EPPO arrests seven in €48m EU-wide VAT fraud probe

EPPO arrests seven in €48m EU-wide VAT fraud probe

At the request of the European Public Prosecutor’s Office (EPPO) in Munich, seven suspects have been arrested in connection with a €48 million VAT fraud scheme.

Over 100 coordinated searches were carried out across seven European countries, targeting an organised network accused of exploiting tax loopholes in the trade of small electronic goods.

Europe-wide operation targets cross-border VAT fraud

The investigation, code-named “Mela,” spans Czechia, Germany, Hungary, Ireland, Italy, the Netherlands, Romania, Spain, and the United Kingdom. More than 300 police and tax officers participated in the raids, seizing documents, electronic devices, and luxury items – including cash, cars, watches, jewellery, and gold worth €4 million, according to the EPPO.

Authorities allege that the suspects ran shell companies across multiple EU states and the UK to fraudulently apply a reduced VAT “margin taxation” scheme. This mechanism, intended for reselling used goods, was allegedly abused to sell new electronic products “on paper,” enabling the group to avoid paying VAT on full sale prices.

How the €48 million fraud scheme worked

Under normal VAT rules, sellers must pay tax on the total value of goods sold. However, under margin taxation, VAT is paid only on the profit margin – the difference between the buying and selling price.

Investigators believe the suspects pretended new goods were second-hand, allowing them to undercut legitimate traders and defraud EU tax authorities of €48 million since 2018.

Evidence-gathering and asset-freezing operations were conducted in Austria, Belgium, Czechia, Germany, Hungary, Ireland, Italy, Lithuania, Luxembourg, the Netherlands, Romania, Spain, and the UK.

The seven suspects were arrested in Germany, Spain, and the Netherlands. Europol established a Virtual Command Post in Nuremberg to coordinate real-time communication and verification between national agencies.

Key agencies involved

• Europol – coordination and data analysis
• Germany – Criminal Police Inspectorate of Lower Franconia, Bavarian Special Operations Unit, and multiple tax offices
• Spain – Guardia Civil
• Italy – Guardia di Finanza
• Romania – Directorate for Combating Organised Crime
• Czechia – National Organised Crime Agency (NCOZ)

All suspects remain innocent until proven guilty before German courts.

VAT fraud schemes of this scale distort market competition, affecting legitimate retailers across Europe – including small businesses run by British and EU expats. Such operations also contribute to higher prices and reduced tax revenue for public services.

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