Nekilnojamojo turto valdymas (VAT - Obligations deemed necessary to ensure the correct collection of VAT and to prevent fraud - Judgment) [2026] EUECJ C-544/24 (30 April 2026)

Judgment This 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'). The 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 TFEU Article 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 Article 49(3) of the Charter provides: 'The severity of penalties must not be disproportionate to the criminal offence.' Under 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 Article 2(1) of the VAT Directive sets out the transactions that are to be subject to VAT. Article 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 Article 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 Article 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.' Article 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.' Article 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. Article 96 of that Law, entitled 'Default interest', provides: '1. Default interest shall be payable by the taxpayer in respect of: … (2) 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; …' Article 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.' Article 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.' Article 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.' Article 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: … (2) a special tax law provides for that legal possibility; (3) one of the grounds provided for in Article 141(1) of this Law exists: …' Article 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: (1) the taxpayer demonstrates that the infringement committed is not attributable to him or her as a wrongful act or omission; (2) 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; (3) an isolated act of the taxpayer, though contrary to the provisions of the tax law, does not result in loss to the budget; (4) 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 The 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. By 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 1 862 257 on the applicant. The 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. By 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. The 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. By 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). On 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. By 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. Since 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. On 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. By 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. On 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. The 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. Relying 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. In 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. In 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: '(1) 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? (2) 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 The 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. In 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. According 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). In 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. It 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. Second, 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. In 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 The 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. As 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). That 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 of 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). In 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. In 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. In 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). Therefore, the first question referred by the referring court is inadmissible. The second question By 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. In 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. In 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 In 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). In 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). Although 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). With 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. As 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). In 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. It 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). It 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). In 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. So 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). In 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). It 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. In 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 Even 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). In 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. In 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). As 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 et Ministero dell'Economia e delle Finanze , C‑452/20, EU:C:2022:111 , paragraph 37 and the case-law cited). In 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). It 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). In 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). 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 (judgment of 2 May 2018, Scialdone , C‑574/15, EU:C:2018:295 , paragraph 28 and the case-law cited). In 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. Accordingly, 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). Although 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 et Ministero dell'Economia e delle Finanze , C‑452/20, EU:C:2022:111 , paragraph 40 and the case-law cited). As 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). Therefore, default interest appears to be an appropriate measure for attaining the objectives pursued by the national legislation at issue in the main proceedings. In 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. In 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. It 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 nominal value of the amount of their tax debt. It 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. As regards, in the third place, whether that measure is proportionate stricto senso , 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. First, 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. Having 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. In 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. In 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. Secondly, 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. That 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. In 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). Thirdly, 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. Fourthly, 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. Therefore, 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. Having regard to all 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 Since 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. 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] * Language of the case: Lithuanian. © European Union The source of this judgment is the Europa web site. 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