Profit tax will be increased, the simplified taxation system will be made more complex, business fragmentation offenses will be forgiven - but not for everyone

The changes will affect both companies using the general taxation system (GTS) and the simplified taxation system (STS).

The standard rate of profit tax that companies are required to pay under GTS is to be increased from 20% to 25%. The list of exempt industries applying a zero rate, for example healthcare or education sector, will no longer include IT: starting from 2025 IT companies will pay profit tax at a rate of 5%.

Changes are also expected in the simplified tax system.

On the one hand, the upper limits for the applicability of the STS are to be raised significantly: from 265.8 million to 450 million rubles for revenue, and from 150 million to 200 million rubles for the residual value of fixed assets. Also abolished will be the increased rates for annual revenues in excess of 199.35 million rubles — the 8% rate for the “Revenue” base and the 20% one for the “Revenue minus expenses” base. Only the standard rates of 6% and 15%, respectively, will remain. The limit on the average number of employees will also increase – from 100 to 130.

On the other hand, entrepreneurs and companies using the STS with a revenue of over 60 million rubles, who previously only paid one tax, will also become VAT payers. Two possible options are offered: one envisions a rate of 20% with deduction of input VAT, the other - without the right to apply deductions, with a 5% rate for revenue of up to 250 million rubles per year and a 7% rate for revenue over 250 million rubles per year.

According to the Ministry of Finance the revenues of 96.8% of entrepreneurs applying STS is below 60 million rubles. However, from 2025, in order to a zero VAT rate such entrepreneurs and companies using the simplified tax system will need to submit a notice claiming VAT exemption. If it is not submitted, the applicable VAT rate will be 20% by default. An annual confirmation will not be required, but the obligation to pay VAT will arise automatically upon exceeding the revenue threshold. The notifice form will be developed by the Federal Tax Service; the required information in it is not yet known.

In addition, those who are currently splitting their business between small companies and individual entrepreneurs to apply the simplified tax system are invited to voluntarily abandon these schemes and, starting from 2025, to calculate taxes without splitting. Then the procedure for “terminating the obligation to remit the arrears in taxes, penalties, and fines resulting from business fragmentation” will apply to them, i.e., tax authorities will not charge additional taxes, penalties, and fines for the fiscal years 2022-24.

The bill details the situations where tax audits have already been ordered or decisions have been made on them. The right to “amnesty” does not apply to those entrepreneurs and companies against whom a criminal case or administrative proceedings have already been opened.

On June 20, the Duma will begin consideration of the bill in the first reading; experts do not expect significant changes to the novelties contained in it.