Criminal Lawyers in VAT & Carousel Fraud

The Value Added Tax (VAT) fraud in its criminal modality integrates the tax offence of Art. 305 CP, aggravated in qualified scenarios by Art. 305 bis CP. The protected legal interest is the State's collection capacity and, mediately, the financial interests of the European Union, since VAT is a harmonized tax under Directive 2006/112/EC and partially finances the community budget. The most serious modalities are channeled through missing trader intra-community fraud (MTIC), multi-million schemes exploiting VAT exemption in intra-community operations to generate fictitious deductions. Consolidated case-law of the Court of Justice of the European Union and the Spanish Supreme Court has established interpretative criteria on buyer responsibility in contaminated supply chains, built around the 'knew or should have known' standard.

The carousel fraud operates through sophisticated mechanisms requiring technical knowledge for understanding. A "missing trader" company (typically instrumental company in front men's names) acquires intra-community merchandise with VAT exemption, resells it internally with VAT charge, collects said VAT from the client, does not pay it to the Public Treasury and disappears. The chain continues with "buffer companies" adding layers to hinder traceability, and ends in a "broker company" requesting input-VAT refund or fully deducting it, generating effective damage to the treasury. The most used merchandise is that with high value-volume ratio (mobile telephony, computer components, scrap metal, alcoholic beverages, electrical energy, CO2 emission rights). The proper "carousel" occurs when the merchandise circulates again intra-community to restart the defrauding cycle. The European 'knew or should have known' doctrine allows charging the acquirer who "knew or should have known" of participation in the scheme, configuring a demanding diligence standard.

The penalties and consequences are particularly severe due to the usual economic magnitude of these schemes. The aggravated type of Art. 305 bis CP almost always applicable carries 2 to 6 years of prison and proportional fine from double to sixfold of defrauded quota, which typically prevents suspension for exceeding 2 years (Art. 80 CP). The corporate liability (Art. 31 bis CP) can be activated with devastating consequences: fine from the amount to fivefold of the quota, suspension of activities up to 5 years, closure of locales and establishments, prohibition to perform the activity in whose exercise the offence was committed, disqualification to obtain public subsidies, and even company dissolution in extreme scenarios. The European Public Prosecutor's Office (EPPO) jurisdiction operates from 2021 for cross-border schemes exceeding 10 million euros or involving two countries with damage above 10,000 euros, operating with own rules and transnational capacity. Civil liability is joint and several among all chain participants and can result in administrator's personal asset garnishment.

Technical defense is built on four axes. First, the accreditation of objective good faith through due diligence (KYC): the CJEU 'knew or should have known' doctrine requires that the buyer "knew or should have known" of fraud involvement; documentary provision of supplier verifications performed (notarial deeds, certificates of being current with AEAT and Social Security, active intra-community VAT number in VIES database, bank references, commercial seniority) dismantles the knowledge presumption. Second, the material operational reality of operations: provision of signed CMR consignment notes, delivery notes with warehouse stamps, transport insurance, vehicle geolocation, industrial weighings, merchandise photographs and customs records; when merchandise existed and actually moved, the absolute-simulation presumption fails. Third, the economic justification of prices: economic expert evidence placing purchase prices within industry market ranges, dismantling the "abnormally low prices" indication frequently used by AEAT as indirect proof of knowledge. Fourth, the differentiation of roles in the chain: rigorous analysis of the client's specific position in the chain, contrasting whether they acted as good-faith final acquirer, involuntary buffer or conscious broker.

In current forensic practice, VAT-fraud investigations have reached massive dimensions after the creation of the European Public Prosecutor's Office (EPPO), the National Office for Fraud Investigation (ONIF) of AEAT, and the Central Customs Surveillance Unit of Customs Surveillance. The VIES system (VAT Information Exchange System), the SII (Immediate Information Supply), model 349 of intra-community operations and automatic cross-checks with European databases allow detecting anomalous patterns in real time. Coordinated police operations with Europol, Eurojust and tax authorities of several Member States generate macro-cases with hundreds of simultaneous indicted persons. Directive 2017/1371/EU (PIF) on fraud to EU financial interests, Regulation (EU) 2017/1939 on EPPO, Act 11/2021 on tax-fraud prevention and Organic Law 1/2025 on Justice Service Efficiency configure the normative framework. At Alonso Sala, our criminal lawyers specialized in VAT fraud work with multidisciplinary teams of forensic economic experts, international tax law specialists, collaborating international lawyers in relevant jurisdictions and experts in logistics and merchandise traceability to build technical defenses proving the client's due diligence, demonstrating operational reality of operations, and rigorously differentiating the honest businessman from the conscious cooperator in the scheme.