ESBU exposes "business fragmentation" scheme in grocery chain of over 100 stores

 Detectives of the Territorial Office of the Economic Security Bureau of Ukraine in the Chernivtsi region are conducting a pretrial investigation into tax evasion through a "business fragmentation" scheme.

The scheme was organized by the owner of a grocery chain operating more than 100 stores across the Chernivtsi, Ternopil, and Khmelnytskyi regions.

The investigation established that an individual entrepreneur (FOP), acting with company officials and controlled FOPs, organized a tax avoidance system. Specific employees were involved in managing "shadow" accounting, paying salaries in envelopes, and ensuring that the income of the FOPs did not exceed legal limits.

The business operated by splitting a single entity into multiple second-group FOPs. Actual employees were registered as independent entrepreneurs rather than staff members. While they functioned as regular employees under a single owner, on paper, they appeared as separate businesses.

This allowed the company to avoid paying corporate income tax and VAT, which would have been mandatory under official business operations.

Following the intervention of ESBU detectives, the retail chain abandoned the "business fragmentation" scheme and transitioned to transparent operations. This shift has helped bring the business out of the shadow economy and ensured revenue for the state budget.

To date, the state has already recovered over UAH 10 million in damages, and efforts to ensure full repayment are ongoing.

The pretrial investigation is being conducted for tax evasion (Part 2, Article 212 of the Criminal Code of Ukraine). Operational support is provided by the SSU in the Chernivtsi region, with prosecution managed by the Chernivtsi Regional Prosecutor’s Office.