Business Fragmentation in Ukraine: When Several Individual Entrepreneurs Are Treated as One Business

The State Tax Service describes “fragmentation” as the artificial splitting of a single business between formally independent entrepreneurs in order to reduce taxes. In other words, what matters is not only a shared address, but how the work is actually organised. Below we explain how the tax authority defines business fragmentation and which signs it names. We also set out the income limits for individual entrepreneurs (FOPs) paying the single tax in 2026 and where the line lies between separate businesses and one business split up only on paper.

How the State Tax Service defines business fragmentation

In its notice of 11 December 2025 (in Ukrainian), the Main Department of the State Tax Service in Odesa Region described business fragmentation as the artificial division of a single business activity into several formally independent entities, mainly individual entrepreneurs. These entities are controlled by the same persons, and the aim is to reduce the tax burden. The tax authority names the following main signs:

• individual entrepreneurs using the same IP addresses to access client-bank systems and software cash registers;
• mass registration of individual entrepreneurs at one address;
• several individual entrepreneurs working in one retail space;
• use of a single trademark or brand;
• shared employees.

According to the State Tax Service, this practice may lead to tax control measures – audits, including actual (on-site) inspections.

On 10 August 2026, the State Tax Service reported that since the beginning of the year it had identified more than 500 brands and trademarks with signs of artificial business fragmentation. In 23 large retail chains, more than a thousand individual entrepreneurs had been involved in such schemes. Possible budget losses were estimated at no less than UAH 1.7 billion, and the materials were passed to law enforcement agencies. At the same time, the State Tax Service stressed that the work of individual entrepreneurs and a company’s cooperation with them are not in themselves a violation. The issue arises when entrepreneurs are only formally separate but in fact work as one company – under a common brand, in the same stores, with shared employees, warehouses and management.

Single tax income limits in 2026

It is the income limits that make splitting a business between several individual entrepreneurs “profitable”. The income of an individual entrepreneur paying the single tax during a calendar year may not exceed a certain number of minimum wages established as at 1 January (clause 291.4 of Article 291 of the Tax Code of Ukraine (TCU)). The minimum wage from 1 January 2026 is UAH 8,647 (Article 8 of the Law of Ukraine “On the State Budget of Ukraine for 2026”). The limits for 2026 are therefore:

• group 1 – 167 minimum wages, i.e. UAH 1,444,049;
• group 2 – 834 minimum wages, i.e. UAH 7,211,598;
• group 3 – 1,167 minimum wages, i.e. UAH 10,091,049.

Single tax at a rate of 15% is paid on the excess amount (subclause 1 of clause 293.4 of Article 293 TCU). From the first day of the month following the quarter in which the limit was exceeded, the taxpayer must switch to paying other taxes. For groups 1 and 2, this applies if they have not switched to another rate (subclause 298.2.3 of clause 298.2 of Article 298 TCU).

Three examples: separate businesses or one

A family, two individual entrepreneurs, one internet connection

The wife is a designer, the husband is a programmer. Each has their own clients, does the work independently and receives payment. A shared home internet connection does not by itself turn these businesses into one.

One shop, several individual entrepreneurs

In fact there is one shop, with the same manager and staff. But as soon as one individual entrepreneur approaches the income limit, payments start being accepted through another. This example already matches the model of artificial business splitting described by the State Tax Service: one retail space, shared employees, one management.

A shared warehouse to save money

Two entrepreneurs rent a warehouse together to save money. Here you need to check who owns the goods, who sells them and receives payment, and how the lease is documented.

So the question is not how many routers you have, but whether these really are separate businesses or one business split up only on paper.

What to check if you work through several individual entrepreneurs

• whether each individual entrepreneur has their own clients, contracts and accounts and receives payment themselves;
• who actually manages the work and makes decisions;
• with whom employment contracts are concluded and for whom the employees actually work;
• how the lease of premises and the warehouse is documented and who owns the goods;
• whether the individual entrepreneurs use one brand, one retail space and the same IP addresses for client-bank systems and software cash registers;
• whether payments are “switched” between individual entrepreneurs when one of them approaches the income limit.

This article is for information only, reflects the law as at 28 October 2026 and is not a substitute for advice on your situation.

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