Publication date: August 11, 2025
The term “carousel fraud” refers to a characteristic scheme in which goods, after passing through a series of related entities, ultimately end up back at the original supplier. This mechanism allows perpetrators to conceal the actual transaction and generate undue tax benefits, most often by fraudulently obtaining VAT refunds or avoiding their payment. A key feature of VAT is its neutrality, so it should not impose an additional burden on taxpayers who do not consume the purchased goods or services but use them for business purposes. However, the structure of this tax makes it particularly vulnerable to abuse. In accordance with the principle of the free movement of goods, the supply of goods between European Union (EU) countries is subject to a 0% VAT rate. VAT carousels involve the use of complex transaction mechanisms embedded in the value added tax structure to avoid paying output tax or to unlawfully obtain a refund. These activities take the form of fictitious economic transactions, which involve the apparent movement of goods between entities located in different Member States. This can be very high, especially with relatively small financial outlays by the fraudsters, as the fraud involves goods that are repeatedly exported and returned to Poland.
An example of a carousel fraud in the EU: Company A from Poland sells goods to the Netherlands. At this point, the VAT rate is 0%. A Dutch entrepreneur then sells the same goods to an Italian company. Ultimately, the goods are sold at a below-market price to Poland, applying a zero rate. These goods did not even have to be physically transported from Poland, so the transaction participants do not incur any transportation or storage costs. The entity required to declare and pay VAT fails to pay it and disappears before preventive measures are taken.
Carousel fraud is the most serious type of tax crime in the EU. A study on missing trader fraud estimated that at least €13 billion was lost to intra-EU VAT carousel fraud, based on previously detected product categories. The scale of this practice, the difficulty of detecting it, and the significant budget losses involved make combating carousel fraud a key challenge for Member State tax authorities and EU institutions. The criminals’ activities result in significant depletion of Member State budgets. A number of EU measures have been introduced to combat VAT carousel fraud. These include, among others, enhanced administrative cooperation between Member States, transparency provisions for payment service providers, and the proposal for a new digital real-time reporting system based on e-invoicing as part of the VAT in the Digital Age package.
Polish law does not specifically address tax carousels. However, such activities may constitute criminal and fiscal offenses. In terms of substantive law, the Penal Code and the Fiscal Penal Code are of key importance, while procedures are regulated by the Code of Criminal Procedure and the Fiscal Penal Code.
Substantive Law
Fiscal Penal Code
Tax fraud is defined in Article 56 of the Fiscal Penal Code. It is the taxpayer who self-assessed tax who submits a declaration containing a statement of actual expenses incurred and revenues earned and assesses the qualification of taxes as deductible. Behavior involving the dishonest performance of activities related to the self-assessment procedure is penalized. Accordingly, a taxpayer who, when submitting a declaration or statement to a tax authority, another authorized body, or a tax remitter, provides false information or conceals the truth, or fails to notify of a change in the data covered by the declaration, thereby exposing the taxpayer to tax depletion, is subject to a fine of up to 720 daily rates or imprisonment, or both (Article 56 §1 of the Fiscal Penal Code). It is not necessary to demonstrate that the perpetrator’s conduct resulted in a depletion of the state budget. It must be demonstrated that, in the circumstances of the specific case, there was a high probability of such a depletion. However, given that the obligation to file a tax return or declaration in most cases coincides temporally with the obligation to pay tax, in practice, Article 56 of the Fiscal Penal Code will be linked to the actual occurrence of tax depletion. To be considered a tax offender, there must be a causal link between their action and the risk of tax depletion, as well as a normative link, i.e., a legally binding attribution of responsibility for that action. An act constitutes a tax misdemeanor if its value does not exceed five times the minimum wage at the time of its commission—otherwise, it constitutes a tax offense (Article 53 §3 and Article 56 §3 of the Fiscal Penal Code). Therefore, Article 56 of the Fiscal Penal Code serves to ensure compliance with the obligations imposed by substantive tax law.
Moreover, Article 62 of the Fiscal Penal Code concerns violations of accounting procedures. As in the previous case, in cases of lesser gravity, the act constitutes a fiscal misdemeanor, while in other cases, it constitutes a fiscal crime. The penalty for this act depends on the nature and seriousness of the violation of obligations related to documenting the transaction. The issuer of a so-called “empty invoice,” as obligated to pay the tax indicated therein, always violates Article 62 § 2 of the Fiscal Penal Code, as the issuer of an inaccurate invoice, thereby undermining the tax obligation (Supreme Court judgment II KK 347/07).
Additionally, Article 76 of the Fiscal Penal Code describes the act of unjustified tax refund and the corresponding penalties. Anyone who provides false information or conceals the truth, misleading the tax authority and exposing it to an undue tax refund (including VAT), is subject to a fine of up to 720 daily rates, imprisonment, or both (Article 76 §1 of the Fiscal Penal Code). If the amount subject to an undue refund is insignificant, the perpetrator is subject to a fine of up to 720 daily rates (Article 75 §2 of the Fiscal Penal Code). In any case, when tax law regulations are used to obtain a specific benefit, and the benefit is provided based on these regulations by misleading the competent authority, a tax liability is violated (Supreme Court judgment II KK 347/07). Misrepresentation may occur through providing information that is inconsistent with the actual state of affairs or by concealing the actual state of affairs. In the first case, it matters whether the perpetrator provides unreliable data or, while presenting accurate data, incorrectly classifies it from the perspective of tax law provisions relevant to refunds – in both cases, this constitutes providing data inconsistent with the actual state of affairs. In the second case, concealment of the actual state of affairs occurs when the content of the declaration, statement, application, or other document does not include all the data relevant to establishing the existence and determining the amount of the VAT refund. If the amount does not exceed the statutory threshold, the perpetrator is liable for a tax offense and is subject to a fine for the offense (Article 75 §3 of the Fiscal Penal Code). Otherwise, the act qualifies as a tax offense.
Additionally, Article 33 of the Fiscal Penal Code provides for the forfeiture of financial benefits obtained from committing a fiscal offence. If it is impossible to impose the penal measure of forfeiture of the financial benefit, the penal measure of recovery of its monetary equivalent is imposed (Article 33 §1 of the Fiscal Penal Code).
Penal Code
Fraud (Article 286 of the Penal Code), which involves causing another person to dispose of property to an unfavorable extent by deception, misleading, or exploiting their inability to properly understand the action, is punishable by imprisonment for a term of six months to eight years. Unlike Article 76 of the Fiscal Penal Code, Article 286 of the Penal Code is universal in nature. However, the possibility of these provisions operating together refers precisely to a situation in which the perpetrator, acting for financial gain, allows the tax authority to pretend, using fictitious documents or other actions, that a basis for obtaining a tax refund of a public law liability exists, misleads the tax authority, and thus obtains a tax refund of a public law liability (undue VAT refund). The rules for excluding multiple assessments apply only in the event of a confluence of provisions; they do not apply in the event of a perfect confluence of prohibited acts (Supreme Court Judgment I KZP 19/12).
Article 270a of the Penal Code states that anyone who forges or alters invoices in order to use them as authentic is guilty of material invoice forgery, which carries a penalty of up to 8 or 20 years in prison (depending on the value of the invoices). Criminal liability is based on the mere act of forging or altering an invoice (or using such a forged or altered invoice) – regardless of the resulting reduction in tax liability.
Intellectual invoice forgery is enshrined in Article 271a of the Penal Code – issuing or using documents containing false information relevant to tax obligations. Depending on the scale of the offense, the penalty can range from a fine to up to 20 years in prison. Particularly severe sanctions are provided for the so-called VAT crime (Article 277a of the Penal Code), which covers the forgery of invoices with a total value exceeding ten times the amount of property of great value (PLN 10,000,000). The perpetrator faces a penalty of 5 to 15 years in prison, and in extreme cases, even 25 years. However, if the offense is deemed less serious, the maximum penalty is 5 years in prison. The harsh penalties stem from the fact that value added tax fraud, most often perpetrated by organized crime groups, exposes the state budget to losses of tens of billions of zlotys annually. In situations where the act meets the criteria of Article 271a or 277a of the Penal Code, criminal liability should be based exclusively on these provisions, to the exclusion of Article 62 § 2 of the Fiscal Penal Code, as they constitute lex specialis. In other cases, particularly concerning invoices of smaller value, it is appropriate to apply Article 62 § 2 of the Fiscal Penal Code, which, as a special provision, excludes liability under Articles 271 and 273 of the Penal Code. However, post-2013 case law allows for the simultaneous assignment of criminal and fiscal criminal liability for the same act (Judgment of the Supreme Court II KK 295/13). This means that in practice, cumulative qualification may occur, which is consistent with Article 8 of the Fiscal Penal Code. Pursuant to Article 277b of the Penal Code, in the case of perpetrators convicted of invoice forgery (270a, 271a, 277a of the Penal Code), a fine imposed in addition to a prison sentence may be imposed in the amount of up to 3,000 daily rates. The legislator considered severe sanctions to be an effective way to counteract, among other things, tax carousels, as the deterrent effect is important.
It should be emphasized that participation in an organized criminal group (Article 258 of the Penal Code) constitutes criminal liability for the mere fact of participating in a criminal structure aimed at committing tax crimes. The penalty can range from 6 months to 8 years’ imprisonment, and in the case of the group leader, from 2 to 15 years. Each entity involved in a VAT carousel fraud has a precisely defined role – no such operation can function without an organizer, a missing taxpayer (front), a buffer (intermediary), a broker, and a leading company. Article 258 of the Penal Code penalizes both those who collude in committing a crime and those who collude before committing it. Collusive behavior by multiple individuals prior to committing a crime also includes collaborating within multi-person organizational structures created for the purpose of committing a crime (including VAT carousel fraud).
Tax Carousels in EU Law
In the EU, tax policy falls within the competence of the Member States. However, because VAT carousels typically involve entities in more than one country, combating this type of crime is a shared responsibility of the Member States and the EU. Missing Trader Intra – Community (MTIC) fraud is regulated, among other things, by Directive (EU) 2017/1371, which establishes minimum standards for criminal offenses and sanctions aimed at protecting the EU’s financial interests. With respect to VAT revenue, this directive applies only to serious infringements of the common VAT system, i.e., when the crime covers the territory of at least two Member States and causes total losses of at least EUR 10 million.
Regulation (EU) 2018/1541, amending Regulation (EU) 904/2010 and Regulation (EU) 2017/2454, is important for improving VAT administrative cooperation in the EU. It provides Member States with additional tools to combat MTIC fraud more effectively, such as common risk analysis and improved information exchange between tax administrations.