A Legal 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.
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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, cross-company 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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