How to choose VAT rate for simplified tax system in 2025?

Due to recent changes in tax legislation, companies have the opportunity to switch to special rates of the simplified taxation system (STS) – 5% and 7%.

The same special rates apply to VAT, and entrepreneurs are wondering if their use is beneficial.

From a purely mathematical perspective, 5% and 7% are more profitable than 20% and 10%. However, when choosing VAT rates under the simplified tax system (STS), it is important to consider the specifics of using these rates.

Advantages of special VAT rates:

• A lower tax rate allows for offering competitive prices to counterparties.
• For STS with the “income minus expenses” object, there is an opportunity to reduce the tax base by including “input” VAT in the cost of purchased goods or services.
• Reduced risks of accusations of creating “gaps” since VAT deductions are excluded.

Disadvantages of special VAT rates:

1. Inability to apply deductions for “input” VAT is the main drawback.
   1. For STS with the “income” object, VAT cannot be included in expenses or deducted.
   1. When switching to STS with a special rate, previously deducted VAT must be restored.
   1. Working at reduced rates is mandatory for 12 quarters (3 years). You can only stop applying them by:
2. Obtaining an exemption from VAT (income less than 60 million rubles per year);
3. Losing the right to use STS (income exceeding 450 million rubles).

When choosing standard rates, switching to special rates is possible at any time. However, if the limit of 450 million rubles is exceeded, VAT will have to be recalculated. It is also worth remembering that splitting a business to retain STS remains risky, especially in 2025–2026, when tax authorities will strengthen control.

The decision on choosing a rate requires analysis – it is necessary to determine which special rate can be applied and assess which standard rates will be used if 5% or 7% are not chosen. The share of costs without VAT, such as salaries or purchases from non-VAT payers, is also taken into account. If such costs are high, special rates are more profitable. It is also important to analyze the customer base. If the majority of buyers are exempt from VAT, special rates are preferable. It is important to remember that choosing special rates deprives the right to 0% VAT, except in strictly limited cases such as exports or international transportation

For “simplified” taxpayers with revenue exceeding 60 million rubles, special rules apply. Income below 60 million rubles exempts from VAT obligations. If the limit is exceeded, companies and individual entrepreneurs must choose between the general and special VAT regimes. The general regime allows for deductions but requires maintaining purchase and sales books and filing declarations. The special regime implies rates of 5% or 7% without deductions but with the same reporting obligations. The rate under the special regime depends on income: 5% applies to income up to 250 million rubles, and 7% applies if this limit is exceeded.

Small businesses with turnovers below 60 million rubles will not be affected by the changes. Large companies will receive VAT similar to other countries, which may lead to price increases for end consumers. The choice of rate depends on the customer base: for B2C, 5% or 7% is more profitable, while for B2B, standard rates are preferable.

Preparation for switching to STS with VAT:

1. Assess the tax burden and choose the optimal regime (STS or general tax system). Consider income, expenses, regional rates, and the need for deductions.
   1. Check the qualifications of the accounting department. Working with VAT requires more documentation and knowledge.
   1. Prepare documents: revise contracts, prices, and business processes related to VAT.
   1. After starting to apply VAT, conduct an audit to avoid errors and penalties.