Big business of “small” sole proprietors: a chain of stores was caught “splitting business”
9 April 2025 17:07
Detectives from the Bureau of Economic Security of Ukraine (BES) exposed a chain of grocery stores in Zakarpattia that sold goods through individual entrepreneurs. This was reported by the law enforcement agency, "Komersant Ukrainian" informs.
The company, which came to the attention of BES detectives, includes three well-known regional grocery store chains.
What law enforcement officers found
The company’s officials used the so-called “business splitting” scheme to reduce the tax burden. In particular, they sold goods worth UAH 288 million in the chain’s stores on behalf of more than 50 individual entrepreneurs. The vast majority of these individual entrepreneurs were relatives of the company’s founders or its ordinary employees.
The scale of the scheme can also be seen in the fact that an entire office closet was filled with colorful registrar folders.
Another interesting detail: in order to conceal the illegal activity and complicate the conduct of procedural actions, the organizers of the scheme located the company’s office at the place of registration of a local lawyer.
Due to the simplified taxation system for individual entrepreneurs, the supermarket chain underpaid income tax and VAT in particularly large amounts.
During the pre-trial investigation, the BES detectives found and seized keys with electronic digital signatures, bank cards, primary financial and business documents, seals of individual entrepreneurs, notarized powers of attorney in the name of the company’s employees, etc.
The BES does not specify the name of the company, but according to ZAXID.NET’s sources in law enforcement, it is the Zina, 1Minute and Kefir chain of stores, which has 50 stores in different districts of Zakarpattia.
Recently, the State Tax Service exposed two electronics chains for “business fragmentation”
At the time, Ruslan Kravchenko, the head of the State Tax Service, said that these two retail chains sell APPLE brand equipment and have more than 160 stores across the country. Their use of a criminal scheme led to VAT evasion of more than UAH 286 million.
During the inspections, the tax authorities discovered massive sales without the use of cash registers and the lack of records of goods and documents on the origin of the equipment.
At the same time, the State Tax Service informed the BES about the facts of artificial division of sales by these networks: legal entities engaged up to 300 related individual entrepreneurs on the simplified taxation system. At that time, 170 entrepreneurs involved in these manipulations had already been identified. Their total income amounted to UAH 1.72 billion.
The NBU recently explained to financial institutions how to detect such schemes
The National Bank of Ukraine has sent a special letter to banks, non-banking institutions and banking associations with recommendations on how to identify the mechanisms of the so-called “business fragmentation”.
According to the NBU, such schemes are usually characterized by certain features that indicate links between a legal entity and individual entrepreneurs. In particular, according to the NBU, such signs may include
– cases where one person submits a package of documents to a financial institution to establish business relations with a legal entity and individual entrepreneurs, including simultaneously
– common address of the location of the legal entity and the individual entrepreneur;
– joint place of sale of goods and services (address of a store, website);
– legal entity and/or individual entrepreneurs have common owners, representatives, accountants, trustees, etc;
– individual entrepreneurs usually do not have the necessary resources to conduct business, including business with a legal entity.
Other signs may also indicate the relationship between the legal entity and the individual entrepreneurs, in particular, the nature of transactions, including their volume, regularity and purpose.
“If the analysis establishes that the clients belong to the Group and there are grounds to believe that the business entity’s activities may be related to tax evasion, financial institutions should notify the State Financial Monitoring Service of such financial transactions and make a decision on further business relations, taking into account the identified risks,” the letter says.
The NBU also recommended that financial institutions improve their internal systems for preventing and combating money laundering and increase the efficiency of risk management.
