Tax authorities suspect 10 "well-known" retail chains of business fragmentation

The State Tax Service suspected 10 retail chains of splitting up their businesses to minimize tax liabilities. Possible budget losses are estimated at UAH 1 billion, said State Tax Service on Tuesday.

"The State Tax Service has identified ten well-known retail chains that used the so-called business fragmentation schemes. These are retail chains that sell household appliances and electronics, clothing and footwear, and food. They involved more than 800 individual entrepreneurs in the scheme," the agency's website says.

It consisted of artificially dividing a large or medium-sized business into dozens or hundreds of individual entrepreneurs operating under the simplified taxation system. This allowed them to formally stay within the established income limits and avoid paying taxes in full.

After one sole proprietor reached the income limit for the respective group of single tax payers, another entrepreneur was introduced to the scheme. At the same time, the business continued to operate as a single network, with the same retail premises, staff, products, and brand.

The tax office transferred the collected facts to the Bureau of Economic Security for investigation.

• Fighting against business fragmentation is the stated goal of the establishment mandatory VAT for individual entrepreneurs with significant turnover, which is planned for 2027.