€310m VAT fraud ringleaders arrested in Belgium

€310m VAT fraud ringleaders arrested in Belgium

Apr 3, 2023

Belgian authorities have made a number of arrests in connection with a multimillion VAT fraud related to Chinese imports into the EU

Among the suspects arrested were two directors, an accountant and another employee of the Belgian companies under investigation.

The investigation is being led by the European Public Prosecutor’s Office (EPPO) and it is estimated that the VAT fraud, which was perpetrated over a three-year period from 2019 to 2022, resulted in at least €303m (£267m) in evaded VAT and €6.6m in custom duties.

The crimes under investigation include forgery, customs and VAT fraud, money laundering and participation in a criminal organisation.

Code-named ‘Silk Road’, the investigation centres around the role of Chinese exporters suspected of having put in place a complex system to evade the payment of VAT on imported goods, using three Belgian private customs agencies and a number of fake companies in several EU member states.

The Belgian companies acted as customs and VAT representatives of the Chinese exporters and declared that the goods entering through Liège Airport – electronic equipment, toys and accessories – were destined for other member states, in order to benefit from a VAT import exemption based on the EU’s Customs Procedure 42 (CP42). This allows VAT to be deferred from the import country to the member state where the product is ultimately sold.

They set up shell companies located in France, Germany, Hungary, Italy, Poland and Spain, using fake invoices and falsified transport documents.

However, the shell companies would not receive the goods, which were actually supplied to real companies established in other member states, or sold to final consumers via online marketplaces in several countries. ‘The purpose of these shell companies was to divert the attention of inspectors, creating a fake commercial chain and making it more difficult to carry out checks,’ the EPPO said.