A massive VAT fraud scheme has been uncovered in Cologne, Germany, as police, tax authorities, and the European Public Prosecutor’s Office (EPPO) raided six locations, arrested a main suspect, and seized various assets.
On February 7, 2025, as part of the “Dutch Windmill” operation, authorities targeted a car dealership director suspected of tax evasion through the abuse of intra-Community VAT refund regulations. This operation was initiated by the EPPO in September 2024 due to suspicious vehicle transactions between Germany and the Netherlands.
According to the EPPO, the suspect, a director of a used car dealership in Cologne, is accused of conducting luxury car sales to dealerships in the Netherlands and deliberately misrepresenting these transactions as “private sales” to benefit from the margin scheme for VAT taxation.
Illustrative image generated by AI.
The margin scheme is intended for private individuals selling used assets and is not applicable to businesses, making this practice illegal and resulting in significant losses for the state treasury.
The total estimated revenue from this fraudulent scheme amounts to over €30 million, with a minimum of €5.8 million in VAT evasion, as per EPPO estimates.
During the raids, authorities seized 40 luxury vehicles worth approximately €1.2 million, €40,000 in cash, and several properties linked to the suspect.
This operation is part of EPPO’s efforts to combat VAT fraud in intra-Community trade, especially in cross-border transactions. The case exemplifies the “carousel fraud” model, where companies issue fake invoices, use shell companies to circulate goods between EU countries, and ultimately legalize profits while evading taxes.
The “Dutch Windmill” operation is a joint effort between EPPO and German authorities, including the Düsseldorf and Münster Tax Offices and the North Rhine-Westphalia State Criminal Police. The investigation is expanding to other cities in Germany and the Netherlands to unravel the entire supply chain and identify all involved companies.
Car dealerships have been under scrutiny before, with EPPO prosecuting similar cases in Belgium, Austria, and Spain, resulting in total damages of hundreds of millions of euros.
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