Spain Busts VAT Fraud Network, Detains 49 in Multi-Million Euro Scam
Spanish authorities have detained 49 suspects and seized documents, cars, and bank accounts as they dismantled a criminal organization believed to have exploited European Union regulations to defraud the budget of VAT worth 17 million euros (US$17.96 million).
The network sold and purchased high-end luxury vehicles through a complex system of fake companies to avoid paying VAT and provided services to other criminal syndicates associated with drug trafficking, often utilizing luxury sports cars.
Upon their arrival in Spain, the vehicles were sold to dealers but were also made available to other criminal organizations linked to drug trafficking through a "renting" scheme in which the vehicles were registered in the name of a company with a front man or used for transporting illicit narcotics.
The investigation began in 2021 when authorities detected three cases of fraudulent activities involving VAT spanning from 2019 to 2021.
Law enforcement soon uncovered that a criminal network in Spain was facilitating the purchase and sale of used luxury vehicles between German and Portuguese companies, utilizing complex systems to evade VAT payments.
They exploited the Special Regime for Used Goods—an European law that allows specific tax arrangements related to second-hand goods, works of art, collectors' items, and antiques, including vehicles—and took advantage of the European Union's regulations on cross-border transactions by creating fake companies and conducting what is known as Missing Trader Intra-Community (MTIC) fraud.
In this complex type of fraud, criminal syndicates abuse a law that allows VAT-free trading between countries. In simple cases, fraudsters sell goods, charge VAT to buyers, but do not pay the collected VAT to the tax authorities.
“By depriving EU Member States of tax revenue, the criminals are effectively robbing EU citizens of the means for governments to fund the provision of infrastructure such as schools and hospitals as well as vital public services. Fraudsters often use their profits to fund other forms of criminality, such as cigarette smuggling or drug trafficking,” Europol explained.
Law enforcement agencies conducted 14 targeted searches across multiple provinces in Spain, including Madrid, Badajoz, León, Navarra, Vizcaya, Granada, Cáceres, Almería, Teruel, Toledo, and Cantabria, and seized four high-end cars, crucial investigation-related documents, as well as 84 vehicles and 55 bank accounts, collectively holding over 500,000 euros (US$528,361).