A VAT carousel is a fraudulent construction in which at least three companies in a chain resell goods (or services) to each other with the intention of reclaiming VAT without paying it to the tax authority. The fraud can take different forms and often involves a complex setup with numerous companies in different countries. When discovered, the mala fide companies are often long gone, and the managing directors have disappeared. This type of fraud causes the tax authorities to lose money, as refunds are granted promptly and audits are relatively sporadic.
Source Billit
