ESBU completes investigation into UAH 25 million tax evasion by food retailer

 Detectives of the Territorial Office of the Economic Security Bureau of Ukraine in the Zakarpattia region have completed a pre-trial investigation in criminal proceedings against an organized crime group that evaded taxes on an especially large scale.

Earlier, notices of suspicion were served to the two founders of the company — one of whom serves as the director — as well as the company’s accountant and an executive director who is a practicing attorney.

The case involves a company engaged in the sale of fast-moving consumer goods. To reduce the amount of taxes owed to the state budget, the management utilized a so-called "business fragmentation" scheme.

Specifically, in 52 grocery stores of the chain, excisable goods (alcoholic beverages, tobacco products) were sold using the details of the company that holds the relevant retail licenses. The enterprise's income was taxed at corporate income tax rates of 18% and Value Added Tax rates of 20%.

Simultaneously, food products, beverages, and household goods were sold in the same stores using the details of nearly fifty individual entrepreneurs. In the vast majority of cases, these individuals are relatives of the company founders or rank-and-file employees of the chain; they operate under the simplified taxation system and pay only predetermined mandatory payments.

Through the involvement of these individual entrepreneurs, the store network generated profits exceeding UAH 100 million, thus evading the payment of income tax and VAT totaling over UAH 25 million.