The State Financial Monitoring Service has uncovered a large-scale scheme to fragment businesses through second-hand stores
The State Financial Monitoring Service of Ukraine has uncovered a scheme involving alleged large-scale tax evasion. The scheme involved fragmenting business operations through 477 individual entrepreneurs (FOPs) linked to a chain of stores selling used clothing. The total value of transactions within the uncovered scheme amounts to 923 million hryvnias.
According to him, an analysis of financial transactions and data from a banking institution revealed that since the beginning of 2026, the accounts of 477 individual entrepreneurs (FOPs) associated with a single chain had received over 923 million hryvnias (primarily acquiring payments from citizens for used clothing).
“The funds were then primarily transferred to the accounts of legal entities as payment ‘for used clothing.’ These companies are essentially intermediaries: despite high turnover, they report minimal profits. Another 156 million hryvnias went toward paying taxes and withdrawing cash,” Pronin noted.
The head of the State Financial Monitoring Service explained that the scheme’s goal was to reduce the tax burden on legal entities (particularly regarding VAT and income tax), artificially shifting profits to sole proprietorships with lower tax rates, and converting non-cash funds into cash.
The agency forwarded the case materials to law enforcement agencies.
As previously reported, in mid-October 2026, the Office of the Prosecutor General announced the return of over 51.5 million UAH in VAT which had not been paid by a chain of secondhand goods stores as a result of a scheme to artificially fragment the business through controlled sole proprietorships in 2023–2025. Since the company’s officials fully compensated for the losses incurred during the pretrial investigation, prosecutors filed a motion with the court to exempt the relevant individuals from criminal liability.
This decision was preceded by the Economic Security Bureau’s (BEB) in May 2026 of a tax minimization scheme involving a network of secondhand stores operating through more than 530 controlled sole proprietorships, resulting in state losses totaling over 38.6 million hryvnias. The agency did not specify the name of the chain; however, as reported to the Interfax-Ukraine news agency, it was the Econom Class chain. Between 2023 and 2025, at least 23 sole proprietorships were involved in the scheme, through which transactions totaling over 231 million hryvnias were conducted, and during searches across five regions, detectives seized data storage devices containing information on the activities of more than 530 entrepreneurs from 2024 to 2026.
This was reported by Philip Pronin, head of the State Financial Monitoring Service.
As a reminder, a chain of secondhand stores returned over 51 million hryvnias in taxes to the Ukrainian budget
The deputy head of the State Financial Monitoring Service was unable to explain whether he had undergone an interview prior to his appointment.
