At the request of the European Public Prosecutor’s Office in Munich, authorities executed more than 100 searches and arrested seven suspects as part of a cross-border probe into organised VAT fraud involving small electronic goods. The alleged scheme is said to have deprived EU tax authorities of about € 48 million.
How the scheme allegedly worked
Investigators say shell companies based in several EU Member States and the United Kingdom applied a reduced taxation method known as margin taxation to new devices sold as if they were resold goods. Under the margin system VAT is chargeable only on the reseller’s profit margin and not on the full sale price. In this case authorities believe new products were recorded on paper as resold, allowing traders to sell at artificially low prices and avoid VAT that would otherwise be due.
Recently, SecondaryMarket.news questioned a major German marketplace about how brand-new Apple iPhone 17 devices could be sold, by merchants, under the margin VAT scheme. The marketplace’s legal team responded that such a practice was legally permissible. SecondaryMarket.news expressed serious doubt about that explanation but received no further clarification. The enforcement action mentioned above may have now brought this practice to a halt.
Scope and scale of the action
The operation, code-named Mela, involved actions in Czechia, Germany, Hungary, Ireland, Italy, the Netherlands, Romania, Spain and the United Kingdom. More than 300 tax investigators and police officers took part in the field work, seizing documents, electronic devices and other evidence. Cash, mobile phones, jewellery, cars, watches and gold with a reported value of about € 4 million were also seized.
Coordination and crosschecks
Europol supported the operation by establishing a Virtual Command Post to coordinate field teams. A Europol specialist deployed to Nuremberg used a mobile office to conduct crosschecks and manage communications between the various national teams. Such coordination is increasingly central to investigations that span many jurisdictions and legal frameworks.
Legal and market implications
If proven, the alleged misuse of margin taxation for new devices distorts competition by enabling lower retail prices and creates an uneven playing field for legitimate resellers. The EPPO emphasises that all persons are presumed innocent until proven guilty before competent German courts of law. The incident underlines the vulnerability of some cross-border tax arrangements to abuse and the need for stronger verification of the provenance of goods in intra-EU trade.
What secondary market actors should watch
Companies in trade, repair, refurbishment and resale should review compliance processes that verify whether goods are genuinely resold and whether VAT treatments are appropriate. Examples involving new devices such as Apple iPhone models demonstrate how high-volume retail items can attract attention where margins and VAT treatments diverge from expected practice.
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