Artificial business fragmentation via individual entrepreneurs: over UAH 60 million already returned to the budget

 In the Lviv region, over UAH 60 million in unpaid taxes was returned to the state budget. The business-splitting scheme was organized by the director of an electronics store chain. She distributed the activities of a single company among controlled individual entrepreneurs, concealed over UAH 361.6 million in income, and evaded more than UAH 60 million in taxes. The illegal activity was documented by the Territorial Office of the ESBU in the Lviv region.

The investigation established that the suspect managed a retail company specializing in electronic appliances, telecommunications equipment, and accessories. To reduce the tax burden, she organized an artificial scheme for business fragmentation.

To implement the scheme, the director involved controlled physical persons-entrepreneurs. Among them were both already registered entrepreneurs, as well as acquaintances and employees of the retail chain, whom she convinced to register as individual entrepreneurs.

Funds from the sale of goods were deposited into the bank accounts of these entrepreneurs and reflected in their tax reporting as personal income. At the same time, the actual sale of appliances, equipment, and accessories was carried out by a single retail chain under the management of the company.

In this manner, the company's business activities were artificially distributed among controlled individual entrepreneurs, which made it possible to conceal income totaling over UAH 361.6 million and evade over UAH 60 million in taxes.

More than UAH 60 million has already been returned to the state budget in full. Most of the individual entrepreneurs involved in the scheme have ceased operations, while the rest are in the process of closing down. Additionally, the company voluntarily transferred UAH 2 million out of UAH 5 million for the needs of the Armed Forces of Ukraine—the remaining funds will be paid in the near future.

The actions of the official have been qualified under Part 3 of Article 212 of the Criminal Code of Ukraine (intentional tax evasion on an especially large scale). The relevant materials have been forwarded to the court with a petition to release the suspect from criminal liability due to the full reimbursement of the damage caused to the state. This is only the first part of the work—the investigation into other aspects of the retail chain's activities is ongoing.

As the Director of the ESBU, Oleksandr Tsyvinskyi, emphasized on his Telegram channel, the ESBU is not fighting against individual entrepreneurs:
“An individual entrepreneur is a normal tool for small business. We react when individual entrepreneurs are used not to run one's own business, but to allow big business to pay fewer taxes to the budget and gain an advantage over those who work honestly,” noted Oleksandr Tsyvinskyi.

Business splitting only seems like ordinary optimization at first glance. In reality, due to such schemes, the state budget loses significant funds, and the companies that employ them gain an unfair advantage over conscientious businesses that operate transparently and pay taxes in full. Uncovering such schemes and returning funds to the budget ensures a level playing field for all market participants.

The prosecution was supervised by the prosecutors of the Lviv Regional Prosecutor's Office.