The sales tax carousel is one of the best-known and most widely used models for organized tax evasion. According to estimates, the use of the carousels alone leaves the German Treasury between 5 and 14 billion euros per year. A sales tax carousel regularly leads to a particularly serious case of tax evasion according to § 370 (3) no. 5 AO. The district or district court can therefore impose a prison sentence of up to 10 years.
Principle 1: How does a VAT carousel work?
The “classic” sales tax carousel contains several business partners, some of whom act only for a sham. At least three entrepreneurs are necessary, but it can also be more. Not all parties involved have to be involved in the sales tax carousel, but even innocent entrepreneurs can accidentally get into the evasion model. The reason for this is that tax evaders make use of the deduction of input tax.
The procedure can be outlined in three steps:
This article does not replace tax or legal advice in an individual case. Facts, current law, jurisdiction, documentation and implementation remain decisive.