ALLO is suspected of tax scams when importing Xiaomi equipment worth tens of millions of dollars.

According to public information, the ALLO company is the official partner of the Xiaomi brand.

Thanks to active efforts to promote this brand in 2018, Xiaomi became the number 1 brand to sell smartphones in Ukraine.

Despite the official cooperation between Xiaomi and ALLO, direct deliveries of this technology to XIAOMI H.K. LIMITED do not operate in Ukraine, and companies - legal entities associated with ALLO, import this equipment not from China at all.

This conclusion can be made by analyzing China's export base and Ukraine's import base.

According to the export base (link to the base below) for the period from 11/01/2019 to 01/31/2020, regarding the export of XIAOMI equipment, the export of smartphones of this brand is carried out in almost all countries of the world except Ukraine.

Among the countries where XIAOMI H.K. LIMITED officially sends smartphones to are: Spain, Myanmar, Russia, Hong Kong (China), Croatia, France, Poland, Germany, Kazakhstan, Hungary, Holland, etc.

At the same time, analyzing the base of imports of Xiaomi smartphones to Ukraine (link to the base below), it is easy to see that Ukrkastom LLC holds a monopoly on importing this equipment to Ukraine, which acquires it from the British company ITT PRODUCTION LLP.

LLC «Ukrkastom» is included in the orbit of the ALLO network and is registered at the address associated with the entire group of companies, as well as its owner Dmitry Derevitskiy, Dnipro, st. Mikhail Hrushevsky 4-D.

https://clarity-project.info/edr/35111950/relations

And the owner and director of the said company LLC "Ukrkastom" Starovierov Oleksandr in 2016 was looking for a job working as a security guard of the "ALLO" store.

According to the import base, for the period from 11/01/2019 to 09/30/2020, Ukrkastom LLC imported to Ukraine 1,595,458 XIAOMI smartphones of various models worth approximately $ 140 million.

All these devices were sold by the British company ITT PRODUCTION LLP, which is registered at 12 Gateway Mews, Bounds Green, London, United Kingdom, N11 2UT.

And the owners of this company are two offshore companies from the British Virgin Islands, JUSTINGTON GROUP LIMITED AND SHELTON ASSETS LIMITED.

At the same time, the country of export Xiaomi smartphones to Ukraine is not China, but Germany.

Consolidating this information, we can say that, being the largest seller of Xiaomi equipment in Europe and a direct partner of Xiaomi Corporation, the ALLO network purchases these devices not directly but through third and third countries associated with offshore companies.

Most likely, these manipulations should have led to an increase in the cost of equipment, but in our case, they led to the opposite process.

Buying Chinese smartphones Xiaomi in Germany from the British company LLC «Ukrkastom» makes it 10-30% cheaper than the corporation XIAOMI H.K. LIMITED sells them directly to Ukraine from China.

Example # 1

Smartphone Redmi Note 8 pro 6Gb + 128 GB

In January 2020, XIAOMI H.K. LIMITED supplied it to different countries of the world for $ 164.40.

At the same time, LLC «Ukrkastom» purchased such a model from ITT PRODUCTION LLP for $ 133.00.

Example No. 2

Redmi Note 8T 4Gb + 64 GB. Model by base (M1908C3XG)

In January 2020, XIAOMI H.K. LIMITED supplied it to different countries of the world for $ 123.99.

At the same time, Ukrkastom LLC purchased such a model from ITT PRODUCTION LLP for $ 90.00

At the same time, according to the model number (M1908C3XG), there are devices with other memory indicators, the cost of which changes proportionally. Here is a comparison of 4Gb + 64 G.B. devices.

The specified difference in the cost of models for export and import and indirect deliveries through Germany may indicate an operation to lower the cost of tax evasion devices in Ukraine artificially.

It is likely that ITT PRODUCTION LLP purchasing these devices in China, or another intermediary, at a real cost, at some stage changes their price to a lower cost which allows the company LLC “Ukrkastom” to pay VAT at a lower rate during customs clearance.

An approximate analysis of data from the table of exports and imports of XIAOMI smartphones suggests that the underestimation of VAT payment by Ukrkast LLC on customs clearance of 1,595,458 devices can reach $ 10 million, which damages the state on an immense scale.

It is noteworthy that in 2018, the SFS investigators investigated criminal proceedings No. 32018100110000090, in which both the said scheme and ITT PRODUCTION LLP and ALLO companies appeared.

“The grounds for the registration of the criminal proceedings under Part 3 of Article 212 of the Criminal Code of Ukraine were the materials of the interregional operational administration of Large Taxpayers Office of State Fiscal Service, namely, the report of the operational officer, according to which the officials of LLC “ALLO” (code 30012848), in 2018, through the affiliated company LLC “Tsifra-Trade” (code 39319695), having imported from a non-resident ITT Production LLP and further sold to the end consumer in Ukraine the mobile phones, tablets, laptops, accessories, and other gadgets, evaded value-added tax for a total amount of 98 million 152 thousand UAH by underestimating the customs value of the goods described above which led to the actual non-receipt of funds to the budget in enormous amounts.

According to the aforesaid materials, it was established that the officials of Allo chain had created a risky tax evasion scheme that performed import, wholesale and retail sale through the outlets of consumer electronics chain, including mobile terminals, tablets, laptops, computer peripherals, accessories, and other gadgets. The essence of a possible scheme used by Allo chain officials is in using the details of an affiliated company registered in a country with preferential taxation to declare a deliberately underestimated customs value of goods when completing customs formalities and, consequently, to evade customs payments.

Besides, it was established that the principal contractor supplier of LLC "TSIFRA-TRADE" is the company ITT PRODUCTION LLP, address - 12 GATEWAY MEWS, BOUNDS GREEN, LONDON, ENGLAND, N11 2UT, represented by PERSON_2 (according to the contract №GB04UA dated November 14, 2107). The main product imported to the address of LLC " TSIFRA-TRADE" and subsequently sold to LLC "ALLO" are the mobile phones of the Xiaomi brand.

According to the analytical materials of the interregional operational administration of Large Taxpayers Office of State Fiscal Service, it was determined that underestimating the customs value of goods by the officials of LLC "TSIFRA-TRADE." Thus, according to the Customs Declaration №UA100210/2019/083616 that was submitted by the company LLC " TSIFRA-TRADE," the cost of a mobile phone Xiaomi Redmi Note 6 Pro 4 G.B. ram 64 G.B. black is $ 95. In the meantime, according to the international website https://aliexpress.com/, the cost of an identical product is $ 190. Thus, the signs of tax evasion in especially large amounts totaling 98 million 152 thousand UAH are suspected in the actions of the officials of the aforesaid enterprises as a result of non-payment of full VAT on customs clearance of goods (190-95= 95$ customs value is two times underestimated. The amount of unpaid VAT in 2018 is: 490 million 763 thousand UAH * 20% VAT = 98 million 152 thousand UAH). Besides, according to the operational information, the person that entered into the contract dated November 14, 2107, №GB04UA on behalf of the company ITT PRODUCTION LLP - PERSON_2 is an affiliated person and may follow the previously provided instructions and aim to minimize tax liabilities of the Allo group enterprises."

To date, there is no information on the progress of the investigation of this judicature in the register of court decisions. In contrast, the information I described above gives the right to assume that the scheme for understating the cost of imported Xiaomi equipment continues to be implemented by the ALLO group with the help of the related company ITT PRODUCTION LLP.

This information should be analyzed by both the SFS investigators and NABU employees. They should pay attention to the fact that there has been no progress in investigating criminal proceedings No. 32018100110000090.

I also believe that the participation of the British company ITT PRODUCTION LLP in the alleged fraudulent tax evasion scheme should become a conduit for the start of an international investigation by the OLAF and FATF structures.

Link to the export and import table.

You can see more details about this scheme in my video investigation.