At the request of the European Public Prosecutor’s Office (EPPO) in Madrid (Spain), 13 searches were conducted and 24 people were arrested this week, in a probe into a €25 million VAT fraud orchestrated by an organized crime group with a reach extending to Latin America, Report informs referring to the EPPO website.

The searches were carried out on November 21 in the Spanish cities of Madrid, Guadalajara and Cádiz, and involved Spain’s National Police (Policía Nacional), the Spanish Customs Office (Vigilancia Aduanera) and the Fraud Investigation Office of the Spanish Tax Agency (ONIF).

As a result, a large number of documents, electronic devices, IT equipment, high-value items, vehicles and €135 000 in cash were seized. Bank accounts have been frozen in Spain, as well as in Belgium, Lithuania and Romania. Real estate properties have also been seized all over Spain. Seizure orders and other investigation measures have also been issued In Latin America.

This complex investigation, which was carried out over a period of two years, has revealed a suspected VAT fraud involving the trade of IT equipment, with estimated losses to the EU and national budgets of more than €25 million.

It is understood that, between 2021 and 2023, the suspects under investigation created a structure, using a maze of companies based in Spain, in other EU Member States and in Latin America, in order to funnel intra-community acquisitions into the suspects’ primary company, which acted as the distribution point. The fraudulent scheme took advantage of EU rules on cross-border transactions between its Member States, as these are exempt from value-added tax, by using a chain of missing traders, which would vanish without fulfilling their tax obligations. Other companies in the fraudulent chain would subsequently claim undue VAT reimbursements from the national tax authorities.

Since no VAT was paid on the goods at any stage of their commercialization, the main company was able to distribute them at prices well below their market price, placing it in a highly privileged position and boosting its sales, while ousting its competitors from the market.

According to the investigation, the corporate structure, which was officially managed by straw men, channeled large sums of illicit profits into the acquisition of real estate. The evidence also shows that the suspects used structures and security measures specific to organized crime groups, including electronic communication applications used to prevent detection by the police.