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Intra-Community VAT fraud in the tyre sector worth more than ¤23.5 million uncovered

Combined operation of the Tax Agency and the National Police

  • 22 people have been arrested and 9 searches have been carried out at the homes of the main suspects and at several company headquarters in Spain.
  • They simulated a series of perfectly coordinated operations of purchase and sale of new tyres between companies in order to avoid paying the VAT due and obtain undue tax refunds through the use of 'carousel fraud'.
  • This fraud allowed the price of the goods to be lowered below the market price, concentrating the business of selling tyres to distributors by making it more difficult to compete with the prices generated.
  • Crimes against public finances, money laundering, forgery of documents and membership of a criminal organisation are being investigated, which were allegedly committed between 2017 and 2020.

June 15, 2022.- Tax Agency officials, in a joint operation with National Police agents, have dismantled three criminal organisations that acted in a coordinated manner in national territory, whose main objective consisted of defrauding the public treasury by creating a transnational corporate network that simulated a series of transactions involving the purchase and sale of new tyres between perfectly coordinated companies in order to avoid paying Value Added Tax (VAT) and obtain undue refunds from the AEAT through the use of 'carousel fraud'. A total of nine searches have been carried out at the homes of the main investigated persons and at several company headquarters in Spain.

The operation began in 2018, when the Regional Inspection Unit of Valencia in coordination with the National Fraud Investigation Office (ONIF) of the Tax Agency together with the Economic and Fiscal Crime Unit of the National Police (UDEF), detected the existence of an international business network whose objective was to defraud the public treasury on a large scale, through the creation of a transnational corporate network that simulated a series of operations of purchase and sale of tyres between companies perfectly coordinated to avoid paying the VAT due and obtain undue tax refunds through the use of 'carousel fraud'. Several EU countries were involved in this fraud, such as Italy, France and Portugal, where they acted in a coordinated manner to achieve the aforementioned fiction, thus avoiding the payment of taxes (VAT) generated by their activity.

VAT fraud in intra-Community transactions

At the beginning of this fraudulent chain were nine Portuguese companies which, making use of the transitional Value Added Tax (VAT) regime for intra-Community transactions, pretended to sell the marketed articles, in this case tyres, to companies located in Spain.

Once the articles were introduced into national territory, they were subject to a series of releases that allowed them to be made available to a group of companies which, after successive sales in Spain, failed to pay the output VAT (21%).This allowed the price of the goods to be lowered below the market price, monopolising the business of selling tyres to distributors, as no legal supplier can compete with the prices generated by deducting the percentage of fraud.

In turn, the aforementioned organisations carried out the criminal activity known as 'VAT carousel', which consists of carrying out fictitious exports using final distribution companies, related to the organisation, which request the refund of input VAT on sales made to companies linked to the organisation in the intra-Community sphere.The goods were brought back into Spain through sales made to the corporate network located in Spain, where the fraudulent activity began again.

In this way, on the one hand, the organisations directly enrich themselves through the collection of undue VAT refunds claimed from the tax authorities, generating huge profits for their coffers, which they use.And on the other hand, to purchase goods which they subsequently put into circulation in the tyre trade segment with discounts generated by the non-receipt of VAT dues which monopolise the market in their favour, damaging the free competition which should govern the market and eroding the economic fabric generated by the legal companies in the sector.

Products at unbeatable prices

This operation, in addition to obtaining large profit margins through the defrauded quotas, allowed them to put the product on sale at an unbeatable price, monopolising the market for these products at national level.

In this way, a fraud against the Public Treasury has been generated, which has been calculated by the Tax Agency at an estimated amount of more than 23.5 million euros, carried out by each of the Organisations identified in the tax years 2017, 2018, 2019 and 2020.

Numerous computers and abundant documentation of interest to the investigation, both on paper and computer, as well as cash, were seized in the searches carried out.

The operation, carried out in our country by the Central Court of Instruction number 3, Audiencia Nacional, has been carried out by agents of the Tax Fraud Section of the Economic and Fiscal Crime Unit of the National Police (UDEF) as well as by officials from the Regional Inspection Unit of Valencia, Andalusia, Castilla La Mancha, Extremadura and the ONIF of the AEAT.