EPPO Expands VAT Fraud Probe as Cross-Border Car Scheme Causes €3.2m Tax Loss

The European Public Prosecutor’s Office (EPPO) has expanded its investigation into a large-scale VAT fraud scheme, resulting in arrests, searches and asset seizures across Germany, Poland and the Netherlands.

The latest developments in Operation Huracán, led by the EPPO office in Cologne, Germany, involved the arrest of two suspects linked to an alleged vehicle trading scheme that investigators say facilitated VAT evasion exceeding €3.2 million.

Authorities allege that the suspects acquired vehicles from individuals previously convicted in the investigation and resold them to car dealers in Germany and other European countries, including the Netherlands and Portugal. The vehicles were reportedly marketed as “margin cars”, allowing dealers to pay VAT only on the profit margin rather than the full value of the vehicles.

Investigators believe the arrangement was designed to exploit VAT rules and reduce tax liabilities unlawfully, resulting in losses to public revenues in the countries where the final sales occurred.

The enforcement action highlights the growing complexity of organised financial crime within cross-border trade and the challenges faced by authorities in detecting fraudulent tax structures involving multiple jurisdictions.

For compliance professionals, the case reinforces the importance of effective transaction monitoring, supply-chain due diligence and stronger cooperation between financial institutions, businesses and enforcement agencies.

As European regulators continue to intensify action against tax fraud and illicit financial networks, businesses operating across borders are under increasing pressure to strengthen controls around suspicious transactions, beneficial ownership and regulatory compliance.