Newsroom, VAT | 20. January 2023

EPPO: Italian tax police freezes €10m in tax evasion probe

On 11 January 2023, the Italian Financial Police (Guardia di Finanza) executed a freezing order of assets for a value of over €10 million as part of an investigation into tax evasion by the European Public Prosecutor’s Office (EPPO). The investigation began in 2019 after a tax audit of a company located in the Lecco-Brianza area. by

The investigation revealed that the company, the tax representative for VAT purposes of a legal entity under Dutch law, with its registered office in Amsterdam, had its actual headquarters in the Lecco area rather than in the Netherlands. The company is suspected of using an international tax evasion mechanism known as ‘tax inversion’.

According to the investigation, the Brianza-based company marketed its products within the Italian territory while fraudulently pretending that the goods were destined for other EU Member States and, therefore, exempt from VAT, abusing the fictitious foreign seat of the company.

Dutch Sandwich Scheme

Furthermore, it is believed that the company, ostensibly based in the Netherlands, created a complex corporate system by which it was controlled by a holding company registered in the Netherlands Antilles (under a preferential tax regime) and, in turn, by another company, also apparently based in the Netherlands – a scheme known as a ‘Dutch sandwich’, a form of tax evasion technique that involves using parent companies in different countries to shift profits to tax havens.

The company’s managers, both of Italian nationality, are under investigation for VAT fraud from 2013 to 2018. The investigation established an effective turnover in Italy of approximately €50 million and unpaid VAT of over €10 million. The execution of the searches, seizure, and freezing of assets is still ongoing. All persons concerned are presumed innocent until proven guilty in the competent Italian law courts.