Penalitățile contractuale – a fi sau a nu fi (în sfera TVA)
Contractual damages – to be or not to be (within the scope of VAT)

Summary/Abstract: Contractual damages are a sensitive issue during VAT audits. According to Art. 286 Para (4) letter b) of the Tax Code, the amounts representing damages, as established by a definitive Court decision, as the case may be, penalties and any other amounts charged for total or partial breach of the contractual obligations, if levied on top of the agreed prices/fees, are not be included in the taxable amount. In practice, however, the tax authorities tend to ignore this provision, displaying a preference for the case law of the European Court of Justice (ECJ) – which, especially in the view of the latest decisions, tends to narrow the cases where the amounts levied for breach of contractual obligations can be considered as being outside the scope of VAT. However, is it correct the approach of the tax authorities? Can they simply elude the national provisions and apply the ECJ case law? Lastly, are the provisions of Article 286 Para (4) letter b) of the Tax Code in line with the VAT Directive?

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