A chain of second-hand shops has reimbursed the state budget more than 51.5 million hryvnias in unpaid value-added tax. According to the investigation, goods were sold through affiliated businesses in order to reduce tax liabilities. Once the losses had been recouped, prosecutors filed a motion with the court to exempt those responsible from criminal liability, the Office of the Prosecutor General announced on 19 October.
Briefly about the main points
- Sales were recorded in the names of entrepreneurs under their control, using the simplified tax system.
- The investigation points to centralised management of retail outlets and funds.
- The losses arising from unpaid tax were fully recouped by the budget.
- The Public Prosecutor’s Office is requesting that those responsible be exempted from criminal liability.
- The court must rule on the application.
The investigation believes that sales were artificially divided amongst business owners
According to prosecutor's offices, between 2023 and 2025, officials from the network organised the sale of second-hand clothing, footwear and other goods through sole traders operating under the simplified taxation system. On paper, the retail outlets and transactions were attributed to individual sole traders.
At the same time, according to the investigation, the chain’s employees organised sales, monitored the flow of funds and ensured the smooth running of the shops. Law enforcement agencies believe that the division of turnover amongst several business owners served to understate the volume of transactions subject to VAT.
In itself, the status of a sole trader or operating under the simplified tax system does not constitute a breach. The State Tax Service considers the formal division of a single business between separate entities to be a risk if, in practice, they operate as a single entity. Among the general indicators, the service mentions shared management, staff, premises and interrelated operations.
Prosecutors filed a motion with the court following the payment of damages
Investigators established that the total amount of unpaid VAT exceeded 51.5 million hryvnias. During the pre-trial investigation, officials at the company paid the full amount of the losses identified, and the funds were transferred to the state budget.
Following the payment of compensation, the prosecutors applied to the court to have the persons responsible exempted from criminal liability. The legal basis cited was Part 4 of Article 212 of the Criminal Code of Ukraine, which provides for this possibility under the conditions laid down by law.
Full settlement of tax liabilities does not automatically bring proceedings to an end. A decision on exemption from liability must be made by the court. As at 19 October, the Public Prosecutor’s Office had only reported that a motion had been filed, not that it had been granted.
