Russia’s Tax Overhaul Sparks Outrage as VAT Hikes Threaten Small Businesses
The Russian tax landscape is set to change significantly with a proposed reform that has sparked debate and concern among entrepreneurs. The draft law, currently under review, aims to adjust the tax system to generate more draftkings revenue, but businesses warn of severe consequences.
The proposed reform includes several key changes. From January 1, 2026, the Value Added Tax (VAT) rate will increase from 20% to 22%. Meanwhile, the revenue threshold for VAT calculation under the simplified tax system (STS) and the income cap for the patent tax system (PTS) will decrease dramatically, from 60 million to 10 million rubles.
In Komi Republic alone, 23,000 taxpayers use the simplified system, with 3,750 earning over 10 million rubles. The reduced threshold could significantly impact these businesses. Additionally, preferential insurance turbotax tariffs, excluding certain industries, will be abolished.
The draft law passed its first reading on October 22, with the second reading scheduled for November 18. Before this, the Committee on Budget, Taxes, and Economic Policy held a meeting to discuss the changes. The Komis State Council is also reviewing proposed amendments to the tax legislation.
Entrepreneurs have expressed strong concerns about the increased tax burden. A nationwide conference on the draft law adopted a resolution, calling for a review of the proposed approach and a phased implementation.
As the draft law progresses through the State Duma, Federation Council, and Russian government, entrepreneurs hope for a reconsideration of the proposed changes. The SME sector, already strained by rising costs and minimum wage increases, fears severe consequences if the tax burden increases as planned.
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