal nature of a penalty, namely the legal classification of the offence under national law, the intrinsic nature of the offence and the degree of severity of the penalty that the person concerned is liable to incur (judgments of 20 March 2018, Menci, C‑524/15, EU:C:2018:197, paragraph 26 and the case-law cited, and of 22 March 2022, bpost, C‑117/20, EU:C:2022:202, paragraph 25 and the case-law cited).

52In addition, again according to that case-law, even in the case of offences which are not classified as ‘criminal’ by national law, the intrinsic nature of the offence in question and the degree of severity of the penalties to which it is liable to give rise may nevertheless result in its being criminal in nature (judgment of 22 June 2021, Latvijas Republikas Saeima (Penalty points), C‑439/19, EU:C:2021:504, paragraph 88 and the case-law cited).

53Although it is for the referring court to assess, in the light of those criteria, whether the imposition of default interest relating to VAT arrears is criminal in nature, for the purposes of Article 49(3) of the Charter, the Court, when giving a preliminary ruling, may nevertheless provide clarification designed to give the national court guidance in its assessment (see, to that effect, judgment of 20 March 2018, Menci, C‑524/15, EU:C:2018:197, paragraph 27 and the case-law cited).

54With regard to the first criterion, relating to the classification of the offence under national law, it follows both from the wording of Article 95(1) of the Law on Tax Administration and from the relevant national case-law, in particular from that of the Lietuvos vyriausiasis administracinis teismas (Supreme Administrative Court of Lithuania) that, under Lithuanian law, the charging of default interest relating to tax arrears in the event of non-payment or late payment of tax due is not regarded as a penalty of a criminal nature. In addition, it is apparent from the file before the Court that such interest is imposed in the context of an administrative procedure. If Lithuanian law also provides for the existence of tax offences which are the subject of criminal proceedings, the penalties incurred in that respect are imposed in a distinct and independent set of proceedings.

55As regards the second criterion, relating to the intrinsic nature of the offence, that involves ascertaining whether the purpose of the penalty at issue is punitive. It follows therefrom that a penalty with a punitive purpose is criminal in nature and that the mere fact that it also pursues a deterrence purpose does not mean that it cannot be characterised as a criminal penalty. Indeed, it is of the intrinsic nature of criminal penalties that they seek both to punish and to deter unlawful conduct. By contrast, a measure which merely repairs the damage caused by the offence at issue is not criminal in nature (see, to that effect, judgments of 20 March 2018, Menci, C‑524/15, EU:C:2018:197, paragraph 31, and of 22 June 2021, Latvijas Republikas Saeima (Penalty points), C‑439/19, EU:C:2021:504, paragraph 89).

56In the present case, it is apparent from the order for reference and from the written observations of the parties before the Court that, according to the Law on Tax Administration, the charging of default interest has, first, a preventive nature, by encouraging the persons concerned to pay the VAT within the period prescribed or as soon as possible after the expiry of that period, which also contributes to ensuring the correct collection of VAT, and, second, a compensatory nature, in that that interest is intended to offset the financial losses incurred by the State as a result of the non-payment or late payment of a tax.

57It should be pointed out in that regard that the Court has already held that the charging of default interest had, first, a preventive nature, by encouraging the taxpayer to fulfil the tax obligation as soon as possible after the expiry of the periods prescribed and, second, a compensatory nature, in that that interest is intended to offset the financial losses incurred by the State as a result of the non-payment or late payment of a tax (see, to that effect, judgment of 13 October 2022, Direktor na Direktsia Obzhalvane i danachno-osiguritelna praktika, C‑1/21, EU:C:2022:788, paragraphs 89 to 91 and the case-law cited).

58It is clear also from the case-law of the European Court of Human Rights that ‘default interest is not essentially intended to punish taxpayers in order to deter them from re-offending, but is primarily intended to provide financial compensation for damage, namely financial damage linked to the passage of time and the delay in payment of the tax’ (ECtHR, 6 October 2009, Poniatowski v. France (dec.), CE:ECHR:2009:1006DEC002949408). Therefore, in accordance with that case-law, neither tax reminder procedures or tax adjustment procedures aimed purely at recovering the full amount of tax, without that adjustment being accompanied by any increase, or proceedings relating to default interest, irrespective of their classification under domestic law or the amount of the sums at stake, have a criminal law connotation (see, to that effect, ECtHR, 17 May 2016, Société Oxigène Plus v. France (dec.), CE:ECHR:2016:0517DEC007695911, §§ 45 and 46 and the case-law cited).

59In the light of that case-law, it appears that the imposition of default interest relating to VAT arrears, such as that at issue in the main proceedings, cannot be regarded as a punitive measure.

60So far as concerns the third criterion relating to the degree of severity of the penalty, the information in the file before the Court does not appear to indicate that the default interest, such as that imposed in the main proceedings, is of such importance that it should be recognised as criminal in nature. As regards, in particular, the fact that, as the applicant in the main proceedings has claimed in the main proceedings, part of the default interest is ‘punitive’ in the light of the increase in the basic rate of that interest by seven percentage points, it should be noted that those claims are based on an interpretation of the national legislation at issue in the main proceedings which differs from that set out by the referring court. The order for reference does not state that the default interest at issue in the main proceedings is punitive in nature (see, to that effect, judgment of 28 February 2018, Nidera, C‑387/16, EU:C:2018:121, paragraph 35).

61In any event, in accordance with the case-law of the Court, default interest is intended to offset the consequences arising as a result of payment not having been made by a set deadline and to compensate for the advantages which the taxable person unduly derives from the delay in paying a tax debt, and not to penalise such a delay (see, to that effect, judgment of 5 December 2024, Network One Distribution, C‑506/23, EU:C:2024:1003, paragraph 32).

62It is also apparent from the case-law of the European Court of Human Rights set out in paragraph 58 above that, irrespective of their amount, measures similar to those imposed in the main proceedings have not been regarded as sufficiently serious to confer on them a criminal nature.

63In the light of the foregoing, and subject to verification by the referring court, none of the three criteria set out in paragraph 51 above for classifying the default interest at issue in the main proceedings as a measure criminal in nature appears to be satisfied. In so far as it is not criminal in nature, that default interest cannot be assessed in the light of Article 49(3) of the Charter.

Application of the general principle of proportionality

64Even if a measure such as that at issue in the main proceedings does not come within the scope of Article 49(3) of the Charter, it is for the referring court to ascertain whether that measure complies with the principle of proportionality, since the Court has jurisdiction to provide the referring court with interpretative guidance which will assist it in that regard. Observance of that principle, which constitutes a general principle of EU law, is binding on Member States when they are implementing that law, including in the absence of harmonisation of EU legislation in the field of sanctions applicable (judgment of 8 March 2022, Bezirkshauptmannschaft Hartberg-Fürstenfeld (Direct effect), C‑205/20, EU:C:2022:168, paragraph 31 and the case-law cited).

65In those circumstances, it must be held that, by its second question, the referring court seeks, in essence, to determine whether Article 325 TFEU and Article 273 of the VAT Directive, read in the light of the principle of proportionality, must be interpreted as precluding national legislation which lays down the detailed rules for calculating the rate of default interest relating to VAT arrears irrespective of the nature and seriousness of the infringement established by the tax authority, and precludes that authority from applying an interest rate lower than that provided for by that legislation or waiving the calculation of a part of the amount of the default interest or exempting a taxpayer from the payment of that interest, with the exception of the cases exhaustively defined by that legislation.

66In accordance with the Court’s settled case-law, in order to observe the principle of proportionality, a measure must be suitable for securing, in a consistent and systematic manner, the attainment of the legitimate objective pursued and does not go beyond what is appropriate and necessary in order to attain it, since the disadvantages caused by that measure must not be disproportionate to the aims pursued (see, to that effect, judgment of 7 September 2022, Cilevičs and Others, C‑391/20, EU:C:2022:638, paragraph 65 and the case-law cited).

67As regards, in particular, the administrative or punitive measures permitted under national legislation, those measures must not go beyond what is necessary to attain the objectives legitimately pursued by that legislation (judgment of 24 February 2022, Agenzia delle dogane e dei monopoli and Ministero dell’Economia e delle Finanze, C‑452/20, EU:C:2022:111, paragraph 37 and the case-law cited).

68In the present case, it should be recalled at the outset that it follows, in particular, from Articles 2 and 273 of the VAT Directive, read in conjunction with Article 4(3) TEU and Article 325(1) TFEU, that Member States are obliged to take all legislative and administrative measures appropriate for ensuring collection of all the VAT due on their territory and for preventing fraud (see, to that effect, judgment of 20 March 2018, Menci, C‑524/15, EU:C:2018:197, paragraph 18).

69It is apparent from settled case-law that, outside the limits laid down therein, Article 273 of the VAT Directive does not specify either the conditions or the obligations which the Member States may impose and therefore gives the Member States a margin of discretion with regard to the means of ensuring collection of all the VAT due on their territory and for combating fraud (judgment of 13 October 2022, Direktor na Direktsia Obzhalvane i danachno-osiguritelna praktika, C‑1/21, EU:C:2022:788, paragraph 69).

70In addition, Article 325(1) and (2) TFEU obliges the Member States to counter illegal activities affecting the financial interests of the European Union through effective deterrent measures and, in particular, obliges them to take the same measures to counter fraud affecting the financial interests of the European Union as they take to counter fraud affecting their own interests (judgment of 1 October 2020, Úrad špeciálnej prokuratúry, C‑603/19, EU:C:2020:774, paragraph 48 and the case-law cited).

71While the choice of penalties remains within their discretion, Member States must ensure that infringements of EU law, including the harmonised rules deriving from the VAT Directive, are penalised under conditions, both procedural and substantive, which are analogous to those applicable to infringements of national law of a similar nature and importance and which, in any event, make the penalty effective, proportionate and dissuasive (judgment of 2 May 2018, Scialdone, C‑574/15, EU:C:2018:295, paragraph 28 and the case-law cited).

72In the present case, the measure establishing the payment of default interest relating to VAT arrears, as provided for in Articles 95 to 99 of the Law on Tax Administration, which causes default interest to accrue on the non-payment or late payment of a tax due, contributes to the recovery of amounts of VAT which have not been paid by a taxable person within the prescribed time limits laid down by the VAT Directive.

73Accordingly, in so far as it is intended to ensure the correct collection of VAT and/or to prevent fraud, the national legislation at issue in the main proceedings pursues a legitimate objective recognised by EU law. The Court has already held that charging default interest helps to combat failures to pay declared amounts of VAT within the prescribed time limits, in accordance with the obligation on the Member States, in particular under Article 273 of the VAT Directive and Article 325(1) TFEU, to take all legislative and administrative measures appropriate for ensuring collection of all the VAT due on their territory and for preventing fraud (see, to that effect, judgment of 13 October 2022, Direktor na Direktsia Obzhalvane i danachno-osiguritelna praktika, C‑1/21, EU:C:2022:788, paragraphs 88, 89 and 92 and the case-law cited).

74Although it is for the referring court, which alone has jurisdiction to interpret and apply national law, to ultimately decide whether the measure establishing the payment of default interest, such as that at issue in the main proceedings, is appropriate, necessary and proportionate to the attainment of the legitimate objective pursued, the Court may, nevertheless, give clarification to guide the referring court in that assessment (see, to that effect, judgment of 24 February 2022, Agenzia delle dogane e dei monopoli and Ministero dell’Economia e delle Finanze, C‑452/20, EU:C:2022:111, paragraph 40 and the case-law cited).

75As regards, in the first place, whether such a measure is suitable for securing, in a consistent and systematic manner, the attainment of the legitimate objectives pursued, it should be noted that the charging of default interest helps to combat failures to pay declared amounts of VAT within the prescribed time limits. Accordingly, such a measure contributes to compliance with the obligation, referred to in paragraph 68 above, for each Member State to take all legislative and administrative measures appropriate for ensuring collection of all the VAT due on its territory and for preventing fraud (see, to that effect, judgment of 13 October 2022, Direktor na Direktsia Obzhalvane i danachno-osiguritelna praktika, C‑1/21, EU:C:2022:788, paragraph 71).

76Therefore, default interest appears to be an appropriate measure for attaining the objectives pursued by the national legislation at issue in the main proceedings.

77In the second place, as regards whether that measure is necessary, attention should be drawn to the importance of combating fraud, in accordance with Article 325 TFEU and Article 273 of the VAT Directive, and the obligation for the Member States to adopt effective measures in order to attain the objective consisting in ensuring the correct collection of VAT and of preventing fraud, in accordance with the same provisions.

78In that regard, the Law on Tax Administration implements the provisions of the VAT Directive, which is binding on the Republic of Lithuania and seeks to ensure that effective measures against VAT fraud may be imposed, in order to encourage the taxable person to fulfil his or her tax obligations meticulously and to cover the costs incurred by the tax authority as a result of the failure of the taxable person to fulfil those obligations in time, in order to compensate the loss caused to the Treasury by the unavailability of the amounts corresponding to the tax due.

79It should be noted, as the Advocate General stated in point 48 of his Opinion, that the imposition of default interest encourages taxpayers to fulfil their tax obligations as a matter of priority, so as to avoid the risk of seeing the amount of their tax debt increase in proportion to the duration of the non-payment of that tax debt. In the absence of such a measure, taxpayers would have no particular incentive to fulfil their tax obligations within the prescribed time limits and might favour commercial transactions. Furthermore, the absence of default interest gives advantage to persons who do not fulfil their tax obligations within the prescribed periods, who thus benefit from additional liquidity and an economic advantage corresponding to the reduction, over time, in the actual value of the amount of their tax debt.

80It follows that, having regard to the context of the national legislation at issue in the main proceedings, that legislation, in so far as it imposes a measure establishing default interest, appears to be necessary for the attainment of the legitimate objective which it pursues.

81As regards, in the third place, whether that measure is proportionate stricto sensu, it should be remembered that the Lithuanian legislature provided for the imposition of default interest and fixed the amount thereof irrespective of the nature and seriousness of the infringement established by the tax authority, and that the amount of that interest is fixed without that authority being able to reduce one of the components of that amount in order to apply an interest rate lower than that provided for by that legislation or waive the calculation of a part of that amount. In that context, it is necessary to examine whether the disadvantages caused by the national legislation at issue in the main proceedings are not disproportionate to the objectives legitimately pursued by that legislation, namely the effectiveness of the collection of VAT and the combating of fraud.

82First, it is apparent from the order for reference that the provisions of national law on the calculation of default interest apply to all taxpayers in the event of non-payment or late payment, as determined in the course of a tax inspection, of a tax subject to declaration and not declared or not subject to declaration and not calculated. The rate is established a priori in a clear and transparent manner in accordance with objective criteria and on the basis of a calculation methodology laid down by the Law on Tax Administration. The decision-making power of the tax authority on fixing default interest is circumscribed by that law.

83Having regard, in particular, to the preventive nature of the measure at issue, which is intended to encourage the taxpayer to fulfil his or her tax obligations meticulously and to cover the costs incurred by the tax authorities as a result of the failure of the taxable person to fulfil those obligations in time, the fixing of a predetermined rate in respect of the calculation of default interest does not appear disproportionate, in the light of the objectives pursued by the national legislation at issue in the main proceedings, in order to ensure the effectiveness of those objectives.

84In that regard, as the Advocate General stated in point 55 of his Opinion, the fact that the amount of the default interest is at a flat rate and is not coupled with any possibility of being varied does not, in itself, permit the inference that that measure is disproportionate. The determination, by the national legislation at issue in the main proceedings, of the amount of default interest, which the tax authority cannot adjust, except in a few cases expressly defined by the applicable tax legislation, protects taxable persons against any arbitrary decision of that authority while ensuring equal treatment between those taxable persons.

85In addition, the amount of default interest thus calculated enables both creditors and debtors to predict precisely the future amount of their financial rights or, where appropriate, financial obligations, so as to also guarantee legal certainty. The absence of a framework for the discretion which the tax authority may have would risk giving rise to an unjustified difference in treatment between taxable persons in a comparable tax situation.

86Second, it should be noted that, in so far as the accrual of default interest is linked to the enforcement or the extinction of the taxable person’s tax obligation, the taxable person’s actions largely contribute to determining the total amount of interest for which he or she must be liable. The application of default interest imposes on the taxable person, who has failed to fulfil his or her tax obligations within the prescribed time limits, a financial disadvantage in proportion to the duration of the non-payment of the debt which triggered the accrual of that interest. Therefore, the use of default interest as a means of ensuring that tax obligations are enforced does not, in principle, constitute a solution which places an excessive burden on taxable persons.

87That conclusion cannot be invalidated by the fact that, as the applicant has claimed in the main proceedings, the default interest at issue was calculated retroactively for the entire period beginning from the time when the tax should have been paid, including, therefore, during the tax inspection procedure and the judicial proceedings. If, at the end of the judicial proceedings, the existence of the tax obligation is definitively confirmed, the fact that the duration of those proceedings is not taken into account in the calculation of default interest would confer on the taxable person concerned a cash-flow advantage in relation to other taxable persons who have fulfilled their obligations in time.

88In addition, as regards the claim of the applicant in the main proceedings that the applicant sought exemption from payment of the part of the interest in excess of the amount ensuring compensation to the Treasury, it should be noted that, although, in certain specific cases, the amount of compensatory interest may exceed the actual loss incurred by the Treasury, that is merely a result of applying compensation at a flat rate, which by its very nature reflects the loss which the Treasury might, in the view of the national legislature, incur and not the loss actually incurred (see, to that effect, judgment of 28 February 2018, Nidera, C‑387/16, EU:C:2018:121, paragraph 36).

89Third, in accordance with Article 100(1) of the Law on Tax Administration, an exemption from the payment, in whole or in part, of the default interest incurred (calculated) but not paid (not received) is possible where the conditions laid down in that provision are met. Such an exemption may, inter alia, be granted where one of the grounds provided for in Article 141(1) of that law is established. Those grounds include, in particular, cases in which the taxpayer demonstrates that the infringement committed is not attributable to him or her as a wrongful act or omission or where the infringement of the tax law is on account of circumstances beyond his or her control, which he or she had not foreseen and could not foresee, or where it is an isolated act which, though contrary to the provisions of that law, does not result in loss to the budget.

90Fourth, it is true that the assessment of the proportionality of measures with a punitive purpose requires that account be taken of circumstances such as the nature and the seriousness of the infringement of a tax obligation established by the tax authority or other circumstances such as the particular context in which that infringement was committed and its possible link with other ongoing proceedings. The fact remains that measures such as default interest relating to VAT arrears are of a preventive nature and, as has been pointed out in paragraph 79 above, are intended to encourage taxpayers to fulfil their tax obligations as a matter of priority, so as to avoid the risk of seeing the amount of their tax debt increase in proportion to the duration of the non-payment of that tax debt.

91Therefore, national legislation, such as that at issue in the main proceedings, which lays down the detailed rules for calculating the rate of default interest whilst precluding the tax authority from applying a lower rate of interest than that which the national legislation lays down or waiving the calculation of a part of the amount of that interest, does not appear to be excessive in the light of the objective which it pursues by means of that interest. The fact that that authority cannot exempt a taxpayer from paying the same interest, with the exception of the cases exhaustively defined by that legislation, does not alter that finding.

92Having regard to all of the foregoing, the answer to the second question is that Article 325 TFEU and Article 273 of the VAT Directive, read in the light of the principle of proportionality, must be interpreted as not precluding national legislation which lays down the detailed rules for calculating the rate of default interest relating to VAT arrears irrespective of the nature and seriousness of the infringement established by the tax authority, and precludes that authority from applying an interest rate lower than that provided for by that legislation or waiving the calculation of a part of the amount of the default interest or exempting a taxpayer from the payment of that interest, with the exception of the cases exhaustively defined by that legislation.

Costs

93Since these proceedings are, for the parties to the main proceedings, a step in the action pending before the referring court, the decision on costs is a matter for that court. Costs incurred in submitting observations to the Court, other than the costs of those parties, are not recoverable.

Operative part

On those grounds, the Court (First Chamber) hereby rules:

Article 325 TFEU and Article 273 of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax, read in the light of the principle of proportionality,

must be interpreted as not precluding national legislation which lays down the detailed rules for calculating the rate of default interest relating to value added tax arrears irrespective of the nature and seriousness of the infringement established by the tax authority, and precludes that authority from applying an interest rate lower than that provided for by that legislation or waiving the calculation of a part of the amount of the default interest or exempting a taxpayer from the payment of that interest, with the exception of the cases exhaustively defined by that legislation.

Signatures

[Signatures]

( *1 ) Language of the case: Lithuanian.

OPINION OF ADVOCATE GENERAL

RANTOS

delivered on 13 November 2025 ¹

(Reference for a preliminary ruling – Common system of value added tax (VAT) – Directive 2006/112/EC – Article 273 – Charter of Fundamental Rights of the European Union – Article 49(3) – Obligations deemed necessary to ensure the correct collection of VAT and to prevent evasion – National legislation providing for a procedure for applying late payment interest on VAT arrears which, irrespective of the nature and severity of the infringement, includes a set fixed penalty part with no possibility for the tax authority to reduce the amount of that penalty part – Principle of proportionality)

I. Introduction

1This request for a preliminary ruling, made by the Mokestinių ginčų komisija prie Lietuvos Respublikos Vyriausybės (Tax Disputes Commission under the Government of the Republic of Lithuania) concerns, in essence, the interpretation of Article 325 TFEU and Article 273 of Council Directive 2006/112/EC ² of 28 November 2006 on the common system of value added tax (‘the VAT Directive’), read in the light of Articles 49 and 50 of the Charter of Fundamental Rights of the European Union (‘the Charter’).

2The request arises from a dispute between BUAB ‘Nekilnojamojo turto valdymas’ (‘the applicant’), a limited liability company governed by Lithuanian law, and the Valstybinė mokesčių inspekcija prie Lietuvos Respublikos finansų ministerijos (State Tax Inspectorate attached to the Ministry of Finance of the Republic of Lithuania) (‘the tax authority’) concerning the latter’s decision to refuse the applicant the exemption it had sought as regards the payment of late payment interest relating to VAT and a fine imposed on it for tax evasion.

3In accordance with a request by the Court, the present Opinion will focus on the analysis of the second question referred for a preliminary ruling, which concerns the interpretation of the abovementioned provisions of EU law, read in conjunction with Article 49(3) of the Charter. More specifically, the referring court is, in essence, asking whether national legislation providing for the payment of late payment interest relating to VAT arrears which, irrespective of the nature and severity of the infringement, sets a fixed penalty part without making it possible to reduce the amount of that part, namely by applying a rate of interest lower than the rate provided for by the law or waiving the penalty part of that late payment interest, is compatible with those provisions.

II. Legal framework

A. European Union law

4Under Article 273 of the VAT Directive:

‘Member States may impose other obligations which they deem necessary to ensure the correct collection of VAT and to prevent evasion, subject to the requirement of equal treatment as between domestic transactions and transactions carried out between Member States by taxable persons and provided that such obligations do not, in trade between Member States, give rise to formalities connected with the crossing of frontiers.

…’

B. Lithuanian law

1. The Law on VAT

5Article 123 of Lietuvos Respublikos pridėtinės vertės mokesčio įstatymas (Law of the Republic of Lithuania on Value Added Tax) of 5 March 2002, ³ in the version applicable to the dispute in the main proceedings (‘the Law on VAT’), entitled ‘Failure to comply with the procedure for the payment of VAT’, states, in paragraph 1, that persons who infringe the provisions of that law are required to pay late payment interest in accordance with the procedure established by the Law on Tax Administration.

2. The Law on Tax Administration

6Article 95 of Lietuvos Respublikos mokesčių administravimo įstatymas (Law of the Republic of Lithuania on Tax Administration) of 13 April 2004, ⁴ in the version applicable to the facts in the main proceedings (‘the Law on Tax Administration’), entitled ‘Methods of enforcing tax obligations’, mentions among those instruments, in paragraph 1(1) thereof, late payment interest.

7Article 96 of that law, entitled ‘Late payment interest’, states in paragraph 1(2):

‘Late payment interest shall be calculated in respect of the taxpayer for:

…

taxes not declared and not calculated, which were not paid or not paid on time, … as determined by the tax authority in the course of a tax inspection;

…’

8Article 97(2) of that law, entitled ‘Commencement of calculation of late payment interest’ is worded as follows:

‘In the case specified in Article 96(1)(2) of this Law, late payment interest shall be calculated beginning with the day following the day on which the tax had to be paid to the Treasury in compliance with the tax legislation in force at that time until the day on which the inspection report was completed and, in the case of failure to pay the tax within the time limit laid down in Article 81(2) of this Law, … late payment interest shall continue to be calculated from the day following the expiry of the said time limit.’

9Article 99 of that law, entitled ‘Amount of late payment interest’, as amended, with effect from 1 May 2023, by Law No XIV-1658 of 13 December 2022, provides in paragraph 1:

‘The rate of late payment interest, which in all cases may not be less than zero, and the procedure for calculating it shall be determined by the Minister of Finance, taking into account the yield on the secondary market, as on the last business day of the previous calendar quarter, of the government security, the redemption period of which is closest to a 12 month period (e.g. in Q2 2024 the yield on a government security was 3.708%). The rate of late payment interest shall be determined by increasing the above rate by seven percentage points.’

10Article 100(1)(3) of the Law on Tax Administration, entitled ‘Exemption from late payment interest’, is worded as follows:

‘The taxpayer may be exempted from late payment interest, calculated but not paid (recovered), or a part thereof, provided that:

…

there is a basis provided for in Article 141(1) of this Law;

…’

11Article 141 of that law, entitled ‘Exemption from fines’, provides, in paragraph 1:

‘The grounds for the exemption of fines imposed under Articles 139 and 140 of this Law shall be the following:

if the taxpayer proves the absence of his fault with regard to the infringement;

if the tax law was infringed on account of circumstances beyond the taxpayer’s control and which he could not and did not foresee. The actions or failure to act by the taxpayer or his employees and the taxpayer’s insolvency shall not be treated as such circumstances;

where a separate act of the taxpayer, though contrary to the provisions of a tax law, causes no damage to the budget;

where the taxpayer infringed the law on account of an erroneous summarised explanation of the said tax law having been given or erroneous tax advice having been provided by the tax administration in writing or by telephone if the advice provided was recorded in accordance with the procedure set out by the central tax administration and it is possible to identify the person who called – the taxpayer (or his representative).’

III. The dispute in the main proceedings, the questions referred for a preliminary ruling and the procedure before the Court

12The tax authority carried out an inspection of the accuracy of the applicant’s calculation, declaration and payment of VAT for the period from 1 December 2012 to 31 December 2016. Following that inspection, it found that the applicant had infringed the Law on VAT in so far as it had deducted VAT from invoices which were not legally valid and had engaged in transactions involving VAT fraud.

13By decision of 4 September 2018, approving the abovementioned inspection report, the tax authority set the amount of VAT at EUR 6 517 901.36 and late payment interest on the VAT payable by the applicant at EUR 2 431 505.31. It also imposed a tax fine of EUR 1862257 on the applicant.

14At the conclusion of the tax dispute which followed, the Lietuvos vyriausiasis administracinis teismas (Supreme Administrative Court of Lithuania), by judgment of 9 September 2020, confirmed the findings of the abovementioned tax inspection.

15On 18 January 2021, the applicant submitted to the tax authority a request for exemption from the payment of late payment interest and of the fine imposed on it.

16By decision of 16 March 2021, the tax authority refused to exempt the applicant from the payment of VAT late payment interest in the amount of EUR 2 835 125.75. It found that the applicant did not satisfy any of the conditions laid down in Article 141(1) of the Law on Tax Administration and that it had also failed to establish exceptional circumstances justifying the application of the criteria of reasonableness and fairness.

17Since the applicant failed to fulfil the additional obligations imposed on it in the field of VAT, the total amount of late payment interest referred to in the tax authority’s decision of 4 September 2018 and accruing during the tax dispute, namely between 26 January 2013 and 4 April 2021, was set at EUR 3 150 660.79 and the fine at EUR 1 838 812.44.

18The applicant submitted a new request for exemption from payment of late payment interest and of the fine. In that regard, it requested exemption from payment of the ‘penalty part’ of that VAT late payment interest, which represents two-thirds of the total amount of the late payment interest calculated in relation to it.

19By decision of 13 May 2024, the tax authority refused to grant that new request, claiming, in essence, that the late payment interest had been determined in accordance with the requirements set out in the Law on Tax Administration. That law does not provide for any possibility of exempting the applicant from paying late payment interest on grounds other than those provided for in Article 100(1) thereof. The detailed rules for calculating the rate of late payment interest are laid down in mandatory terms by that law and the tax authority may take a decision on late payment interest only within the limits laid down by that law. Moreover, according to settled national case-law, late payment interest is a method of ensuring compliance with a tax obligation and cannot be regarded as a penalty of a criminal nature. Furthermore, if the tax authority were to grant the applicant’s request by opting to apply to it a different rate of interest from that provided for by the Law on Tax Administration, that authority would infringe the principle of equality of taxpayers before the law.

20On 4 June 2024, the applicant brought an action before the Mokestinių ginčų komisija prie Lietuvos Respublikos Vyriausybės (Tax Disputes Commission under the Government of the Republic of Lithuania), the referring court, seeking annulment of the decision of the tax authority of 13 May 2024.

21The referring court notes that the primary function of late payment interest is to ensure fulfilment of a tax obligation, and that it is primarily intended to compensate the State for its costs rather than to punish the person concerned. ⁵ However, that late payment interest also has a penalty element, since it is calculated by increasing the compensatory part related to the State’s borrowing costs, which is determined by taking into account the yield of the government security on the secondary securities market, by seven percentage points. That court refers, in that regard, to the settled case-law of the Lietuvos vyriausiasis administracinis teismas (Supreme Administrative Court of Lithuania), according to which the inherent nature of late payment interest, as a means of enforcing a tax obligation, is that its application or the possibility to apply it encourages voluntary and proper performance of the tax obligation, while in the case of non-compliance or inadequate compliance it ensures that debt to the budget and the State’s financial losses are covered. ⁶ According to that case-law, the requirement to pay late payment interest for late compliance with a tax obligation is not a penalty of a criminal nature.

22Consequently, in such circumstances, the referring court questions, in particular, whether Articles 96 to 99 of the Law on Tax Administration are compatible with Article 325 TFEU and Article 273 of the VAT Directive, read in the light of Article 49(3) and Article 50 of the Charter, in so far as those national provisions do not ensure the coordination of the procedures for administrative imposition of late payment interest with those for criminal prosecution, so as to reduce to what is strictly necessary the additional disadvantage resulting from the duplication of those measures and does not ensure that the severity of all penalties imposed corresponds with the seriousness of the offence concerned, and in so far as there are no restrictions, for the purposes of imposing criminal penalties, on the application of the penalty part of the late payment interest when the actions on the basis of which that interest is determined also give rise to criminal proceedings.

23In those circumstances, the Mokestinių ginčų komisija prie Lietuvos Respublikos Vyriausybės (Tax Disputes Commission under the Government of the Republic of Lithuania) decided to stay the proceedings and to refer the following questions to the Court of Justice for a preliminary ruling:

Are Article 325 TFEU, Article 273 of the VAT Directive and Article 50 of the Charter to be interpreted as precluding national legislation which makes it possible to impose interest on late payment of tax, a part of which has the effect of a penalty in respect of the same tax infringements which are the subject of a criminal prosecution, without laying down any rules ensuring coordination which limits to what is strictly necessary the additional disadvantage which results, for the persons concerned, from a duplication of proceedings or making it possible to ensure that the severity of all of the penalties imposed is limited to what is strictly necessary in relation to the seriousness of the offence concerned?

Are Article 325 TFEU, Article 273 of the VAT Directive and Article 49(3) of the Charter to be interpreted as precluding a procedure for applying interest on late payment of taxes which, irrespective of the nature and severity of the infringements, sets a fixed penalty part of interest on late payment of taxes, without making it possible to reduce that penalty part, that is to say, to impose a rate of late payment interest which is lower than the rate provided for by the law or to waive the penalty part of late payment interest?’

24Written observations were submitted to the Court by the applicant, the Lithuanian and Polish Governments and the European Commission.

IV. Analysis

A. Admissibility of the request for a preliminary ruling

25Before analysing the second question referred for a preliminary ruling, on which the Court has requested that the present Opinion be focused, it is necessary to rule on the objection of inadmissibility raised by the Lithuanian Government. The latter submits, in its written observations, that the request for a preliminary ruling is inadmissible in its entirety on the ground that the questions referred by the national court have no bearing on the dispute in the main proceedings.

26In that regard, that government observes that the payment of late payment interest and the tax fine imposed on the applicant by the decision of the tax authority of 4 September 2018 was confirmed by a final judgment of the Lietuvos vyriausiasis administracinis teismas (Supreme Administrative Court of Lithuania) delivered on 9 September 2020. Accordingly, the applicant’s tax liability was established by a final decision, which cannot form the subject of an appeal. Therefore, the subject matter of the dispute pending before the referring court relates only to the conditions for granting an exemption from payment of late payment interest in accordance with the applicable national law.

27As a preliminary point, I note that, according to the settled case-law of the Court, questions on the interpretation of EU law referred by a national court in the factual and legislative context which that court is responsible for defining, and the accuracy of which is not a matter for the Court to determine, enjoy a presumption of relevance. The Court may refuse to rule on a question referred by a national court only where it is quite obvious that the interpretation of EU law that is sought is unrelated to the actual facts of the main action or its object, where the problem is hypothetical, or where the Court does not have before it the factual or legal material necessary to give a useful answer to the questions submitted to it. ⁷

28In the present case, as set out in point 18 of the present Opinion, the applicant has brought an action before the referring court against the decision of the tax authority of 13 May 2024, by which the tax authority rejected the applicant’s request seeking exemption from payment of the late payment interest relating to VAT and the fine imposed on it. That is the context in which that court asks, in essence, whether the mechanism for charging late payment interest provided for by the Law on Tax Administration is compatible with Article 325 TFEU and Article 273 of the VAT Directive.

29I note, first, that a mechanism for the payment of late payment interest relating to VAT arrears, such as that established by Articles 95 to 99 of the Law on Tax Administration, constitutes an implementation of the provisions of the VAT Directive and, more specifically, Article 273 thereof, since it is intended to ensure the collection of amounts of VAT which have not been paid in accordance with the other provisions of that directive. Second, it is not obvious from the material in the documents submitted to the Court that the interpretation of Article 273 of that directive which is sought bears no relation to the actual facts of the main action or its purpose or even that the problem is hypothetical. Since the second question referred for a preliminary ruling concerns, in essence, compliance with the principle of proportionality in the context of the calculation of the late payment interest at issue, that appears to be relevant for the purposes of resolving the dispute in the main proceedings.

30In those circumstances, and in so far as the Court has before it all the factual and legal material necessary to give a useful answer to the questions referred to it, it must be held that the present request for a preliminary ruling is admissible.

B. The second question referred for a preliminary ruling

31By its second question referred for a preliminary ruling, which the Court has requested be the focus of the present Opinion, the referring court is, in essence, asking whether Article 325 TFEU and Article 273 of the VAT Directive, read in the light of Article 49(3) of the Charter, must be interpreted as precluding national legislation providing for the payment of late payment interest relating to VAT arrears which, irrespective of the nature and severity of the infringement, sets a fixed penalty part with no possibility to impose a rate of interest lower than the rate provided for by the law or to waive the penalty part of that late payment interest. The referring court therefore asks the Court to determine, first, the extent to which the late payment interest relating to VAT arrears which the applicant was required to pay following an administrative tax inspection is criminal in nature for the purpose of Article 49(3) of the Charter and, second, whether such national legislation complies with the principle of proportionality as interpreted and assessed in the context of the interpretation and application of Article 325 TFEU and Article 273 of the VAT Directive.

1. The applicability of Article 49(3) of the Charter

32As a preliminary point, I would point out that Article 49(3) of the Charter, which provides that the severity of penalties must not be disproportionate to the offence, refers to penalties of a criminal nature.

33According to the Court’s settled case-law on the interpretation of Article 50 of the Charter and transposed into Article 49(3) thereof, three criteria (‘the Engel criteria’) ⁸ are relevant for assessing the criminal nature of a penalty, namely (i) the legal classification of the offence under national law, (ii) the intrinsic nature of the offence, and (iii) the degree of severity of the penalty which the person concerned is liable to incur. ⁹ In addition, even for offences which are not classified as ‘criminal’ by national law, the intrinsic nature of the offence in question and the degree of severity of the penalties to which it is liable to give rise may nevertheless result in its being criminal in nature. ¹⁰

34With regard to the first criterion, concerning the classification of the offence under national law, it follows both from the wording of Article 95(1) of the Law on Tax Administration and from the national case-law referred to in the order for reference, in particular that of the Lietuvos vyriausiasis administracinis teismas (Supreme Administrative Court of Lithuania) referred to in point 21 of the present Opinion that, under Lithuanian law, the charging of late payment interest on tax arrears in the event of non-payment or late payment of a tax due is not regarded as a penalty of a criminal nature. ¹¹

35As regards the second criterion relating to the nature of the offence itself, that involves checking whether the penalty at issue has, inter alia, a punitive purpose. It follows that a penalty with a punitive purpose is criminal in nature and the sole fact that it also pursues a deterrent purpose does not mean that it cannot be characterised as a criminal penalty. By contrast, a measure which merely repairs the damage caused by the offence at issue is not criminal in nature. ¹²

36It must be pointed out, in that regard, that although, in the context of its case-law on tax disputes, the European Court of Human Rights was able to find that proceedings following which tax penalties had been imposed were criminal in nature even where those proceedings could not be regarded as criminal in nature under national law, such classification was not adopted in respect of measures similar to those at issue in the present case. More specifically, the European Court of Human Rights has held that ‘late payment interest is not essentially intended to punish taxpayers in order to deter them from re-offending, but is primarily intended to provide financial compensation for damage, namely financial damage linked to the passage of time and the delay in payment of the tax’. ¹³ Therefore, in accordance with that case-law, tax reminder procedures or tax adjustment procedures aimed purely at recovering the full amount of tax, without that adjustment being accompanied by any increase, and proceedings relating to late payment interest, irrespective of its amount do not have a criminal-law aspect. ¹⁴

37In addition, it should be noted that the non-punitive nature of late payment interest has also been emphasised in the Court’s case-law on VAT in cases similar to that at issue in the main proceedings. Although the latter did not directly concern the question whether late payment interest relating to VAT arrears was criminal in nature within the meaning of Article 49(3) of the Charter, the Court nevertheless held that the charging of late payment interest was, first, preventive in nature, by encouraging the taxpayer to fulfil the tax obligation as soon as possible after those time limits expire ¹⁵ and, second, compensatory in nature (or a compensatory function), in that such interest is intended to offset the financial losses suffered by the State as a result of the non-payment or late payment of a tax. ¹⁶

38Moreover, in accordance with the case-law of the Court, a measure which merely repairs the damage caused by the offence at issue is not criminal in nature. ¹⁷ Consequently, late payment interest, which is intended to offset the financial losses suffered by the Member State as a result of the non-payment or late payment of a tax, cannot be regarded as constituting a punitive measure.

39I should point out, in that regard, that the fact that the referring court identifies a ‘fixed penalty part’ cannot confer any criminal-law aspect to the late payment interest at issue in the case in the main proceedings. ¹⁸ Although the use of the expression ‘penalty part’ by that court in its order for reference may, to a certain extent, give rise to confusion, and beyond the fact that late payment interest (including that ‘part’) could be perceived by the taxpayer as a form of penalty or sanction, the fact remains that its objective is to encourage the debtor to pay the amount due to the creditor within the prescribed time limit, failing which that amount will be increased. Therefore, the analysis carried out by the referring court in order to determine which part of the rate of late payment interest has a compensatory function and which other has a punitive function is, in the present case, irrelevant.

40As regards the third criterion relating to the degree of severity of the penalty, there is nothing in the documents before the Court to suggest that the late payment interest in the present case is of such significance that it should be regarded as criminal in nature. ¹⁹ In any event, as is apparent from the case-law of the European Court of Human Rights set out in point 36 of the present Opinion, it must be borne in mind that, irrespective of their amount, measures similar to those in the main proceedings were not regarded as sufficiently serious to confer a criminal nature on them. ²⁰

41In the light of the foregoing, I consider that none of the three Engel criteria for determining that the late payment interest at issue in the main proceedings is criminal in nature is satisfied and, therefore, Article 49(3) of the Charter is not relevant for the purpose of answering the second question referred for a preliminary ruling.

2. The application of the principle of proportionality in the interpretation of Article 325 TFEU and Article 273 of the VAT Directive

42As a preliminary point, I would point out that, in accordance with the Court’s settled case-law, it follows from the first paragraph of Article 273, Article 2 and Article 250(1) of the VAT Directive and from Article 4(3) TEU that each Member State is required to take all legislative and administrative measures appropriate for ensuring collection of all the VAT due on its territory and for preventing evasion. ²¹

43In that regard, the Court has already held that, outside the limits laid down therein, Article 273 of the VAT Directive does not specify either the conditions or the obligations which the Member States may impose and therefore gives the Member States a margin of discretion with regard to the means of ensuring collection of all the VAT due on their territory and for combating fraud. ²²

44Moreover, Article 325(1) and (2) TFEU obliges the Member States to counter illegal activities affecting the financial interests of the European Union through effective deterrent measures and, in particular, requires them to take the same measures to counter fraud affecting the financial interests of the European Union as they take to counter fraud affecting their own interests. ²³ The Court has specified that Article 325 TFEU obliges the Member States to provide, in their national legislation, for effective proceedings for the recovery of assistance wrongly received from the budget of the European Union. ²⁴ In that regard, Member States are subject to a precise obligation as to the result to be achieved which is not subject to any condition regarding the application of the rule laid down in Article 325(1) and (2) TFEU. ²⁵

45In accordance with the settled case-law of the Court, while the choice of penalties remains within their discretion, Member States must ensure that infringements of EU law, including the harmonised rules deriving from the VAT Directive, are penalised under conditions, both procedural and substantive, which are analogous to those applicable to infringements of national law of a similar nature and importance and which, in any event, make the penalty effective, proportionate and dissuasive. ²⁶

46Accordingly, it follows from the Court’s case-law that while the Member States remain free to determine the amount and the detailed rules for the charging of late payment interest applied to VAT arrears in the event of non-payment or late payment of that tax under their national law in the context of their procedural autonomy, the measures adopted by those Member States must, however, comply with the general principles of law, which include the principle of proportionality.

47I note, in the first place, that, in so far as it is intended to ensure the correct collection of VAT and to prevent evasion, the national legislation at issue in the main proceedings pursues a legitimate objective recognised by EU law. ²⁷ The Court has already acknowledged that charging default interest helps to combat failures to pay declared amounts of VAT within the prescribed time limits, in accordance with the obligation on the Member States, in particular under Article 273 of the VAT Directive and Article 325(1) TFEU, to take all legislative and administrative measures appropriate for ensuring collection of all the VAT due on their territory and for preventing evasion. ²⁸ As recalled in point 37 of the present Opinion, the late payment interest provided for by the Law on Tax Administration has a dual function consisting in, first, enforcing tax obligations and ensuring the collection of tax which is due by encouraging the taxpayer to fulfil that obligation punctually and, second, covering the costs incurred by the tax authorities as a result of the taxpayer’s failure to fulfil tax obligations in good time, thereby compensating the loss caused to the public exchequer by the unavailability of the amounts corresponding to the tax due. ²⁹

48In the second place, a measure imposing late payment interest, such as that at issue in the main proceedings, is undoubtedly an appropriate means of achieving the objective referred to above. In the absence of measures such as late payment interest, taxpayers would have no particular incentive to fulfil their tax obligations within the prescribed time limits and might give preference to other commercial transactions. Moreover, given the fluctuating value of money, taxpayers could even be encouraged to favour those other transactions instead of paying their tax debts within the time limits laid down. Late payment interest is charged specifically in order to encourage taxpayers to fulfil their tax obligations as a matter of priority, in order not to risk seeing the amount of their tax debt increase in proportion to the length of time they have been in arrears. The absence of late payment interest would also favour those who do not meet their tax obligations within the prescribed time limit. The latter would benefit, inter alia, from additional liquidity and an economic advantage corresponding to the reduction, over time, of the real nominal value of the amount of the tax debt. Consequently, late payment interest is an appropriate and necessary measure for attaining the objectives pursued by the national legislation at issue in the main proceedings.

49While it has been established that a measure such as that at issue is appropriate and necessary to attain the objective of ensuring the correct collection of VAT and preventing evasion, in accordance with Article 325 TFEU and Article 273 of the VAT Directive, it remains to be examined, in the third and final place, whether the national legislation concerned goes beyond what is necessary to attain that objective.

50In that regard, first, while it is conceivable that late payment interest set in an arbitrary or discretionary manner may be disproportionate, that does not appear to be so in the present case. The provisions of national law on the calculation of late payment interest apply to all taxpayers in the event of non-payment or late payment, as determined in the course of a tax inspection, of tax subject to declaration and not declared or not subject to declaration and not calculated. ³⁰ Moreover, I would point out that, first, the rate in the present case is established a priori in a clear and transparent manner in accordance with objective criteria and on the basis of a calculation methodology described in the Law on Tax Administration ³¹ and, secondly, the decision-making power of the tax authority with regard to setting late payment interest is circumscribed by that law. ³² The amount of interest thereby laid down allows creditors and debtors to predict precisely the extent of their future financial rights or, where appropriate, obligations, so as to also guarantee legal certainty. ³³

51Second, it must be acknowledged that, in so far as late payment interest is linked to the enforcement or extinguishing of the tax obligation, it is the actions of the taxpayer which will determine the total amount of late payment interest for which the taxpayer will be liable. In other words, the application of late payment interest imposes on the person who has failed to discharge his or her tax obligations within the prescribed time limit a financial burden which is proportionate to the period of non-payment of the debt which triggered the calculation of interest. ³⁴ Consequently, the use of late payment interest as a means of ensuring that tax obligations are enforced does not, in principle, constitute a solution which places an excessive burden on taxpayers. ³⁵

52Third, as established in points 36 and 37 of the present Opinion, since interest for late payment does not have a punitive purpose, factors such as the nature and severity of the established infringement which are, as a general rule, relevant in order to assess whether a penalty such as a tax fine is consistent with the principle of proportionality ³⁶ are not necessarily relevant in the case of late payment interest. Such late payment interest is due because of non-payment or late payment of tax and not because of tax evasion. ³⁷ I would like to point out, in that regard, that late payment interest is not applicable solely in the event of evasion, but is used more generally in the field of taxation to ensure the collection of all types of tax.

53Fourth, although it is for the referring court to assess whether the amount of late payment interest applied in the case in the main proceedings does not go beyond what is necessary to ensure the efficient collection of VAT and to combat evasion, nothing in the documents submitted to the Court appears to indicate that the rate of late payment interest provided for by the national legislation in the present case is disproportionate in relation to the objectives which it pursues. ³⁸

54I therefore note that, in so far as the national court is, in essence asking whether it is possible to grant the applicant’s request to be exempted from paying the ‘penalty part’ of the VAT late payment interest, being two-thirds of the total amount of the VAT late payment interest calculated in relation to it, such a decision would in fact amount to reducing that interest to a particularly low amount by limiting it to a single component, namely the average interest rate for government bonds. ³⁹ Such a possibility would risk undermining the objective of ensuring the timely recovery of VAT since taxpayers would no longer have any incentive to fulfil their tax obligations as a matter of priority, thereby giving priority to other commercial transactions instead. ⁴⁰

55Moreover, the fact that the amount of the late payment interest is fixed at a flat rate and is not coupled with any possibility of adjustment does not, in itself, support the conclusion that that measure is disproportionate. The fact that the national legislation at issue in the main proceedings determines the amount of late payment interest, which the tax authority cannot adjust, except in a few cases expressly defined by the applicable tax legislation, ⁴¹ protects taxable persons against any arbitrary decision by that authority while ensuring equal treatment between those taxable persons. The absence of a framework for the discretion of the tax authorities could lead to an unjustified difference in treatment between taxable persons who are in a comparable tax situation and, therefore, a situation which cannot be tolerated for tax purposes.

56In the light of the foregoing, I propose that the answer to the second question referred for a preliminary ruling should be that Article 325 TFEU and Article 273 of the VAT Directive, read in the light of Article 49(3) of the Charter, must be interpreted as not precluding national legislation which, irrespective of the nature and severity of the infringement found by the tax authority, sets the amount of late payment interest without that authority being able to reduce one of the parts of that amount and thereby apply a rate of interest which is lower than the rate provided for by that legislation or waive a part of that amount and which provides that the taxpayer may be exempted from paying late payment interest only in the cases expressly defined by that legislation.

V. Conclusion

Conclusion

57In the light of the foregoing considerations, I propose that the Court should answer the second question referred for a preliminary ruling by the Mokestinių ginčų komisija prie Lietuvos Respublikos Vyriausybės (Tax Disputes Commission under the Government of the Republic of Lithuania) as follows:

Article 325 TFEU and Article 273 of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax, read in the light of Article 49(3) of the Charter of Fundamental Rights of the European Union,

must be interpreted as not precluding national legislation which, irrespective of the nature and severity of the infringement found by the tax authority, sets the amount of late payment interest without that authority being able to reduce one of the parts of that amount and thereby apply a rate of interest which is lower than the rate provided for by that legislation or waive a part of that amount and which provides that the taxpayer may be exempted from paying late payment interest only in the cases expressly defined by that legislation.

¹ Original language: French.

² OJ 2006 L 347, p. 1.

³ Žin., 2002, No 35-1271.

⁴ Žin., 2004, No 63-2243.

⁵ That court mentions, in that regard, the judgment of the Lietuvos vyriausiasis administracinis teismas (Supreme Administrative Court of Lithuania) of 10 March 2020 in Case A-3247-575/2020.

⁶ The same court cites, to that effect, the judgment of the Lietuvos vyriausiasis administracinis teismas (Supreme Administrative Court of Lithuania) of 18 November 2011 in Case A-143-2619/2011.

⁷ See, to that effect, judgment of 11 September 2025, Fira (C‑215/24, EU:C:2025:695, paragraph 36 and the case-law cited).

⁸ European Court of Human Rights (ECtHR), 8 June 1976, Engel and Others v. the Netherlands, CE:EHCR:1976:0608JUD000510071, § 82.

⁹ See, to that effect, judgment of 4 May 2023, Agenția Națională de Integritate (C‑40/21, EU:C:2023:367, paragraph 34 and the case-law cited).

¹⁰ See judgment of 22 June 2021, Latvijas Republikas Saeima (Penalty points) (C‑439/19, EU:C:2021:504, paragraph 88 and the case-law cited).

¹¹ It is also apparent from the documents before the Court that that measure was imposed in the context of an administrative procedure.

¹² See judgment of 4 May 2023, MV – 98 (C‑97/21, EU:C:2023:371, paragraph 42 and the case-law cited).

¹³ ECtHR, 6 October 2009, Poniatowski v. France, CE:ECHR:2009:1006DEC002949408. Similarly, mere interest for late payment, which means that it is accepted that the taxpayer was acting in good faith, does not constitute a criminal charge, within the meaning of Article 6(1) of the European Convention for the Protection of Human Rights and Fundamental Freedoms (signed in Rome on 4 November 1950) (see, in that regard, ECtHR, 14 September 1999, J.B. v. France, CE:ECHR:1999:0914DEC003363496). See, also, to that effect, Opinion of Advocate General Campos Sánchez-Bordona in Menci (C‑524/15, EU:C:2017:667, point 50).

¹⁴ ECtHR, 3 December 2002, Mieg de Boofzheim v. France, CE:ECHR:2002:1203DEC005293899, and ECtHR, 17 May 2016, Société Oxygène Plus v. France, CE:ECHR:2016:0517DEC007695911, § 50.

¹⁵ See judgment of 13 October 2022, Direktor na Direktsia ‘Obzhalvane i danachno-osiguritelna praktika’ (C‑1/21, ‘the judgment in Direktor na Direktsia, EU:C:2022:788, paragraph 89 and the case-law cited).

¹⁶ See the judgment in Direktor na Direktsia (paragraph 91 and the case-law cited). A similar finding regarding the compensatory function of interest for late payment is apparent from the case-law of the Court in cases relating to EU customs legislation in which it has been established that interest on arrears is intended to offset the consequences arising as a result of payment not having been made by a set deadline and to compensate for the advantages which the trader unduly derives from the delay in paying a tax debt, and not to penalise such a delay. See, to that effect, judgment of 5 December 2024, Network One Distribution (C‑506/23, EU:C:2024:1003, paragraph 32).

¹⁷ See judgment of 20 March 2018, Menci (C‑524/15, EU:C:2018:197, paragraph 31 and the case-law cited).

¹⁸ In that regard, it should be noted that the national legislation at issue in the main proceedings provides that the rate of late payment interest relating to VAT arrears is determined by adding seven percentage points to the rate of interest on debts owed to the Treasury. The referring court considers that those seven percentage points make late payment interest punitive in nature.

¹⁹ As the Commission pointed out in its written pleadings, it must be noted that the rate of late payment interest at issue in Poniatowski v. France (0.75% per month, therefore 9% per annum), in which the ECtHR did not recognise a criminal-law aspect, was close to the rate applicable in the present case (0.03% per day, therefore 10.708% per annum) (see ECtHR, 6 October 2009, Poniatowski v. France, CE:ECHR:2009:1006DEC002949408).

²⁰ See ECtHR, 6 October 2009, Poniatowski v. France, CE:ECHR:2009:1006DEC002949408, and ECtHR, 17 May 2016, Société Oxygène Plus v. France, CE:ECHR:2016:0517DEC007695911, § 50.

²¹ See the judgment in Direktor na Direktsia (paragraph 60 and the case-law cited).

²² See the judgment in Direktor na Direktsia (paragraph 69 and the case-law cited).

²³ See, to that effect, judgment of 1 October 2020, Úrad špeciálnej prokuratúry (C‑603/19, ‘the judgment in Úrad špeciálnej prokuratúry, EU:C:2020:774, paragraph 48 and the case-law cited).

²⁴ See, to that effect, the judgment in Úrad špeciálnej prokuratúry (paragraphs 60 and 62).

²⁵ See, to that effect, the judgment in Úrad špeciálnej prokuratúry (paragraph 50 and the case-law cited).

²⁶ See judgment of 2 May 2018, Scialdone (C‑574/15, EU:C:2018:295, paragraph 28 and the case-law cited).

²⁷ It must be added that both the European Union and the Member States have a financial interest in the full and timely payment of taxes. As the Lithuanian Government has pointed out, referring to a judgment of the Lietuvos Respublikos Konstitucinis Teismas (Constitutional Court of the Republic of Lithuania), in the event of non-payment or late payment of taxes, the Treasury does not collect any revenue, with the result that the budget deficit increases and the State’s ability to perform its tasks of vital importance for its nationals and that State are limited.

²⁸ See the judgment in Direktor na Direktsia (paragraphs 88, 89 and 92 and the case-law cited).

²⁹ These include, for example, costs associated with monitoring taxpayers’ compliance with tax obligations and the adoption of appropriate measures in that regard to recover unpaid amounts.

³⁰ See point 7 of the present Opinion.

³¹ See point 9 of the present Opinion.

³² See points 10 and 11 of the present Opinion.

³³ See, by analogy, Opinion of Advocate General Szpunar in Nidera (C‑387/16, EU:C:2017:740, point 29).

³⁴ That charge corresponds to the flat-rate remuneration of the tax creditor for unlawful use of the amount of the tax debt, during the period in which the taxable person did not fulfil his or her obligations. The amount of interest is, moreover, intended to cover the costs incurred by the tax authority as a result of the taxpayer’s failure to meet his or her tax obligations within the prescribed time limits.

³⁵ It is important to point out in that regard that the fact that the amount of interest may equal, or even exceed, the amount of the tax due because a long period has elapsed during which the taxable person has not fulfilled his or her obligations is merely a result of applying compensation at a flat rate and cannot call into question the proportionality of the national measure providing for interest for late payment. See, by analogy, judgment of 28 February 2018, Nidera (C‑387/16, EU:C:2018:121, paragraph 36).

³⁶ See judgment of 17 May 2023, Cezam (C‑418/22, EU:C:2023:418, paragraph 30 and the case-law cited).

³⁷ That does not, of course, rule out a situation where, as in the case in the main proceedings, late payment interest is charged following a finding of tax evasion. In any event, even if the fine imposed on the applicant for tax evasion were to be regarded as linked to the imposition of VAT late payment interest, there seems to me to be no doubt that the infringement committed by the applicant is of a serious nature in the light, inter alia, of the importance of combating VAT fraud, as recalled in point 42 of the present Opinion. Therefore, in the light of the severity of the harm to the public interest resulting from acts of evasion, the mechanism for the payment of late payment interest relating to VAT arrears provided for by the national legislation at issue in the main proceedings does not, in principle, appear to be disproportionate to the infringement which it seeks to penalise. The late payment interest charged to the applicant corresponds to a tiny fraction of the tax arrears (namely 0.03%) and the amount of late payment interest will ultimately depend on the duration of the non-payment or late payment of tax.

³⁸ So far as is relevant, I would like to emphasise that there appears to be a wide divergence in the rates of interest for late payment between the various Member States. While five of them (namely Denmark, the Czech Republic, Slovakia, Latvia and Estonia) have interest rates which are higher, or even significantly higher than those laid down by the Lithuanian legislation at issue in the main proceedings (almost 25% in the case of Estonia), four other Member States (namely Belgium, Ireland, Bulgaria and Greece) are more or less at the same level as the level set by Lithuania. See, in that regard, the report of the European Commission’s Directorate-General for Taxation and Customs Union (DG TAXUD), EU VAT Forum Subgroup 7.2. – ‘Administrative Sanctions and Interests’ Final Report, in particular p. 33, available only in English at the following address: https://op.europa.eu/en/publication-detail/-/publication/f3c5fca5-96e1-11ed-b508-01aa75ed71a1/. Moreover, as the Commission stated in its written submissions, the interest rate applicable in the case in the main proceedings (that is to say 10.708% per annum) does not appear excessive by comparison with the interest rates applied to certain bank loans or with the interest rates for late payment established in accordance with the relevant provisions of Directive 2011/7/EU of the European Parliament and of the Council of 16 February 2011 on combating late payment in commercial transactions (OJ 2011 L 48, p. 1), which are generally higher than 10%. See, in that regard, Article 2(6) and (7) of that directive.

³⁹ As financial instruments which are considered to be particularly safe, government bonds usually have rates (significantly) lower than the average bank loan rates.

⁴⁰ That would be the case, in particular, if the interest rate applied for non-payment of VAT within the prescribed time limit were significantly lower than that payable for non-payment of commercial debts.

⁴¹ See points 10 and 11 of the present Opinion.