Five people have been arrested in connection with the European Public Prosecutor’s Office investigation into an £11.7 million VAT fraud involving the trade of second-hand mobile phones.
The arrested individuals have been charged with tax fraud. If convicted, they face five to 10 years in prison.
Authorities seized assets worth £2 million, including houses, cars, motorcycles, precious stones, luxury handbags, and watches. Bank accounts were frozen, and key IT data and documents were secured.
Czechia’s National Agency against Organized Crime (NCOZ) and Latvia’s Revenue Service Tax and Customs Police Department (VID) carried out searches in multiple locations. Three suspects were arrested in Latvia, and extradition proceedings to Czechia are ongoing. Another individual was taken into custody in Czechia.
Authorities believe the suspects fraudulently applied a reduced VAT rate to mobile phones imported from the USA and other non-EU countries by falsely declaring them as EU-origin goods. This allegedly allowed them to unlawfully benefit from the VAT margin scheme, which is only applicable to goods previously sold within the EU.
Under EU tax law, resellers can use the ‘margin taxation’ scheme when selling second-hand goods bought from private individuals or from sellers who have already paid full VAT. This scheme allows VAT to be applied only to the profit margin (the difference between the purchase and resale price) rather than the total sale price. However, investigators suspect the accused unlawfully used this provision, enabling them to sell mobile phones at lower market prices, creating unfair competition.
Evidence-gathering took place in Austria, Czechia, France, Germany, Italy, Latvia, and Slovakia under Article 31 of the EPPO Regulation, which facilitates faster cross-border investigations. This allows EPPO’s European Delegated Prosecutors to request specific investigative measures from their colleagues in other participating Member States more efficiently than through traditional judicial cooperation..
The EPPO is the independent public prosecution office of the European Union, responsible for investigating, prosecuting, and bringing to judgment crimes against the EU’s financial interests.
