Many car owners who use gas for their cars may have noticed that a large network of Avantazh 7 gas stations has ceased operations. In addition to zero prices, the steles of gas stations bear the inscription “We were not stopped by the war, we were stopped by the Ukrainian tax authorities.” Let’s look at what happened.
As Avantage 7 reported in a Facebook post, on November 3, the Avantage 7 network of gas stations ceased operations in Kyiv region due to claims from the State Tax Service.
“We are not stopped by the war, we are stopped by the tax authorities. Unexpectedly, Ruslan Rachynsky, deputy head of the State Tax Service in Kyiv region, canceled 20 licenses for a formal reason – failure to submit a change of legal address,” the statement said.
“Do you think that we are the ones who did not submit changes to the licenses? They just can’t find anything, so they come up with formal reasons to stop us.” – the company says.
According to the report, on November 3, Avantage 7 filling stations in Kyiv region will cease operations.
However, according to the report, the problems with the Avantage 7 licenses may have other reasons, Ekonomichna Pravda reports.
The network itself points to another problem. “We forecast the price of gas in Kyiv region to be 32 hryvnia per liter. Wait for it,” Avantage 7 said in a statement.
So, why did the tax service apparently take away the license from such a major player in the Ukrainian auto gas market?
On October 17, new rules for fuel customs clearance came into effect in Ukraine. Previously, customs officers asked only for a certificate of origin, but now they require documents on the entire journey of autogas from the manufacturing plant to the border.
The purpose of introducing new rules for fuel customs clearance was supposedly to stop the import of cheap autogas from Russia into Ukraine. It is noted that the share of Russian fuel in the Ukrainian market could reach 20%.
At the same time, open sources contain references to documents that seem to indicate that Russian autogas could enter Ukraine, including through the Avantage 7 gas station chain.
What is the Avantazh 7 network?
The Avantazh 7 brand operates 89 filling stations in Kyiv, Khmelnytsky, Chernihiv, Cherkasy and Chernivtsi regions. Half of the network is just gas stations, Forbes writes. According to the company, 80% of fuel sales are autogas, 20% are gasoline and diesel.
50 gas stations are registered with Avantazh-7 LLC, the rest are registered with other legal entities. The company’s revenue for 2022 is UAH 6.2 billion, with a profit of UAH 113 million. For the first six months of 2023, the data are comparable: UAH 3.3 billion in revenue, UAH 51.5 million in profit, according to YouControl.
Average sales of Avantazh 7 gas station are about 5 tons of fuel per day, according to Serhiy Kuyun, director of A-95 Consulting Group. The company will lose approximately UAH 652.4 million per month for a month of downtime at the shutdown gas stations, according to estimates based on A-95 data.
“Avantazh 7 is one of the largest suppliers of autogas, says Kuyun. This year, the five largest importers of autogas are Zakhidekotop, Avantazh 7, BRSM, Nadezhda, and OKKO, says Oleksandr Sirenko, an analyst at Naftogaz.
The closure of the company’s filling stations coincided with a sharp rise in autogas prices in Ukraine due to unprecedentedly tightened border checks.
According to Forbes, the formal reason for the license revocation is the failure to submit a change of legal address, the company says. “In October, Avantazh 7 decided to move its headquarters from Kyiv to Vinnytsia. The tax authorities delayed the review of the documents, and when the deadline expired, they canceled the licenses, the company says. In fact, it looks like a common Ukrainian tax scheme where entire enterprises are closed down because they were either approached with a bribe demand and refused, or because the authorities do not like certain brands or businesses. Especially if the company is fast-growing and successful. This was the case, for example, with some large international IT companies with Ukrainian headquarters and a Ukrainian owner.
Why did the company want to move to Vinnytsia? Since November 2022, the tax authorities have conducted more than 169 online inspections and issued millions in fines, some of which the company is challenging in court. “In the Kyiv region, the judicial system is very slow, so we decided to move the headquarters to Vinnytsia,” the company says.
The tax authorities became suspicious of the company. “Avantazh 7 pays less taxes per liter of fuel sold than most competitors. In the first quarter of 2023, Avantazh 7 paid 44 kopecks of taxes per liter of fuel, according to a study by ISET and CASE Ukraine. While OKKO and Socar paid about UAH 2 in taxes per liter of fuel.
In response to the tax authorities’ actions, on November 1, the company raised prices for all petroleum products by UAH 5. However, the prices for Avantage 7 ceilings are still among the lowest. Autogas – 28.62 UAH/l; gasoline – A-95 at 51.62 UAH/l, minfin.com.ua reports.
“No one understands how to be profitable at these prices,” says one market participant, speaking on condition of anonymity due to the sensitivity of the issue.
Should the results be the same for different networks? “There may be anomalies with taxes per liter,” says Oleh Hetman, an expert at the Economic Expert Platform, who helped prepare the CASE Ukraine study. The calculation includes income tax, which can depend on many factors, including debt and investments, Kouyoun said in September.
The company explains these figures by the fact that 80% of the network’s fuel sales are autogas. “According to the company, Avantazh 7 cannot pay UAH 2 in taxes per liter because the difference between the purchase and sale price of autogas is also UAH 2. In addition, the company has registered gas station stores as a separate legal entity, so their taxes are not taken into account in the study, explains Chyrych.
“So don’t expect results like OKKO’s,” insists the chain owner.
What Avantazh 7 will do and who might be next
The tax authorities had the right to revoke the company’s license due to the failure to submit a change of legal address, says Dmytro Lazebnyi, attorney at Ilyashev & Partners Law Firm. Since the beginning of summer 2023, there have been four similar cases, he adds.
What are the company’s options? “Avantazh 7 can use an application for interim relief to ensure that the gas stations operate under the old licenses until the court makes a decision in the case, Lazebnyi said. At the same time, the company can apply for new licenses, the lawyer adds.
The company will appeal the tax authority’s decision in court and will apply for new licenses, Tsarenko confirms.
Who could be next? All competitors of large chains, because small market players have fewer opportunities to resist Ukrainian legislation. But in Ukraine, there are many loopholes for dishonest entrepreneurs and for the authorities. Therefore, the competition will continue. But unfortunately, the Ukrainian authorities are framing all such closures as a fight against Russian influence or Russian businesses. But as it turned out, in the second year of the war, the authorities do not see any obvious collaborators right on their side. Unfortunately, this has very bad consequences for Ukrainians.
