Denmark - Fictitious Invoice Fraud Case Explained

There are many forms of VAT evasion and fraud. Contrary to some frauds being spread across multiple countries and jurisdictions involving several or even more individuals, other, even simpler schemes can significantly damage countries' budgets, making the impact of VAT evasion a matter of grave concern.

One of those cases occurred in Denmark, where VAT evasion was conducted using fictitious invoices.

Facts of the Case

The Danish Tax Agency diligently brought the case to the Eastern High Court. It involved a director and owner of a private limited company (Company X) accused of using fictitious invoices for almost two years. Invoices were issued to Company X  for, among other things, cleaning and kitchen services, but there was suspicion that these services were not provided to Company X.

Using those invoices, Company X provided incorrect information for tax audit during this period and managed to present that its VAT liability is around EUR 125,000 instead of EUR 203,000, thus inflicting significant damage of nearly EUR 78,000 on the state budget.

After conducting a thorough investigation, determining all the facts, and reviewing all the evidence, the District Court sentenced the Company X director and owner to 6 months probation with community service conditions. Additionally, it issued a fine of DKK 736,000 (around EUR 99,000) that the director and owner must pay. 

The director and owner appealed against this decision, but the Eastern High Court confirmed the District Court decision and reduced the fine to DKK 730,000 (around EUR 97,800).

Conclusion

Court decisions like this one are always interesting since they show how fraudsters try to carry out VAT fraud and avoid paying the due VAT, securing personal benefits for themselves at the expense of the state and other taxpayers.

In addition, such cases and decisions show that not all VAT frauds must be complex and elaborate and that VAT evasion can be achieved in many ways.

Source: Eastern High Court