Fiscal phantoms: tax authorities expose Apple dealers who avoided paying VAT
25 March 21:56
The tax authority has uncovered a large-scale tax evasion scheme in two large Apple retail chains. The State Tax Service of Ukraine (STSU) reported exposing a large-scale value-added tax (VAT) evasion scheme used by two large retail chains specializing in the sale of electronics, including Apple equipment, the head of the agency, Ruslan Kravchenko, wrote on his Telegram channel on March 25, Komersant ukrainskyi reports.
According to preliminary estimates, the budget lost more than UAH 286 million.
Ruslan Kravchenko did not specify the names of specific networks, but Ukrayinska Pravda informs that it is Yabko and Yabluka.
The essence of the scheme: division of business through hundreds of “simplified taxpayers”
These networks operated on the principle of “business fragmentation” – instead of keeping records and paying taxes as large legal entities, they divided the turnover through hundreds of related individual entrepreneurs (IEs) who were on the simplified taxation system and did not pay VAT.
According to the State Tax Service, the scheme involved up to 300 related individual entrepreneurs. Tax authorities have already identified 170 such entrepreneurs. The total amount of income transferred through these individuals is UAH 1.72 billion.
Fiscal irregularities: pseudo-checks and shadow turnover of goods
In addition to the artificial division of business, tax authorities also recorded massive violations of cash discipline. During more than 150 control purchases over the weekend alone, they found 22 cases of non-fiscal checks being issued, which are actually just pieces of paper imitating real cash documents.
The sellers also had no documents on the origin of the goods and their accounting in the databases.
This allowed entrepreneurs to evade taxes on a massive scale, as sales were not recorded in the system, and thus were not subject to VAT and were not reflected in accounting.
Businesses’ reaction after the audits
After the STS intervened, retailers were forced to abandon their shadow schemes. They
- completely ceased operations through related individual entrepreneurs;
- transferred their business to the general taxation system;
- made legal entities VAT payers.
After that, official revenues grew more than 10 times, which once again demonstrates the scale of the previous evasion.
Financial consequences and further actions
As a result of the audits:
- imposed fines of over UAH 85 million;
- transferred all the materials to the Bureau of Economic Security, which is to provide a legal assessment of the violations and bring the perpetrators to justice.
The State Tax Service emphasizes that the detected scheme is only the first in a chain of further inspections, and in the near future, control over other major players in the electronics and home appliances market will be strengthened.
The tax authorities also appealed to citizens to be careful. In particular, to check whether a fiscal receipt is provided when buying appliances. They should also pay attention to the originality of the packaging and the availability of a warranty card.
If you find a sale without a fiscal document, you should inform the State Tax Service via the hotline or online form.
How the “business split” scheme works
“Business splitting is a shadowy scheme used by large companies to avoid paying value added tax (VAT) and understate their profits. The idea is to disguise a large business as many small entrepreneurs (individual entrepreneurs) operating under the simplified taxation system.
Mechanics of the scheme:
1. Instead of one legal entity with VAT, there are dozens or hundreds of individual entrepreneurs. A large company creates (or formally cooperates with) a network of related sole proprietorships, each of which officially conducts “independent” activities. In practice, they all work under a single brand and are actually managed from a single center.
2. Sole proprietors under the simplified taxation system do not pay VAT. Most sole proprietors are single taxpayers of the 2nd or 3rd group, who are not VAT payers or have a turnover limit. This allows them to avoid charging and paying 20% tax on each sale.
3. Sales are split between these individual entrepreneurs. One store or website can technically sell through 5-10 individual entrepreneurs, distributing the proceeds between them in order not to exceed the tax limits and remain in the simplified taxation system. This complicates control and allows avoiding inspections.
4. There is no accounting of the real business structure. On paper, these are dozens of small “independent” entrepreneurs. In reality, it is a single network with centralized management, supply, advertising, and accounting.
5. As a result:
- the state loses millions of hryvnias in VAT and income tax;
- the company gains an unfair competitive advantage over those who work honestly;
- buyers often do not receive fiscal receipts, and thus are deprived of official guarantees and consumer protection.
