(Luxembourg, 7 February 2025) – In a VAT fraud probe led by the European Public Prosecutor’s Office (EPPO) in Cologne (Germany), tax and police investigators have carried out six searches, and have seized 40 luxury cars worth around €1.2 million, real estate and €40 000 in cash yesterday. One person was arrested.
The investigation, codenamed ´Dutch Windmill`, was initiated in September 2024, based on findings of an ongoing investigation into the sales of used vehicles by the EPPO office in Rotterdam (Netherlands).
The total fraudulent turnover of the group behind the scheme is estimated at over €30 million, and the estimated VAT damage amounts to at least €5.8 million.
VAT fraud with second hand cars
The evidence suggests that the managing director of a German car dealership sold used cars to Dutch car dealers, who allegedly manipulated VAT rules to reduce the tax due on vehicle sales. Instead of declaring that the German cars had been owned by a car dealer, the Dutch car dealers knowingly falsely declared that the cars had previously been owned and resold by private individuals.
Under VAT regulations, when a private individual sells a vehicle, VAT on the full price of the vehicle is no longer applicable, as the individual would have paid it when they first purchased the car (so-called margin tax system). Following from that, only the dealer’s profit margin is taxed and that is why the scheme is believed to have allowed the suspects to evade a considerable amount of VAT in the Netherlands.
The suspected fraud also allowed a higher profit margin for the sellers, as they acquired the vehicles at a lower cost and paid less tax, thus causing unfair competition.
Role of German suspect
According to the investigation, the German car dealer was aware of the misrepresentation of the transaction history of the vehicles and that the cars were in fact dealer-to-dealer transactions. As a result, his originally VAT-exempt intra-community supplies should be retrospectively subject to German VAT. He was arrested today.
The investigation counted on the support of the German tax investigation offices in Düsseldorf and Münster, and the Criminal Police Department in Münster.
All persons concerned are presumed innocent until proven guilty in the competent German 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.