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- Sales limit: authorities have changed their mind about tightening VAT payments for small businesses
Sales limit: authorities have changed their mind about tightening VAT payments for small businesses
The authorities have changed their minds about tightening VAT payments for small businesses in the trade sector in the coming years, Izvestia found out. Currently, the tax is charged if the income exceeds 60 million rubles per year. They wanted to lower this threshold (there were proposals to reduce it by half) in order to raise more funds to the budget. However, after harsh criticism from business associations, the decision was postponed. At least until 2028, the Finance Ministry told Izvestia. Entrepreneurs warned that against the background of high rates, such steps could lead to a retreat into the shadows, rising prices and arrears. Why the Ministry of Finance decided not to rush and how much the treasury has already received from VAT on small businesses is in the Izvestia article.
Who wanted to raise taxes
Starting in 2025, small and medium-sized businesses must pay value-added tax (VAT) if they earned more than 60 million rubles last year. In June, the government was instructed to work out changes to the simplified taxation system (STS) for companies and individual entrepreneurs in the field of trade. This includes lowering the income threshold after which VAT must be paid. The exact amount has not yet been announced, but there have been proposals to reduce the limit by half starting next year. That is, retailers with an income of 30 million or more could be subject to the fee.
However, the authorities decided to postpone making this decision, two sources familiar with the discussion told Izvestia. According to them, at a meeting with businesses in July, a representative of the Ministry of Finance said that there were no plans to lower the VAT threshold in the coming years.
The Ministry of Finance will propose considering lowering the income threshold for businesses to pay VAT on USN no earlier than 2028, as the government promised last year not to make systemic tax changes for at least three years," State Secretary and Deputy Finance Minister Alexei Sazanov told Izvestia.
According to him, further lowering the threshold can dramatically increase the number of people paying such a tax, so it is necessary to thoroughly analyze the consequences, as well as warn entrepreneurs in advance — a couple of years in advance — so that they have time to adapt.
The simplified taxation system is a special regime for small and medium—sized businesses that allows transferring a single tax instead of collecting income, property payments and personal income tax. Until this year, VAT was also included in the list. The USN is used by sole proprietors and legal entities with an income of up to 450 million and a staff of no more than 130 employees. You can choose the base for payment: "income" with a rate of 6% or "income minus expenses" — 15%.
The single tax remained, but VAT was withdrawn from it. Now companies on the USN can choose for themselves at what rate to pay, Anton Stepanov, partner of the Keep tax dispute resolution group, reminded. There are two options: to work according to the general system — 20% (or 10% and 0% for individual goods) with the right to deduction, or special interest — 5% (with income from 60 to 250 million) and 7% (from 250 to 450 million). In the latter case, refunds are not provided.
— Currently, about 4% of companies on the USN pay VAT — those whose incomes exceeded 60 million rubles in 2024. If the threshold is lowered, the obligation to pay tax will extend to a much larger number of small entrepreneurs and firms," the lawyer estimated.
2.2 million small and medium-sized enterprises are employed in the trade sector in Russia, said Alexander Isaevich, CEO of SME Corporation. This is more than a third of all small players (6.4 million). About 4.5 million people work in this business, which is one in four employees of SMEs, not counting the self—employed, he added.
What will the increase in the tax burden on small businesses lead to?
The business reacted negatively to the idea of lowering the VAT threshold. In July, Opora Russia sent a letter to Prime Minister Mikhail Mishustin asking him not to rush this decision (Izvestia has a document signed by the head of the association, Alexander Kalinin). The letter clarifies that the initiative came from Delovaya Rossiya, which represents the interests of large non-resource businesses, while the amendments would have heavily affected small companies. The organization itself did not respond to the editorial's request. Izvestia also appealed to the Cabinet of Ministers, where they recommended redirecting questions to the Ministry of Finance.
In the letter, Opora Russia warns of the consequences of lowering the VAT threshold. Among them are an increase in the tax burden on microbusiness, the transition of some companies into the shadows and a subsequent decrease in budget revenues, an increase in accounting costs, an increase in the cost of goods due to shifting costs to the consumer, as well as cash gaps. The document clarifies that the tax is paid on shipment, and small businesses often do not have free money. Against the background of a high key rate, this can lead to arrears.
The business association remembers that the authorities had previously promised them not to change the tax system even until 2030. Therefore, it was suggested that we first conduct an in-depth analysis of the consequences and discuss the initiative with businesses and experts before making changes.
Earlier, the Association of e-Commerce Market Participants (AUREK) also appealed to the Cabinet of Ministers with a request to postpone lowering the VAT threshold. As the media reported with reference to the organization's letter, such a measure could increase the tax burden for small businesses by at least 5 percentage points — 5% or 7% of separate VAT will be added to 6% or 15% of the single tax. As a result, online retailers will have lower sales, and some players will leave the market.
However, taking into account inflation, in a few years 60 million rubles will have less purchasing power. Such income will be more typical for microbusiness. In this case, in fact, it will be easier to cancel the tax system altogether than to lower the threshold in order to collect "reduced" VAT from the smallest players, says Alexey Krylov, an expert at the Council on Financial, Industrial and Investment Policy of the Chamber of Commerce and Industry, a tax consultant. At the same time, for the sake of saving 5-7%, few people will break the law and go for fragmentation — this is risky and requires additional costs. As a result, the benefits are questionable, but the risks remain, he believes.
Why did the authorities refuse to lower the VAT threshold
Initially, the idea of lowering the VAT threshold could have been promoted due to the growing budget deficit, said Natalia Milchakova, a leading analyst at Freedom Finance Global. According to preliminary data, in the first half of the year it amounted to 3.7 trillion rubles, or 1.7% of GDP, reaching the annual target. According to the expert, the authorities wanted to attract more small players to pay the tax in order to replenish the treasury.
— However, they refused to "patch a hole" in the budget through tax tightening for businesses, most likely because of the risk that small businesses could completely fade into the shadows. And then tax collection will decrease even more, — Natalia Milchakova believes.
According to the tax service, the introduction of VAT for small businesses has not led to massive evasion through fragmentation. The budget is already receiving tangible revenues: 180 billion rubles in the first quarter of 2025, said Ekaterina Golubtsova, Associate Professor of the Department of State and Municipal Finance at Plekhanov Russian University of Economics. By the end of the year, the amount may exceed 700 billion, she predicts. The expert noted that reducing the limit, on the contrary, would worsen the situation.
If the threshold is lowered, companies will start including VAT in the price at the rate of 5% or 7%, but without the right to deduct the "incoming" tax. This will become an additional pro-inflationary factor, says Anton Stepanov from Kept.
— The postponement of the decision is most likely also due to the desire to wait for more stable inflation, when price increases will not exceed 4-6%. It is now above 9%," added economist Andrey Barkhota.
The refusal to tighten taxes is also due to the risk of bankruptcies and closures among non-chain retailers, Natalia Milchakova added. Otherwise, part of the business could leave the market, and the retail space could move to large chains.
Maintaining the key parameters of the tax regime for a long time will give small businesses more confidence and allow them to work in stable conditions, Alexander Isaevich from the SME Corporation is sure.
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