Licensing of fermentation plants begins in Ukraine

From 1 January 2025, the licensing of fermentation plants, which play a significant role in the illegal turnover of tobacco products, has begun in Ukraine.

These enterprises import unprocessed tobacco in huge volumes without paying excise duties. During the fermentation process, approximately 90% of the raw material "disappears", although in reality it ends up in shadow production facilities where it is processed for cash. In this way, untaxed tobacco, which officially does not exist, becomes the basis for illegal cigarettes.

Details of the schemes and manipulation mechanisms, including specific examples, have been discussed previously, for instance, regarding two plants.

One prominent example is an enterprise in Lviv — LLC "Fermentation Plant 'Tobacco'", which is part of a group of tobacco companies linked to Hryhorii Kozlovskyi. In 2023, this enterprise was mentioned in an investigation by the Temporary Investigative Commission (TIC) of the Parliament, chaired by Yaroslav Zheleznyak, as a target of tax manipulation.

Here is an excerpt from the TIC report:

• LLC "Fermentation Plant 'Tobacco'" ordered 3,674 tonnes of raw material and an additional 1,287 tonnes of tobacco waste. However, the taxes paid amounted to only 50,000 UAH, meaning just 13 UAH per tonne of raw material.

Such figures raise obvious suspicion. In reality, all this tobacco was used without paying excise duties for the production of illegal cigarettes under brands such as Lifa, Compliment, and others.

In 2025, the tax authority is set to begin issuing licences for such fermentation plants. According to available information, Hryhorii Kozlovskyi plans to obtain a licence for his LLC "Fermentation Plant 'Tobacco'" from the new leadership of the tax authority.

At present, the enterprise does not have a licence, and the previous tax authority leadership even attempted to revoke the operating rights of its parent structure — the Vinnikovskaya Tobacco Factory. However, with the arrival of the new head of the tax authority, Kravchenko, the activity of participants in such schemes has increased. They are confident that processes involving illegal tobacco will now receive support.