VAT Compliance
The sector is not the problem. The evidence position is.
Many in the metals and scrap trade consider themselves “carousel-proof”: for scrap and waste metals, and for many metals besides, the German reverse charge makes the customer liable for the VAT anyway. That comfort is half right — and half dangerous. The legislator extended the reverse charge to this sector precisely because it was classified as fraud-prone. The enforcement grid remains in place. This does not put the trade under blanket suspicion: sector risk creates grounds for scrutiny, not guilt. But anyone who believes Section 13b UStG replaces their own evidence architecture is underestimating three open flanks.
Why this sector is under scrutiny
The record of the European Public Prosecutor’s Office (EPPO) begins — remarkably — right here:
- The Munich precious-metals complex (EPPO Munich, from November 2021): one of the first major German EPPO cases of all — cross-border VAT fraud involving precious metals and platinum coins across Germany, Czechia, Romania and Slovakia; damage of €26 million and €23 million depending on the strand, six arrests, €23 million seized. Fast convictions followed at Munich Regional Court I (from April 2022, with €20.5 million confiscated), a Slovak parallel case against six individuals and two companies (November 2024), and a further conviction on 6 June 2025.
- The EPPO’s first large-scale VAT action (4 August 2021, EPPO Munich): searches in five countries (Germany, the Netherlands, Slovakia, Bulgaria, Hungary) over more than €14 million — proof that cross-border wholesale of any goods category can enter the grid.
- Operation Metallo (from 6 October 2025): beware of the name — despite “Metallo”, this is a vehicle case (over 1,700 cars from Germany to Italy, €42.8 million). It is instructive for metals traders nonetheless: operation names say nothing about sectors — and enforcement grids move to wherever paper chains are brittle.
For scale: at the end of 2025 the EPPO reported 981 ongoing VAT and customs fraud investigations with around €45 billion in estimated damage. The Munich complex shows the mechanics that expose the metals trade: high-value, fungible goods, fast chains, international legs — the same logic as electronics, only in tonnes instead of boxes.
The typical constellations
The cross-border flank. Section 13b UStG operates domestically only. The chains at issue in carousel cases run through zero-rated intra-Community supplies and acquisitions — the Munich complex spanned four countries. Exporters and importers therefore carry the classic Kittel exposure despite the reverse charge: denial of the exemption or of input VAT under Section 25f UStG where knowledge or constructive knowledge is alleged.
The displacement move. Fraud models look for goods outside the reverse-charge annexes. Coins and collectors’ items regularly fall outside Annex 3 and Annex 4 — the Munich complex worked with platinum coins. A metals trader suddenly offered coin or bar deals from unknown foreign chains is not looking at a niche opportunity but at a warning sign that belongs on the record.
The classification trap. Annex 3 (waste and scrap), Annex 4 (metals, with the €5,000 threshold), plus special rules for gold: classifying mixed scrap, alloys and semi-finished products is error-prone. Misclassification creates your own tax liability, Section 14c exposure for incorrect VAT statements and input VAT disputes — with no fraud allegation involved at all.
The buffer position in drop-shipments. Between yard, intermediary and smelter, goods often travel directly. A trader who never touches the goods carries the full burden of proof on the paper trail: weighbridge tickets, origin, transport.
Your red flags
- Purchase prices noticeably above or below market and exchange quotations — with no documentable reason
- Suppliers with no recognisable operation: no yard, no weighbridge, no history, yet large tonnages
- Changing invoice issuers with identical loads and identical contacts
- Identical goods invoiced sometimes with VAT, sometimes net under Section 13b
- Coin, bar or precious-metal offers from unknown foreign chains (the platinum-coin pattern)
- Missing or contradictory weighbridge, origin and transport records
- Unusual requests for cash or third-party payments
What affected businesses should do now
If an investigation reaches your supply chain, the buffer perspective applies: you do not have to explain the carousel — you must show your diligence. Secure, per transaction, the weighbridge ticket, origin and transport documentation, the VAT classification (Annex 3/4, threshold, invoicing) and the payment route; organise the audit trail before you explain anything; involve the defence early at the first Section 25f or liability signal. The standard comes from supplier due diligence with the red-flag catalogue, a first orientation from the missing trader quick check, the evidence structure from Proof of Check. How the reverse-charge paradox works across sectors is set out on the electronics sector page.
FAQ
Almost all our sales run through Section 13b anyway — can a carousel allegation even reach us?
Yes. First, the reverse charge operates domestically only; cross-border chains run through zero-rated supplies and acquisitions. Second, Section 25f UStG attaches to involvement in a fraud-affected chain — not to whether your individual transaction triggered VAT. Third, fraud models shift to goods outside the annexes, as the platinum-coin complex shows.
Our supplier invoices identical goods sometimes with VAT, sometimes net under Section 13b — what should we do?
Stop and clarify, on the record. Classification under Annex 3/4 is a question of law, not a matter of choice. Alternating invoicing signals either disorder or intent — and creates Section 14c and input VAT exposure for you. A documented clarification protects twice: on the tax itself, and as evidence of your diligence.
What do investigators typically examine first in the metals and scrap trade?
Recurring patterns: weighbridge and origin records against the invoice chain, price distance to quotations, supplier rotation, payment routes, and the treatment of borderline cases between Annex 3, Annex 4 and standard taxation. Your own check architecture should address and document exactly these points in advance.
Let us talk about your supply chain — a free 15-minute consultation: You describe. We assess. You know where you stand. → Confidential first assessment
Start the missing trader quick check — eight questions, traffic-light result, evaluated in your browser only. → Quick check
Acutely affected?
Unannounced inspection, dawn raid or Section 25f assessment: emergency — the first 72 hours or call the emergency line directly.