The Spanish Supreme Court, in its judgment no. 401/2026 of 30 March 2026 (cassation appeal 4256/2024), confirms that the penalty provided for in article 171.One.4 of the Value Added Tax Act (LIVA) for the infringement of article 170.Two.4 —reverse charge without real economic prejudice to the public treasury— may be directly annulled by the court where it finds disproportionality in the specific case, without need to raise a constitutional question before the Constitutional Court or a preliminary reference before the Court of Justice of the European Union. The doctrine rests on the Spanish Supreme Court’s own case law (judgments 1093/2023 and 1751/2024) and on the CJEU’s criterion in Farkas (case C-564/2015, 2017) and Grupa Warzywna (C-935/19, 2021), where the Luxembourg court declared that formal penalties that do not attend to the economic reality of the breach are contrary to the EU principle of proportionality.
The practical consequence, for defensive purposes, keeps a robust line of argument alive. In cases where AEAT imposes a penalty under article 171.One.4 of the LIVA for a purely formal breach of the reverse charge, with no real revenue prejudice, it is advisable to raise the disproportionality of the penalty before the court from the first moment of the challenge. Administrative rejection does not exhaust the defence: the court may directly disapply the sanctioning rule if it finds it disproportionate, attending to the contributor’s specific conduct and the actual prejudice caused.
Full analysis in → Penalties under article 170.Two.4 of the VAT Act for reverse charge may be annulled as disproportionate