Italy: EPPO uncovers €8.8 million VAT fraud involving cleaning products and beverages

Venice: At the request of the European Public Prosecutor’s Office (EPPO) in Venice (Italy), two individuals were arrested today in Italy, on suspicion of orchestrating an €8.8 million VAT fraud involving the trade of cleaning products and alcoholic and non-alcoholic beverages.

The Italian Financial Police (Guardia di Finanza) of Verona also executed a freezing order, at the EPPO’s request, targeting bank accounts, real estate and other assets.

The judge for preliminary investigations of the Court of Verona has ordered the house arrest of the two suspects. They are suspected of VAT carousel fraud – a complex criminal scheme that takes advantage of EU rules on cross-border transactions between its Member States, as these are exempt from value-added tax – with estimated losses to the EU and national budgets of at least €8.8 million.

The investigation centres on two companies, active in the trade of cleaning products and alcoholic and non-alcoholic beverages, with headquarters in Verona.

According to the evidence, the suspects employed a variety of fraudulent tactics, including fake invoices for non-existent goods and fictitious transactions via legitimate Bulgarian, Croatian, Hungarian and Slovenian companies – which were managed by Italian nationals. It is understood that afterwards, these companies resold the same products to so-called missing traders in Italy – shell companies established for the sole purpose of evading the payment of VAT.

Based on the investigation, the cleaning products and beverages therefore appeared to pass through several countries outside Italy, when in fact, they were only ever distributed directly in Italy.

It is understood that the missing traders in Italy would vanish without fulfilling their tax obligations, while other companies in the fraudulent chain would subsequently claim VAT reimbursements from the national tax authorities. It is believed that this allowed the suspects to sell products at artificially low prices, undercutting legitimate competitors and resulting in VAT losses amounting to over €8.8 million.

All persons concerned are presumed to be innocent until proven guilty in the competent Italian courts of law.

The EPPO is the independent public prosecution office of the European Union. It is responsible for investigating, prosecuting and bringing to judgment crimes against the financial interests of the EU.