A company's VAT penalty does not punish its director twice

The Constitutional Court on 19 January 2026 dismissed an appeal by a company director and three of his companies, who claimed they had been punished twice for the same VAT facts. The court held that the rule against double punishment did not apply, because the director was convicted in person while the administrative penalties fell on the companies as taxpayers. It also found the 20% penalties and the interest charged proportionate.

The facts

In 2007 a company reported an employee to the police for misappropriation. The investigation found that, since VAT was introduced in 1995, the company had not charged VAT on all its taxable supplies. According to the criminal judgments, B.G., one of its directors, developed a system of two sets of books, one for official use and one recording sales made without VAT.

Two criminal cases followed. In the first, decided in September 2009, B.G. admitted charges that included helping to corrupt VAT officials and making false declarations for several companies. He received a suspended prison sentence.

In the second, decided on 14 July 2011, he admitted part of the charges and was sentenced to effective imprisonment. The court that sentenced him took into account the nature of the offences, how long they lasted and his criminal record.

Meanwhile the Commissioner of VAT, now the Commissioner for Revenue, issued assessments against the companies, with administrative penalties of 20% of the tax assessed and interest. He also asked for bank guarantees before they could supply goods or services.

B.G. and the companies sued the State Advocate, the Commissioner for Revenue, the Commissioner of Police, the Director General (Contracts) and Malta Enterprise. The First Hall of the Civil Court rejected their claims on 24 January 2025.

What the court held

The court was composed of Chief Justice Mark Chetcuti, Mr Justice Giannino Caruana Demajo and Mr Justice Anthony Ellul. The appellants relied mainly on article 39(9) of the Constitution and article 4 of the Seventh Protocol to the European Convention, which protect a person from being tried or punished twice for the same offence.

The court applied the test the European Court of Human Rights set in A and B v Norway (2016). It asks whether both proceedings are criminal in nature, whether they concern the same or substantially the same facts, whether there is a final decision, and whether the proceedings merely duplicate each other or form parts of an integrated system.

The court then pointed to what the appellants had not said. The criminal case of 2009 was against B.G. personally, for offences he committed. The administrative penalty was imposed on the company, the taxpayer, for failing to declare the truth in its VAT returns. The court held: "Għalhekk m’għandniex l-istess persuna" (so we do not have the same person).

A complaint that B.G. should not have been treated as a repeat offender had nothing to do with double punishment. The court held that it was a question of criminal law that he should have raised before the Court of Criminal Appeal.

On article 1 of the First Protocol, the court refused to act as a third instance on the tax assessments, which the companies had contested before the Administrative Review Tribunal. It found that the 20% penalties applied only for periods in which tax had been under-declared. They were not excessive, given the work and resources the State spent investigating the case and issuing the assessments.

Interest ran at 1% a month until the end of 2008, and later at 0.75%, 0.54% and 0.33%. The court held that these rates could not be seen as disproportionate, since the companies had kept funds belonging to the public purse.

Exclusion from public contracts, the court added, is not a penalty. It is a measure that protects the integrity of public procurement from those who have shown they cannot be relied on. On discrimination, the court held that like must be compared with like, and the sentences reflected different circumstances. With no breach found, no remedy or compensation was due, and the appellants pay the costs of the appeal.

Why it matters

A director facing both a criminal prosecution and tax assessments against his companies cannot rely on ne bis in idem simply because the facts overlap. The first question is whether the two sanctions fall on the same person. Challenges to the size of an assessment belong before the Administrative Review Tribunal, not in a constitutional case.

Where it sits

Ne bis in idem, the rule that no one is tried or punished twice for the same offence, is found in article 39(9) of the Constitution and article 4 of the Seventh Protocol. Under A and B v Norway, a tax penalty and a criminal conviction for the same facts may stand together if they form one integrated response. This judgment turns on an earlier step: the identity of the person sanctioned.

The appellants relied on the Constitutional Court (8 May 2017), which held that the remedy for disproportionate VAT fines and interest was their reduction. The First Hall had distinguished that line, because there the taxpayer faced repeated criminal fines for the same failure. The court also distinguished the European Court of Human Rights (17 January 2012), cited by the appellants, because it concerned mandatory life sentences under article 3.

Source

Constitutional Court, 196/2019/1, 19 January 2026, 196/2019/1