Simplified taxation system (Russia)

Simplified taxation system

An important issue that has to be considered when registering a company in the Russian Federation is the necessity and expediency of the application for the simplified taxation system.

In accordance with Article 346 part 2, the application of the simplified system of taxation by companies implies the replacement of the following taxes:

  1. the tax on profit,
  2. the tax on property of companies,
  3. the uniform social tax,
  4. the value added tax (except for the value added tax payable under the Tax Code in the case of importating goods into the customs territory of the Russian Federation).

The company pays only uniformed tax, computed in accordance with the results of its economic activities in the tax period. The company may apply this system from the time of the initial registration or may have the right to move to the simplified system of taxation, if by the results of nine months of the year in which the organization files an Application for a transition to the simplified system of taxation, the revenue determined in accordance with Article 249 of the present Code, did not exceed 15 million rubles (not taking into account value-added tax) (approximately, 556 000 US Dollars).

Taxpayers, applying the simplified system of taxation, have no right to return to the general taxation regime until the end of the tax period.

Recognized as an object of taxation are:

  • incomes;
  • incomes, reduced by the amount of expenses.

Taxable items shall be selected by the tax payer himself. The taxable items cannot be changed by the tax payer in the course of the entire term of the application of the simplified system of taxation.

  • If the taxed items are incomes, the tax rate shall be established at 6 per cent.
  • If the taxed items are incomes, reduced by the amount of expenses, the tax rate shall be established at 15 per cent.

The system cannot be used by:

  • Companies and entrepreneurs having revenue larger than RUR 20 million rubles (about $700,000) per calendar year.
  • Companies having branch offices and/or more than 25 percent corporate ownership (!). 
  • Companies and entrepreneurs engaged in certain activities (banking, insurance, gambling and some other businesses).
  • Companies and entrepreneurs employing more than 100 employees.
  • Companies having amortized assets worth more than RUR 100 million (about $3.5 million).

Despite a number of advantages of this system, there are some inconveniences: for example the list of expenses is limited when compared to the general taxation system.

For more information>>