Chain fraud: Avoid being liable for scammers
Watch out for the risk of tax and VAT fraud in the supply chain. It can hit your business financially. Here are some tips.
How well do you know your suppliers?
This is an important issue to consider if you want to protect your company from inadvertently becoming involved in fraud committed by suppliers and/or subcontractors.
A typical form of fraud is called chain fraud. It occurs when a company contracts for services from a supplier who, through chains of subcontractors, front men and fictitious companies, deliberately and systematically cheats on taxes and VAT.
By creating fictitious invoices, the supplier hides who is actually performing and being paid for the work and thus has to pay tax and VAT.
VAT deductions, A-tax and AM contributions are in play
Chain fraud can have financial consequences for the companies that have been unwittingly exploited for the scams. They risk not being able to deduct VAT, and they may also be liable for the fraudsters' unpaid A-tax and AM contributions.
According to the Danish Tax Agency, large amounts of tax and VAT fraud are systematically committed every year.
How to avoid chain fraud
To avoid your business getting caught up in chain fraud, it's a good idea to check the following:
- Whether your suppliers are registered for VAT - search for Danish VAT numbers here.
- Whether your suppliers are registered as employers and thus pay A-tax and am-bidrag - find companies with employer registration here.
8 tips against chain fraud
Read more about the 8 tips and chain fraud at skat.dk.
1. Pay attention to whether the supplier frequently changes account number, name or company registration number.
2. Is the supplier's price significantly lower than the competition?
3. Check that the invoice meets legal requirements and pay digitally.
4. Check that your supplier is registered for VAT.
5. Ask for supplier and employee identification.
6. Set requirements if the purchased service is outsourced.
7. Check the conditions at the supplier yourself.
8. Be aware of special rules if you use foreign suppliers.
More information
If you need advice or assistance with chain fraud, feel free to contact us.
