European VAT fraud with tentacles in Portugal dismantled

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17 people arrested in network that defrauded several states of 25 million euros.

A European Public Prosecutor’s Office investigation has dismantled a network responsible for a VAT fraud worth 25 million euros, detaining 17 people in a joint operation in eight countries, including Portugal, the European body said Wednesday.

According to the statement from the European Public Prosecutor’s Office (EPPO), the operation took place on Tuesday 21st, with 17 people arrested as part of “an extensive operation” against an alleged criminal network based in Spain, which “orchestrated a massive VAT fraud of 25 million euros through the sale of cell phones and other electronic equipment,” adding that one of the main suspects was arrested in Milan, Italy, as part of another EPPO investigation.

Operation “Marengo Rosso” was led by the EPPO Madrid office, 39 searches were conducted and people were arrested in the Czech Republic, Hungary, Italy, Luxembourg, Portugal, Poland, Slovakia and Spain.

“At issue is an alleged VAT carousel fraud, a complex criminal scheme that takes advantage of European legislation for cross-border transactions between member states as they are exempt from VAT,” explains the EPPO statement.

According to the investigation, the fraudulent scheme involved the use of “front companies in different countries, through which cell phones, tablets, computers and other electronic equipment were ostensibly traded, using fictitious invoices, with the aim of evading payment of VAT.”

“The chain of shell companies also allowed VAT refunds to be claimed from national tax authorities and to which the owners would not have been entitled, culminating in illegitimate profits of massive proportions. Finally, these goods were sold at very competitive prices through online platforms in several countries,” the EPPO note adds.

According to evidence gathered by the investigation, the illegitimate profits were then “laundered and reinvested in luxury real estate in different countries, including the Czech Republic, Italy, and Portugal.”

The statement from the European Public Prosecutor’s Office also says that one of the main suspects in the operation is also believed to be the ringleader in another investigation in Italy, in which the EPPO made six arrests and seized 40 million euros.

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