Italy Probes Major €33.4M Clothing Import VAT Fraud Involving Front Directors

Italian authorities have placed two people under house arrest over an alleged €33.4 million (approx. $38.5 million) VAT carousel fraud involving clothing imported from China into the EU.

The order was requested by a preliminary investigations judge at the Court of Milan following a request from the European Public Prosecutor’s Office (EPPO) in Venice. The investigation is being conducted by the Venice Financial Police.

Investigators have identified a Chinese couple operating from Milan as the main suspects. Since 2019, the pair has allegedly exercised de facto control over several companies used to conceal the unlawful introduction of clothing into Italy and its subsequent domestic resale without payment of the VAT due.

The front companies were being managed in name by directors with no police records or assets. According to EPPO, these registered directors “played no effective role” in running the businesses and may not have known about the alleged offenses. These companies allegedly generated millions of euros in sales while collecting VAT on transactions and failing to transfer it to tax authorities.

EPPO has said the suspected scheme operated as a criminal organization under the couple’s direction. Although the court ordered assets equivalent to the alleged losses to be seized, investigators have found few funds or assets attributable to the suspects in Italy.