Simplified taxation system as a type of tax regime

Nov, 24 2023

Organizations and individual entrepreneurs engaged in professional commercial activities can choose the most appropriate tax regime that best suits the structure of the company’s activities. A simplified taxation system is one such option.

The simplified taxation system, abbreviated STS, is a special taxation system for enterprises and individual entrepreneurs. Under this taxation system, enterprises pay only one income tax. This taxation system replaces value added tax (VAT), personal income tax for individual entrepreneurs, profit tax for LLC and corporate property tax, except for retail and office real estate.

There are two types of simplified taxation system: “income” and “income minus expenses”.

“Income” – the tax rate is no more than 6%, and expenses are not considered if the income does not exceed 188.55 million rubles per year. Regions have the right to reduce the tax rate for all or individual spheres of activity. For example, in Crimea, the simplified tax rate is 4%.

“Income minus expenses” – up to 15% of profit, if the annual income does not exceed 188.55 million rubles; the final tax rate varies depending on the region.

To qualify for a simplified system, sole proprietors and companies must meet certain conditions (income, number of employees, field of activity). In addition, there are restrictions for organizations on the presence of branches and the share of participation in the authorized capital.

• As for income, up to 150 million rubles per year multiplied by the coefficient of the Ministry of Economic Development for 2023 1.257; the limit for 2023 is 188.55 million rubles.

• The average number of employees is limited to 100 people. At the same time, employees and employees working under employment contracts are considered.

The number of employees is calculated on average for the first quarter, six months, nine months and one year.

• Restrictions by the type of activity.

Within the framework of the simplified taxation system, it is impossible to work in some business sectors. As an example, banks, investment funds, pawnshops, notaries, manufacturers of alcoholic beverages and tobacco can be cited.

For LLC – the share of participation of other companies, which cannot exceed 25%.

Another limitation for LLC based on the simplified taxation system is that they should not have branches.

To switch to a simplified taxation system, you must fill out the notification form 26.2–1.

Tax payments under the simplified taxation system should be made four times a year (based on the results of the first quarter, the results of the sixth month and the results of the ninth month, minus the amount of annual tax paid in advance):

– First quarter: from January 1 to March 31 — April 28;

– Half-year: from January 1 to June 30 and July 28;

– Nine months: from January 1 to September 30 and October 28;

– А year (from January 1 to December 31): until March 28 for companies and until April 28 for individual entrepreneurs.

As for liability, late submission of a tax return entails the collection of a fine in the amount of 5 to 30% of the unpaid tax amount, but not less than 1,000 rubles. for each full or incomplete month of delay (Article 119 of the Tax Code of the Russian Federation).

Late payment threatens to incur penalties. The amount of the penalty is calculated at a rate equal to 1/300 of the refinancing rate for each day of delay from the full or incomplete unpaid contribution or tax amount (Article 75 of the Tax Code of the Russian Federation).

Author of the article
Simplified taxation system as a type of tax regime
Valentina Khlavich
Managing Partner
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