Business splitting through individual entrepreneurs: the BEB is already adding VAT and corporate income tax

On 1 September, the Bureau of Economic Security of Ukraine (BEB) reported a new criminal proceeding involving a company that sells household appliances and electrical goods.

According to the investigation, during 2024–2025 the company processed part of its sales through controlled individual entrepreneurs who, in practice, did not carry out independent business activities.

Revenue was distributed among these individual entrepreneurs, which, according to the BEB, made it possible to conceal the actual volume of sales and reduce the amount of VAT payable.

However, there is another important aspect to this case.

The BEB analysed not only the use of individual entrepreneurs itself.

The investigation also found that bad debts owed to the company were not included in income. According to the Bureau, this led to an understatement of financial results and corporate income tax.

In addition, the BEB alleges that tax returns did not include data on part of the sales that had actually taken place.

As a result, according to the investigation’s calculations, the state budget received more than UAH 7.6 million less in VAT and corporate income tax.

The losses have already been fully reimbursed, and the criminal proceeding under Part 2 of Article 212 of the Criminal Code of Ukraine has been referred to court.

This sends an important signal to businesses.

Today, “business splitting” is no longer simply a matter of how many individual entrepreneurs operate alongside a company.

The BEB may analyse the entire business model:

• who actually manages the individual entrepreneurs;
• who owns the goods;
• who controls sales and personnel;
• where the revenue is received;
• how transactions are reflected in accounting records;
• how much VAT is actually paid;
• how corporate income tax is calculated;
• whether tax reporting corresponds to the actual scale of business activity.

Therefore, the mere presence of several individual entrepreneurs does not automatically mean unlawful business splitting.

The key question is whether these individual entrepreneurs are genuinely independent businesses or are effectively used as parts of one business to reduce the tax burden.

The risk is no longer limited to additional tax assessments.

As this case shows, the matter may develop into criminal proceedings under Article 212 of the Criminal Code of Ukraine.

Companies operating through a group of individual entrepreneurs should therefore review their business model now, before it is analysed by the State Tax Service or the BEB.

You can seek legal advice now, so that you do not later need legal defence services.

Would you like legal advice on the tax and criminal-law risks of your business model?

📞 Call: 096 574 81 02
📧 Email: info@uk-winner.com

Yevhenii Murchenko, Head of Criminal Law and Criminal Procedure Practice at WINNER Law Firm.