VAT fraud probe: Five arrested over €14 million mobile phone scam
European prosecutors allege millions in tax fraud tied to mobile phone imports from outside the EU.
European authorities have launched an investigation into a suspected value-added tax (VAT) fraud scheme worth an estimated 14 million euros ($14.72 million), targeting the trade of second-hand mobile phones imported from the United States and several other non-EU countries.
Law enforcement in Latvia and Czechia carried out searches as part of the investigation, led by the European Public Prosecutor’s Office (EPPO), resulting in five arrests, the EPPO said Tuesday.
Authorities believe the suspects fraudulently applied a reduced VAT rate to mobile phones imported from the U.S. and other non-EU countries by falsely claiming the devices originated within the EU. That misrepresentation allowed them to unlawfully benefit from the EU’s VAT margin scheme—a tax benefit intended only for goods already sold within the bloc.
Under EU law, resellers can apply the margin taxation scheme when selling second-hand goods purchased from private individuals in the EU or from sellers who have already paid VAT in full. In such cases, the reseller only pays VAT on the profit margin—the difference between the purchase price and the resale price—rather than on the full sale price of the item.
Investigators suspect the accused applied the scheme illegally, giving them a competitive advantage by allowing them to sell phones at lower prices than legitimate competitors.
During the searches in Latvia and Czechia, authorities seized assets worth approximately 2.5 million euros ($2.63 million), including luxury houses, cars, motorcycles, precious stones, designer handbags, and watches, the EPPO said. Officials also froze the suspects’ bank accounts and secured key documents and IT data.
The five suspects have been charged with tax fraud. If convicted, they could face prison sentences ranging from five to 10 years.
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