A cross-border operation in Germany and the Netherlands uncovers a major VAT fraud scheme

The European Public Prosecutor’s Office (EPPO) conducted an operation in the Netherlands and Germany on November 7, targeting an alleged customs and VAT fraud ring involving Chinese nationals. EPPO reported on Wednesday that this group is suspected of evading taxes and customs duties amounting to more than 200 million euros.

EPPO is the independent public prosecutor’s office of the European Union. It is responsible for investigating, prosecuting and bringing to justice crimes targeting the financial interests of the European Union. For the operation last week, EPPO received special assistance from the Dutch financial crimes inspectorate FIOD.

Our ‘Masquerade Ball’ investigation uncovered a suspected criminal organization behind a massive customs and import VAT fraud. The group is believed to have set up a complex system to evade customs duties causing more than €200 million in damage.
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— European Public Prosecutor’s Office (EPPO) (@EUProsecutor) November 15, 2023

During the operation, more than 300 tax and customs investigators searched more than 200 locations, confiscating more than 450,000 euros in cash, two luxury cars, more than 80 smartphones, 30 hard drives, and numerous servers. Four suspects, believed to be the leaders of the scheme, have been arrested and are currently in custody.

The suspected organized crime group including Chinese nationals allegedly imported large quantities of textiles, footwear and electronics from China into the European Union, using false invoices to reduce the value of these goods, thus reducing the customs duties payable.

The group is also suspected of evading the payment of VAT by exploiting a loophole in the EU import mechanism that exempts VAT if goods imported from outside the EU are transported from one EU member state to another for final delivery. They allegedly did this by falsely claiming to ship goods between EU countries.

“It is understood that in order to carry out this type of scheme, the criminal group had to create an extensive network of intermediaries, mostly based in Germany, Belgium and the Netherlands,” EPPO stated. EPPO explained that these intermediaries supervised customs clearance and logistics within the European Union and acted as intermediary sellers.