Online retailer attempts to exploit Åland Islands' tax special status - Over 7 million euros under investigation for tax evasion

This operation is suspected to be aimed at avoiding the value-added tax (VAT) on sales. Until July 2021, the Åland Islands were allowed to sell goods with a value of up to 22 euros without charging VAT. However, according to the investigation, this was deemed taxable distance selling, and the tax should have been paid in Finland.

The investigation revealed that the goods were sold to customers as taxable, although the company had reported to Customs and the Tax Administration that it was tax-free sales from the Åland Islands. The company failed to pay approximately 2.6 million euros in VAT on sales to Finland.

The company had recorded the VAT incurred from taxable sales as a standard tax liability in its accounting but later changed it to revenue, instead of remitting the VAT collected from customers to the Tax Administration.

"Through this operation, they were suspected to be exploiting the special status of the Åland Islands regarding tax-free sales. Additionally, the company, acting as an agent on behalf of its customers in the Åland Islands, is suspected of providing false information to Customs about the customs value of the shipments, thereby also allegedly evading import VAT of approximately 177,000 euros. When a company acts as an agent, it handles customs declarations and tax payments on behalf of its customers when taxes become due based on the value of the shipment," explained Customs Senior Inspector Johanna Mickelsson.

The company is also suspected of making unjustified deductions of import VAT amounting to around 4.6 million euros. The tax was no longer deductible for the company since the products were already sold to customers before being imported to the Åland Islands. The tax deduction would have been possible if the company had a warehouse in the Åland Islands for sales, and the transportation to customers would have started from there.

Errors in Customer Return Customs Declarations

Customs has investigated a case of aggravated customs clearance fraud, where the company reported customer return goods to Customs at the Åland Islands' tax border, although the company directly transported the goods from mainland Finland to Sweden. Later, the company changed its operation, delivering the goods through the Åland Islands to Sweden, but still only reported them on the tax border lists. Even in these cases, export declarations should have been made when the goods were exported from the Åland Islands to Sweden. The goods that the company failed to report to Customs had a significant combined value of about 526,000 euros.

Customs suspects the responsible persons of the Finnish subsidiary of the Swedish group, and a person who acted in the name of an Åland Islands contractual partner, of aggravated tax fraud, aggravated accounting offense, and aggravated customs clearance fraud. The investigation will now be transferred to the Southern Finland prosecution district for consideration of charges.

Briefly on the Åland Islands' Special Status

• Åland Islands are within the EU customs territory but outside the EU VAT territory.
• Åland Islands belong to the EU special tax territories, separated from the EU VAT and excise duty areas by a so-called tax border. According to Finnish legislation, goods imported to the Åland Islands are subject to excise and VAT.
• Since July 2021, all goods passing through the Åland Islands have become fully taxable, regardless of their customs value.
• Shipments need to pay VAT.
• Shipments arriving in the Åland Islands are cleared almost similarly to shipments arriving from outside the EU to Finland.

HT