An organised route used to import second-hand vehicles from the United Kingdom through the Netherlands and Bulgaria has come under scrutiny by the Customs Department.
Through this method, vehicles are allegedly declared at values significantly below their true worth, acquire EU status and are subsequently imported into Cyprus.
The Customs Department has examined more than 1,000 vehicles, while lost customs duties and taxes are estimated to amount to millions of euros. In dozens of cases, and possibly more than a hundred, investigators identified forged or altered documents relating to the payment of customs duties.
Speaking to Politis, Customs Department spokesperson Georgios Constantinou, a senior customs officer, said the declared values of some vehicles were strikingly low.
"We are talking about prices for which you could not even buy a bicycle," he said, explaining that luxury saloons and SUVs were being declared at as little as one-fifth or even one-twentieth of their actual value.
The route used to 'convert' vehicles into EU imports
The scheme primarily involves second-hand vehicles purchased in the United Kingdom.
Instead of being shipped directly to Cyprus, where the relevant customs duties and taxes would be payable, the vehicles are first routed through another European Union member state.
According to Mr Constantinou, many vehicles initially arrive in the Netherlands, where they are cleared through customs based on the exceptionally low values declared in electronic systems.
They are then transported by road to Bulgaria, registered there and issued with EU documentation before being sent to Cyprus as vehicles originating from an EU member state.
Once a vehicle has been customs-cleared in the Netherlands or Bulgaria, it cannot be cleared through customs a second time in Cyprus.
This constitutes the main challenge facing the authorities, as the undervaluation and tax evasion appear to occur in the first EU country through which the vehicle enters the bloc.
Responses received from other countries typically state that the declared values were accepted electronically and that customs duties were assessed on that basis.
Possible circumvention of the five-year rule
The case extends beyond simple undervaluation.
The Customs Department is also examining whether routing vehicles through other EU member states is being used to circumvent Cypriot legislation, which does not permit the import of second-hand vehicles older than five years from third countries.
By being registered in Bulgaria, the vehicles are presented as EU vehicles rather than as direct imports from the United Kingdom.
According to investigators, this may allow the relevant provision to be bypassed. Oversight of this issue falls primarily under the responsibility of the Road Transport Department.
Mr Constantinou said this aspect is being examined in parallel because it is linked to the same import route.
Forged documents and penalties
Of the more than 1,000 vehicles examined, investigators found unusually low declared values in almost every case.
In several dozen instances, checks indicated that forged or altered documents had been presented to create the impression that customs duties had already been paid in another member state.
Where it was established that no lawful customs clearance had taken place, the department imposed substantial penalties and demanded payment of customs duties and taxes based on the vehicles' true value.
Investigators have not identified evidence of odometer tampering.
Instead, the inquiry is focusing on actual vehicle values, certificates of origin and customs-clearance documentation.
At the same time, British authorities are being asked to verify the true sale prices through invoices issued by the companies involved.
Investigation at European level
The department is cooperating with authorities in the Netherlands and Bulgaria and has placed the evidence before the relevant European institutions.
The European Public Prosecutor's Office (EPPO) and OLAF, the EU's anti-fraud office, are expected to become involved in examining whether an organised network operating across multiple countries is behind the scheme.
The department says it is ready to provide all available evidence.
The involvement of Cypriot vehicle import businesses has not been ruled out, although no specific individuals or companies have been linked to the alleged activities at this stage.
Unfair competition concerns
The practice is said to create not only a loss of tax revenue but also conditions of unfair competition.
Importers who avoid paying thousands of euros in duties and taxes are able to sell vehicles at significantly lower prices than businesses operating legally.
"When someone avoids thousands of euros in customs duties and taxes, they can sell a vehicle much more cheaply. In this way, trade is distorted," Mr Constantinou said.
The investigations are also delaying the release of vehicles for two to three months while authorities await responses from the relevant agencies.
Despite the inspections, the flow of vehicles continues daily.
The United Kingdom is expected to remain a major source of second-hand vehicles for Cyprus, with the Customs Department stressing that the key issue is the declaration of the vehicle's true value and the full payment of all duties and taxes.
Customs investigations are continuing as new vehicles arrive in Cyprus every day.
