Taxation systems in Russia

When starting a business, any company must choose a taxation system.

There are currently two main systems:

1. General system
2. Simplified system

The general system usually involves – Value added tax (VAT) 20% + income tax 25%

The simplified system has two options:

• 6% of income
• 15% of income minus expenses

There are several restrictions on the application of the simplified system:

• The share of other organizations in the company cannot exceed 25%
• Prohibition of application for companies that have branches

If you register a company under the simplified 6% system, the following income levels will apply:

• Up to 60 million rubles (approximately 640,000 euros) – only 6%,
• 60–250 million rubles (approximately 640,000–2,700,000 euros) – 6% + VAT 5% (without deduction) or 20% (with deduction),
• 250–450 million rubles (approximately 2,700,000–4,800,000 euros) – 6% + VAT 7% (without deduction) or 20% (with deduction),
• More than 450 million rubles (approximately 4,800,000 euros) – the right to use the simplified system is lost, income tax of 25% and VAT of 20% (with deduction) is paid.

To use the simplified system immediately after registering a company, it is necessary to submit an additional application together with a package of documents.

If the company was registered under the general system but then decided to switch to the simplified system, an application for the transition to the simplified system can be submitted within 30 calendar days after the company’s registration. Otherwise, the transition is only possible from the new year.