Business Split Schemes Under Control: STS Analytics, New Risks, and Entrepreneur Liability in 2025

In the current realities of Ukrainian business, the issue of “business splitting” remains one of the most high-profile and painful not only for government agencies but for entrepreneurs of any size. Business splitting generally refers to the deliberate division of a large business into a number of smaller business entities (usually sole proprietors) with the main goal of tax avoidance, maintaining simplified tax status, reducing the tax burden, and minimizing inspections.

1. Increased Oversight and the State Tax Service’s Motivation
2024–2025 have seen a significant strengthening of the State Tax Service’s (STS) analytical tools aimed at detecting artificial business structures. The key motivation is simple: the budget loses hundreds of millions of hryvnias annually due to optimization schemes using dozens of sole proprietors, relatives, or affiliated persons. For example, just in recent months of 2025, the STS uncovered large-scale schemes in seven retail chains, with budget losses exceeding 668 million UAH solely in VAT.

2. The Nature of the Splitting Scheme
Structurally, business splitting involves creating a fictitious network of affiliated entrepreneurs who allegedly operate independently, but in fact have a common control center, use the same brands, IP addresses, cash registers, or even staff. Main features of such splitting:
· use of a single trademark or brand;
· a single place of business (sales points, warehouses, offices);
· identical or similar contact persons, founders, servicing banks, accountants;
· same IP addresses and equipment;
· regular coordination of financial flows;
· lack of own resources for business operations in each entity.

3. Detection Technologies: Big Data, Bank Monitoring, Analytics
The STS is increasingly using digital technologies and big data analysis to detect and prove splitting schemes.
· Big Data and transactional analytics: transactions between sole proprietors and legal entities—especially frequent and large ones—are automatically flagged for review;
· Bank monitoring: banks have received explicit NBU guidance on identifying suspicious activity—such as similar documents, shared ownership or representation among several sole proprietors, shared address, and common counterparties;
· Tax IT systems: matching IP addresses, analyzing logins to e-cabinets, digital identification of goods and cash flows;
· On-site audits: sudden inspections to identify mismatches between actual business operations and tax reporting.

4. Legal Aspects and the Line Between Optimization and Violation
It’s important to note: there is no separate offense titled “business splitting” in tax, administrative, or criminal law. However, tax and investigation bodies assess schemes for concrete violations:
· underreporting of taxes (simplified tax, VAT, profit tax);
· use of illegal labor;
· failure to submit required reports;
· exceeding the turnover limit for simplified taxpayers;
· fictitious deals between entities.

Criminal liability is possible if tax evasion exceeds 4.5 million UAH (Article 212 of the Criminal Code), which is realistic only for big business. Small entrepreneurs risk administrative responsibility, fines, additional tax assessments, and forced transfer to the general tax system.

5. STS Practice in 2025: Landmark Cases, Approaches, and Consequences
A notable case involved seven electronics and clothing retail chains that split operations among 491 sole proprietors. Through unified analysis of IP addresses, registration locations, sales points, and staff, control by a single legal entity was proven and the scheme recognized as artificial. Budget losses from VAT alone exceeded half a billion UAH.

Another area is restaurants: in large chains, payment of the simplified tax is often optimized by splitting activities among dozens of family or affiliated sole proprietors, thus bypassing limits. The STS tracks such schemes via digital analysis of turnover, bank data, staff, and operational assets.

6. Financial Monitoring and the Role of Banks
Since 2024, banks have begun more actively tracking signs of splitting, based on NBU instructions and clarifications. Indicators triggering deep analysis or account blocking include:
· one address for several sole proprietors or legal entities;
· incoming payments with no real economic activity;
· fast registration of several sole proprietors with identical business codes (KVEDs);
· lack of resources (equipment, premises, staff) in sole proprietors;
· mass operations with recurring counterparties.

This data is promptly passed to the STS and State Financial Monitoring Service, which triggers tax inspections.

7. How to Avoid Suspicion: Advice for Businesses
True cooperation is not a crime. The main thing is to avoid artificial structures for tax evasion or labor relationship masking, not to enter into fake transactions, to keep real accounts, and not to abuse proximity to limits.
· Formalize labor relations, don’t disguise personnel as sole proprietors;
· Properly execute all documents;
· Don’t create “turnkey” schemes only to minimize taxes;
· Follow NBU, STS guidance and positive court practice.

8. Conclusions
Approaches to controlling business splitting are becoming more sophisticated and automated each year. The STS and banks synchronize their systems and widely deploy Big Data and digital analysis to identify artificial structures. The main challenge for entrepreneurs is to work transparently, not abuse schemes, and promptly adapt business to new realities.

Business organically divided by ownership, activity, and control has a chance for protection, but any formal signs of “fictitious splitting” will almost certainly draw additional scrutiny, fines, and reputational damage. The cost of avoiding tax obligations can greatly exceed any hypothetical “bonuses” from business splitting in 2025.

Author: Maksym Bahniuk, Head of Tax and Customs Law Practice, Law Association “Legal Company WINNER”.