Business splitting through FOPs: ESBU shuts down UAH 11 million tax evasion scheme in Odesa

 Detectives of the Territorial Office of the Economic Security Bureau of Ukraine in the Odesa region have exposed an entrepreneur who organized a tax evasion scheme by "splitting" a business into several FOPs (Individual Entrepreneurs). The suspect sold flowers through a network of retail and wholesale stores.

The pretrial investigation established that to hide actual income volumes and maintain the simplified taxation system, the organizer implemented a so-called "business splitting" scheme.

To achieve this, he formally registered relatives, acquaintances, and salespersons as individual entrepreneurs who did not actually conduct independent business activities. All management decisions were made by the organizer, and the business functioned as a single entity.

The operations utilized an office in the center of Odesa and a warehouse in an industrial zone. Flower products were sold through a network of stores in Odesa and Kyiv. In total, over 60 people were involved in the activities, some of whom were registered as FOPs.

Payments for the flowers were made without the use of cash registers (RRO), as well as in non-cash form by transferring funds to the accounts of more than 30 controlled FOPs. This mechanism allowed the suspect to conceal actual sales volumes and evade more than UAH 10 million in taxes.

During the searches, detectives seized accounting and tax records for over 30 controlled FOPs, employment record books, UAH 511,000 in cash, rough records, seals, and nearly 91,000 flowers. The total value of the seized assets exceeds UAH 10.5 million.

The organizer of the scheme has been notified of suspicion under Part 3 of Article 212 of the Criminal Code of Ukraine—intentional tax evasion. The indictment has been referred to court.

During the pretrial investigation, the enterprise repaid UAH 10.6 million to the budget. Additionally, another UAH 1 million was transferred to meet the needs of the Armed Forces of Ukraine.

The "business splitting" scheme has been liquidated. The individual entrepreneurship through which the activities were carried out has been dissolved. The entrepreneur has committed to registering a legal entity, operating within the Tax Code of Ukraine, and officially hiring employees.

Going forward, analysts from the Territorial Office of the ESBU will monitor tax revenues to prevent repeated tax evasion.

Operational support is provided by the Strategic Economic Protection Detective Department of the Territorial Office of the ESBU in the Odesa region. Procedural guidance is carried out by the Odesa Regional Prosecutor's Office.

It should be noted that, according to Article 62 of the Constitution of Ukraine, a person is presumed innocent of committing a crime and cannot be subjected to criminal punishment until their guilt is proven in accordance with the law and established by a court verdict.