European authorities dismantle €15.7 million mobile phone VAT fraud scheme

The European Public Prosecutor’s Office (EPPO) has led a coordinated international operation against a cross-border VAT fraud scheme involving the online sale of new mobile phones. The investigation, which spanned Austria, Bulgaria, Cyprus, and Germany, targeted a scheme estimated to have defrauded authorities of approximately €15.7 million.

According to investigators, the criminal group utilized a specialized tax arrangement known as the VAT margin scheme. While intended for second-hand goods to prevent double taxation, the suspects allegedly applied this scheme to new mobile phones. By passing devices through a chain of companies controlled by the suspects, they created the appearance that the goods qualified for the margin scheme, allowing VAT to be calculated only on the profit margin rather than the full sales price.

Four individuals were arrested: three in Bulgaria and one in Germany. The primary organizers have been identified as a Bulgarian couple who controlled the companies involved in the supply chain. In response to the investigation, a court in Frankfurt issued asset freezing orders totaling approximately €20.5 million against two suspects and two companies. Seized items include bank accounts, mobile phones, and luxury watches. One involved company has already recovered €3.3 million.