German law enforcement authorities, at the request of the European Public Prosecutor’s Office (EPPO), conducted several searches this morning, 12 May 2022, in an investigation into missing trader VAT fraud with estimated tax loss damages of more than €40 million. The suspects are alleged to have participated in a VAT carousel fraud scheme organised throughout Europe, which had the aim of falsely claiming input tax deductions based on fictitious intra-community sales of luxury cars and medical face masks.
This morning, investigators from the Tax Offices for Investigation and Criminal Matters (Finanzamt für Fahndung und Strafsachen) in Berlin and Cottbus and the State Criminal Police Office (Landeskriminalamt) Berlin, entered 55 premises and houses of a group of suspects who used a network of dummy companies to trade in luxury cars (Lamborghini, Ferrari, Bentley, Porsche, Rolls-Royce…) and medical face masks. Two suspects were arrested and five cars, real estate, luxury watches, bank accounts, data and documents were seized. Searches are still ongoing at the time of publication. The payment of falsely claimed refunds in the amount of €12 million could be prevented.
Actual goods were traded in the system, but in simultaneous trading chains – one of which served as a virtual trading circuit for the exclusive purpose of falsely claiming VAT refunds. Invoice chains started in different countries of the European Union. Due to the tax exemption of intra-community supplies, the first trader in the virtual circuit issued net invoices to traders in Germany. The buyer then acted as a so-called ‘missing trader’, and failed to fulfil its obligation to declare the charge of VAT for the sale of the purchased goods to another German company. This other German company, however, claimed the refund of the VAT paid from the tax authorities, and exported the goods within a VAT-exempt intra-community sale to a fourth company, seated in another EU Member State. According to the plan, the goods were then resold to another participating German company, which again acted as a missing trader and could start another invoice cycle.
The estimated tax loss amounts to more than €40 million. To commit the offences, the suspects used a network of dummy companies, in which straw men were employed. The main suspects acted as factual managing directors by forging signatures. They were assisted by a notary and a tax advisor.
The measures taken today are part of a joint action day with the Prosecutor’s Office of Berlin, which is investigating other crimes that do not fall under the EPPO’s competence.