Ukraine In­ter­na­tional Air­lines, na­tion’s top, con­ceals own­er­ship

Opaque, off­shore struc­ture be­lieved to hide Kolo­moisky’s in­ter­est.

Kyiv Post Legal Quarterly - - Contents - By Olena Gordiienko and Vlad Lavrov [email protected], [email protected]

ALe­gal Quar­terly in­ves­ti­ga­tion has re­vealed how Ukraine In­ter­na­tional Air­lines own­er­ship is clev­erly con­cealed by an opaque struc­ture lead­ing to a num­ber of off­shore lo­ca­tions.

The air­line is 74 per­cent owned by Ukrainian com­pany Cap­i­tal In­vest­ment Project, which is cross-owned by an­other Ukrainian en­tity called In­vest­ment Projects Man­age­ment – it­self a sub­sidiary of a Cyprus-reg­is­tered com­pany with five ben­e­fi­cia­ries reg­is­tered in Belize and Bri­tish Vir­gin Is­lands.

How­ever, many sus­pect that the real owner is Dnipropetro­vsk Gover­nor and bil­lion­aire Igor Kolo­moisky, whose for­tune is es­ti­mated at $2.3 bil­lion by Dragon Cap­i­tal in­vest­ment house. He has never con­firmed or de­nied own­er­ship.

Nei­ther Belize nor the Vir­gin Is­lands re­quire that com­pany own­er­ship de­tails be made pub­licly avail­able on­line; nor do they main­tain com­pany own­er­ship de­tails in their of­fi­cial records.

Ac­cord­ing to Dmytro Pichugin, a lawyer with Gold­blum and Part­ners in Kyiv, cross­com­pany own­er­ship is of­ten used to con­ceal in­di­vid­ual ben­e­fi­cia­ries and min­i­mize tax ex­penses. The scheme in it­self is not il­le­gal, but can be used to break the law.

“Thanks to this scheme, if the ben­e­fi­ciary is a Ukrainian cit­i­zen, they can evade the legal re­quire­ment to get an in­di­vid­ual li­cense from the Na­tional Bank of Ukraine and can profit from their ac­tiv­i­ties in Ukraine us­ing their bank ac­counts off­shore. In this way they can hide their in­come and avoid pay­ing higher Ukrainian taxes.”

The fur­ther sale of Cypriot com­pany shares to a com­pany in Belize or Bri­tish Vir­gin Is­lands are per­formed to con­ceal the real owner’s iden­tity.

“Cyprus is a gray zone while ev­ery­thing af­ter Cyprus is just a black hole,” says Pichugin. “This is a way to pro­tect the own­ers from in­ves­ti­ga­tions, taxes and hos­tile takeovers by Ukrainian legal en­ti­ties. It also al­lows for the ar­ti­fi­cial in­fla­tion of some ex­penses and profit mar­gin ma­nip­u­la­tion.”

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