Tax Reform 2026: What Awaits Businesses and How to Prepare Now

The Russian Government has submitted a draft law introducing large-scale changes to the Tax Code. The majority of the amendments, scheduled to take effect in 2026, will increase the fiscal burden on companies and individual entrepreneurs (IEs). Here are the key innovations and an action plan for 2025.

Key Changes in Tax Legislation

The reform will affect the main areas of business taxation: VAT, special tax regimes, and insurance premiums.

1. VAT: Rate Increase and Tighter Rules

• Increase in the Standard Rate: The standard VAT rate will rise from 20% to 22%. The reduced 10% rate for socially significant goods will remain.
• Reduction of Exemptions: A number of operations will lose their VAT exemption, including the transfer of rights to Russian software and related licenses.
• Strict Limits for “Simplified” Taxpayers: Companies and IEs using the Simplified Taxation System (STS) will be required to pay VAT if their income exceeds 10 million rubles (the current limit is 60 million rubles). This is aimed at combating artificial business fragmentation.

2. Special Regimes: Reduced Availability

• Patent System (PSN): The income limit for applying the PSN is also being reduced to 10 million rubles. Furthermore, the patent will become unavailable for:
  • Freight road transportation services.
  • Retail trade through stationary outlets with trading floors.
• Simplified Taxation System (STS): The reduced rates of 5% and 7% are preserved, but their application, as well as that of the new preferential 1% rate, will be subject to strict industry-specific criteria.

3. Insurance Premiums: Abolition of Benefits and New Rules

• Return to General Tariffs: Reduced insurance premium tariffs (15%) are being abolished for most small and medium-sized enterprises (SMEs). Starting in 2026, contributions will be calculated at general rates:
  • 30% — on payments within the established base.
  • 15.1% — on payments above the base.
• Benefits for a Select Few: Reduced tariffs will remain only for types of activities included in a special list approved by the Russian Government, provided that the income share from this primary activity (OKVED code) is at least 70%.
• Premiums on Payments to Directors: If payments to a director in a month are less than the federal Minimum Wage (MROT), contributions will have to be calculated based on the federal MROT.

As commented by Finance Minister Anton Siluanov, the innovations are necessary to curb illegal tax optimization schemes; however, they will also seriously impact bona fide businesses.

Action Plan for Businesses in 2025

Experts recommend starting preparations for the reform now to minimize risks and financial losses.

1. Conduct a Financial Analysis. Calculate how the changes will affect your company’s tax burden and profitability. Model different scenarios.
2. Review Your Tax Regime. Analyze whether your current regime (STS, PSN) will remain beneficial. Assess the feasibility of switching to another system or changing the tax object.
3. Optimize Costs and Contracts. Find reserves for maintaining efficiency. Begin revising contracts with counterparties and your pricing policy to mitigate the consequences of the VAT increase where possible.
4. Check and Update Your OKVED Codes. Ensure that your primary type of activity in the Unified State Register of Legal Entities/Individual Entrepreneurs (EGRUL/EGRIP) corresponds to reality and allows you to qualify for benefits on insurance premiums or under the STS.
5. Assess Your HR and Accounting Resources. If you will be dealing with VAT for the first time, decide who will handle the preparation of returns and invoices. Consider the option of accounting outsourcing.
6. Refrain from Illegal Schemes. Against the backdrop of tightening control, the risks of using dubious optimization schemes have increased significantly.

The draft law is expected to be adopted in the near future, so businesses have slightly over a year to adapt their processes to the new tax realities.