Since intra-Community transactions are zero-rated, such transactions can give rise
to VAT evasion either in the supplier country (because the supplier, after having declared an
intra-Community delivery, retains goods for sale in the domestic market without VAT) or in
the country of destination (because the recipient fails to pay VAT due on arrival) or by
operating the so-called missing trader fraud.
Furthermore, the invoicing mechanism of the VAT system is open to abuse through falsified
invoices. In addition, the time delays between invoicing and VAT returns involved in the
process any paying invoices means it is far more difficult to identify and chase fraudulent
behaviour, and gives time for fraudulent traders to “disappear”.
Missing trader fraud
Missing trader fraud (also known as Carousel fraud) often extends over several Member
States and involves numerous companies.