A Europe-wide fraud network operating in the second-hand car trade has been uncovered by the European Public Prosecutor’s Office (EPPO) and national authorities. The resulting losses amount to around 300 million euros. Investigations led to arrests, searches and seizures in Germany, the Netherlands and Poland.
How the fraud scheme worked
The case began in 2021 with a tip-off from the Italian tax authorities to the Federal Central Tax Office. The allegation was that those involved had provided incomplete information regarding the purchase and resale of vehicles imported from Germany to Italy. The Münster Tax Investigation Unit subsequently launched an investigation, which was later taken over by the EUStA in Cologne.
Essentially, the suspects abused the so-called ‘differential taxation’ scheme. This VAT procedure is actually intended for traders who purchase second-hand goods from private individuals and resell them. It provides that VAT is levied only on the trade margin – that is, the difference between the purchase price and the selling price – and not on the full value of the vehicle. This significantly reduces the tax burden and makes the system attractive to legitimate dealers. In this case, however, this scheme was deliberately exploited to evade VAT on final sales in other countries.
The suspects purchased vehicles from key figures in the network who had already been convicted, and then sold them as vehicles subject to margin taxation to car dealers in Germany, the Netherlands and Portugal. This part of the scheme alone resulted in a tax loss of more than 3.2 million euros.
Scope and findings of the investigation to date
The entire fraud scheme was active between 2017 and June 2023. The total loss is estimated at around 300 million euros. To date, assets worth around 15 million euros have been recovered. In the most recent operations, the authorities seized, amongst other things, luxury vehicles, high-end watches, cash, jewellery and property with a total value of over 2.5 million euros.
Since the investigation began, nine people have been convicted by a final judgement. The prison sentences ranged from two to seven years. In total, more than 70 people are suspected of having been involved in the fraud or of having actively supported the main perpetrators.
What retailers and tax advisers should learn from this
This case illustrates how vulnerable the margin scheme is to abuse and the extent to which tax authorities and public prosecutors cooperate across borders. For car dealers and other businesses that trade in second-hand goods and apply the margin scheme, this means that accurate documentation and careful scrutiny of the supply chain are not mere formalities, but a serious compliance issue.
Anyone who purchases and resells vehicles or other second-hand goods under this scheme should be able to provide a complete chain of evidence regarding the origin of the goods. If there are any doubts regarding the reliability of a supplier or their eligibility for the margin scheme, tax advice should be sought at an early stage. In cases of suspected irregularities, criminal tax law may also apply, which further emphasises the importance of careful documentation.
Source: North Rhine-Westphalia Tax Authority, press release dated 10 July 2026
Source: Haufe: Tax
This post and the accompanying image were created with the help of AI and have been editorially reviewed.
