# CJEU on Limitation Periods for Serious VAT Fraud > The CJEU approves a 15-year absolute limitation period for serious VAT fraud where there is no systemic risk of impunity. Source: https://www.mtrlegal.com/en/cjeu-limitation-periods-serious-vat-fraud/ · Language: en · Updated: 2026-10-29 --- The Court of Justice of the European Union (CJEU) has clarified the requirements under EU law governing national limitation rules for serious VAT fraud and the penalties applicable to agreements in the field of organised crime ([CJEU, judgment of 15 October 2026](https://eur-lex.europa.eu/./legal-content/AUTO/?uri=CELEX:62025CJ0321) – C‑321/25). According to the judgment, an [absolute limitation period](https://www.mtrlegal.com/wiki/verjaehrungsfrist/) of 15 years is compatible with Article 325 TFEU and the Convention on the Protection of the European Communities’ Financial Interests, provided that, in the Member State concerned, it does not create a systemic risk that serious fraud affecting the financial interests of the European Union will go unpunished. ## Criminal proceedings concerning alleged tax offences The main proceedings concern five defendants. They are accused of having led or participated in an organised criminal group established for the purpose of committing tax offences. Four of them are also alleged to have committed various forms of VAT fraud. All defendants benefit from the presumption of innocence. The CJEU was not required to determine whether the allegations were substantiated. Its judgment dealt exclusively with how the relevant provisions of EU law must be interpreted and the resulting requirements for national law. ### Scope of the allegations Two defendants are accused of having led an organised criminal group established for profit. Under Bulgarian law, this offence is punishable by imprisonment for between five and 15 years. Three other defendants are charged with participating in the same group; Bulgarian criminal law provides for imprisonment of between three and ten years for this offence. According to the judgment, the additional allegations of VAT fraud concern amounts equivalent to approximately: - EUR 633,525 in the case of one defendant. - EUR 1,130,568 in the case of another defendant. - EUR 1,022,583 in the case of a third defendant. - EUR 1,244,274 in the case of a fourth defendant. Under Bulgarian law, the respective tax offences are punishable by imprisonment for between three and eight years and by the full or partial confiscation of assets. However, the maximum aggregate term of imprisonment that may be imposed for all these offences may not exceed eight years. ## Repeated changes in the composition of the judicial panel After the indictment was filed, the proceedings were initially assigned to a judicial panel consisting of one judge and two lay judges. Between 2015 and 2021, that panel held a total of 48 hearings. After the judge was appointed as a European Delegated Prosecutor, the proceedings had to recommence from the beginning before a newly constituted judicial panel. A further 18 hearings were held between 2022 and 2025 without any substantive measures being taken to hear evidence. Following the retirement of the second judge, the case was reassigned to another judge and two new lay judges. The Bulgarian court considered that it was objectively no longer possible to conclude the criminal proceedings through all three levels of jurisdiction before the absolute limitation periods expired. It therefore referred the matter to the CJEU for clarification as to whether the Bulgarian rules were compatible with EU law. ## Absolute limitation period under Bulgarian law ### Calculation based on the maximum prescribed penalty Under the relevant Bulgarian criminal law, the ordinary limitation period is determined by the severity of the penalty prescribed for the offence concerned. That period may be interrupted or suspended. In addition, there is an absolute limitation period equivalent to one and a half times the ordinary period, which can be neither interrupted nor suspended. If no final conviction has been handed down by the end of the absolute period, prosecution is definitively time-barred. For the VAT offences and participation in an organised criminal group at issue here, the absolute limitation period is 15 years. By contrast, due to the higher prescribed penalty, an absolute period of 22 years and six months applies to the alleged leadership of the group. In the referring court’s assessment, that period is sufficient to conclude the proceedings, including any appeals. ### Concerns of the national court The national court doubted whether a limitation rule is compatible with EU law if it is based exclusively on the statutory maximum penalty. Such a rule does not take account of the factual and legal complexity of proceedings or unforeseen events that require the proceedings to recommence in their entirety. In the Bulgarian court’s view, this could give rise to a structural problem, particularly in complex proceedings: the more extensive and difficult the matters to be investigated, the greater the risk that no final decision could be handed down before the absolute limitation period expired. ## Requirements under Article 325 TFEU and the PIF Convention Article 325(1) TFEU requires the Member States to counter fraud and any other illegal activities affecting the financial interests of the Union through deterrent and effective measures. In cases of serious fraud, effective and deterrent criminal penalties must be provided for. Article 2(1) of the PIF Convention likewise requires effective, proportionate and deterrent criminal penalties. In cases of serious fraud, these must at least include custodial sentences capable of giving rise to extradition. ### Applicability to the allegations at issue in the proceedings The alleged offences are said to have been committed in 2011 and 2012. The PIF Convention was therefore applicable ratione temporis. The total VAT loss at issue exceeds EUR 4 million. If the allegations are substantiated, the acts concerned would constitute serious fraud affecting the financial interests of the Union. This assessment is not limited to completed acts of fraud. Article 325(1) TFEU and the PIF Convention also cover attempts. The CJEU further clarified that forming an association for the purpose of committing VAT offences may, in principle, be treated as fraud affecting the financial interests of the Union. ## No infringement solely due to the 15-year period ### Discretion afforded to the Member States At the time of the alleged offences, the EU legislature had not yet harmonised limitation periods for offences affecting the financial interests of the Union. Partial harmonisation was introduced only later by the PIF Directive, which was not applicable ratione temporis to the main proceedings. The formulation of limitation rules therefore fell, in principle, within the competence of the Member States. In exercising that discretion, however, they must comply with Article 325 TFEU and the PIF Convention. National provisions must allow serious fraud to be punished effectively. EU law does not require prosecution to remain possible indefinitely. Rather, an absolute limitation period serves the interests of legal certainty because repeated interruptions or suspensions cannot postpone the expiry of the limitation period indefinitely. ### A systemic risk of impunity is decisive An absolute limitation period must be sufficiently long to ensure that the protection of the Union’s financial interests is not rendered practically impossible or excessively difficult. This assessment must take account of the national limitation system as a whole and the complexity of the necessary criminal proceedings. The CJEU considered that a period of 15 years is, in principle, an appropriate period within which the Bulgarian prosecuting authorities can conclude proceedings concerning serious fraud, including review at three levels of jurisdiction. The national court had not presented sufficient circumstances from which it could be inferred that final decisions in such cases could not systematically be obtained in Bulgaria within that period. According to the judgment, individual changes in the composition of a judicial panel are not sufficient to establish a systemic risk of impunity. The decisive issue is therefore not whether prosecution in a particular case may fail because the limitation period expires. Rather, the key question is whether the national rule structurally prevents serious fraud from being prosecuted effectively. Article 325 TFEU and Article 2(1) of the PIF Convention therefore do not preclude an absolute limitation period of 15 years where no final conviction has been handed down within that period and the period does not create a systemic risk of impunity in the Member State concerned. This also applies where grounds for interruption or suspension, or unforeseen events, do not affect the expiry of the absolute period. ## Higher penalty for agreements in the field of organised crime The second part of the judgment concerns Article 3(1)(b) of Framework Decision 2008/841/JHA. The Bulgarian court sought to determine whether the custodial sentence for agreeing to commit an offence may be higher than the penalty for the offence contemplated by the agreement. ### Penalties under the Framework Decision Article 2(b) of the Framework Decision covers an agreement between several persons to engage in conduct that, if carried out, would amount to one of the offences referred to in Article 1. Participation in the actual commission of the offence is not required. Under Article 3(1)(b), that conduct must be punishable either by the same maximum term of imprisonment as the intended offence or by a maximum term of imprisonment of at least between two and five years. The different language versions of the Framework Decision differ in their wording. The CJEU therefore interpreted the provision in light of its context and the objective it pursues. ### Minimum harmonisation does not restrict higher national penalties The Framework Decision is based on an EU competence to establish minimum harmonisation of criminal penalties. Its provisions therefore set minimum requirements. They do not prevent the Member States from prescribing a maximum term of imprisonment exceeding five years for the conduct covered. Nor does Article 3(1)(b) require the penalty for the agreement to be limited to the maximum penalty applicable to the intended offence. The Framework Decision itself recognises the possibility that the planned offence may be punishable by a maximum term of four years, while participation in the agreement is subject to a higher maximum penalty. The CJEU based this conclusion on the particular danger posed by organised criminal structures, the difficulty of detecting them and the serious consequences of their activities. A national provision may therefore prescribe both a maximum penalty exceeding five years and a maximum penalty higher than that applicable to the intended offence. ### Proportionality remains necessary Notwithstanding this discretion, the Member States must observe the principle of proportionality of penalties enshrined in Article 49(3) of the Charter of Fundamental Rights of the European Union. The severity of the penalty must correspond to the seriousness of the offence, have a genuinely deterrent effect and not go beyond what is necessary to achieve the legitimate penal objective. In the CJEU’s assessment, the sentencing ranges applicable in the main proceedings—five to 15 years for leading an organised criminal group and three to ten years for participating in such a group—do not, as such, exceed the limits of what is appropriate and necessary to combat organised crime. ## Significance for tax criminal proceedings with an EU dimension The judgment draws a clear distinction between delays in individual proceedings and structural deficiencies in a national limitation regime. An absolute period of 15 years does not infringe EU law merely because particular extensive proceedings may not be concluded by a final decision before it expires. Such a rule would be incompatible with EU law only if it systematically jeopardised the effective punishment of serious fraud affecting the Union’s finances. At the same time, the decision confirms the Member States’ discretion regarding penalties for organised crime. Maximum penalties may exceed five years and may be higher than the penalty applicable to the planned offence, provided that, in particular, the principle of proportionality is observed. Companies, investors and private individuals facing VAT issues or questions concerning the protection of the Union’s financial interests in connection with cross-border matters can obtain [tax law advice](https://www.mtrlegal.com/rechtsberatung/steuerrecht/) from MTR Legal.