A starch factory seems an odd addition to an Eastern European oligarch's portfolio. Yet in the case of Ukrainian President Petro Poroshenko, starch is an important ingredient for his chocolate empire; so important that Poroshenko's group of companies does not buy the ingredient but produces it in their own factories, which include two in Ukraine and one in eastern Germany, according to a DW investigation.

Poroshenko and shell companies

Speculation about Poroshenko as a possible investor in the factory in Germany dates back to 2011, the date it was purchased. With the "Panama Papers" revelations, the complexity of the investments held by Poroshenko and those close to him has become clear: the politician has coordinated the business of his well-known confectionery manufacturing company "Roshen" via offshore holdings. Critics say this was to avoid taxation, but Poroshenko denies those allegations, saying that these offshore companies were created in order to allow them to be managed in escrow for as long as he is president.

An investigation by Deutsche Welle has shown, however, that the use of shell companies in tax havens is not unusual for Poroshenko. One example of that can be found in the starch factory in the city of Elsterau in the eastern German state of Saxony-Anhalt. With revenues of around six million euros and nearly 100 employees, it is just a side project in the larger business empire the Ukrainian president has built.

Ukrainian President Petro Poroshenko says his holdings are in escrow while he is in office

Goal: stay anonymous

The firm in Elsterau belongs to a limited liability company called "Interstarch GmbH," which, as DW discovered, is run by Poroshenko's firm "Interstarch Ukraine." According to commercial registration records, the German company is formally registered to a corporation in Cyprus, which itself is controlled by a corporation registered in the British Virgin Islands. This web conceals the real ownership and could be used for tax advantages.

A request made by DW to the office of the Ukrainian president for clarification about his relationship to these offshore companies has gone answered. His business adviser has said that the network of companies does not belong to Poroshenko, but instead legally belongs to a man named Sergei Zaitsev, who, according to the adviser is an "independent businessman" and business partner of Poroshenko.

But an inspection of commercial registries in Cyprus and the Netherlands tell a different story. Zaitsev is not only the deputy director general at Poroshenko's Roshen company but is also the CEO of the shell companies which are said to be handling Roshen in escrow. The "Panama Papers" have thus revealed the Ukrainian president to be the person legally charged with this web of firms that can be traced back to the British Virgin Islands. That is also where the company Euro Business Investments Ltd is registered - a company, which - via Cyprus - is controlled by the German firm Interstarch GmbH.

Poroshenko's chocolate company uses a complex network of shell companies for purchasing

No registration requirements but tax savings

The British Virgin Islands are one of the most important tax havens in the world, according to Tax Justice Network. There is no public registry of companies and they do not cooperate with foreign tax offices. Is this how Poroshenko's firms have been organized offshore?

Legally, the Ukrainian president is required to detail any earnings openly. Poroshenko has said that since he took office, he has not had any overseas income. And he couldn't have, as his old friend Zaitsev is in reality the owner of the factory in Germany via the firm in Cyprus. What remains unclear, however, is who claims ownership at the end of the chain of firms in the British Virgin Islands?

In addition to the anonymity that a shell company offers, these holdings come with the added advantage of reduced taxes. The sale price for the German factory was 35 million euros, which the company Interstarch GmbH received in the form of a loan from its Cypriot parent company, Camarin Limited. The Ukrainian investors had essentially lent themselves the money, and it seems they did so at a high interest rate, according to the annual balance sheet. Since 2011, nearly two million euros in interest have been paid out to the Cypriot firm annually.

Such interest payments are not taxed due to a double-taxation agreement between Germany and Cyprus, a legitimate method for saving on taxes according to financial expert Hans-Lothar Merten.

"The interest payments can be claimed here as an expense which reduces profits in Germany. Then the profits that flow further through to Cyprus and the Caribbean are tax-free," said the expert. In his best-selling book, "Steueroasen" (Tax Havens), Merten writes about such loopholes. Large German companies also take advantage of such opportunities, said the publicist and banker.

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More millions said to flow

Year after year, Interstarch has piled new debt onto its Cypriot parent company. By the end of 2014, that amounted to 44 million euros. Yet during a visit by Hartmut Möllring, the economics minister of Saxony-Anhalt, the head of management at Interstarch announced a further investment in the company totalling 25 million euros.

The company complained in their annual report that prices for starch are too low and prices for wheat too high. That resulted in a loss in 2014 amounting to nearly six million euros. But, at the same time, the production capacity there will be expanded over the next five years. The Ukrainian investors are apparently loaning themselves money in Germany, for which more interest payments will be made that will need to flow into the accounts of the offshore firms. The German tax authorities with therefore come away empty-handed: without profits there are also no corporate taxes.