Ministry of Finance Announces Changes to VAT Rate from 2026

The main initiatives concern an increase in VAT for the majority of goods.

1. Increase in the VAT Rate

· What’s changing: The standard VAT rate will be increased from 20% to 22%.

· Effective date: From January 1, 2026.

· Purpose: To direct additional revenue to fund defense and security.

· Important clarification: The reduced VAT rate of 10% will be retained for socially significant goods (medicines, food, children’s goods).

2. Tighter Rules for Small Businesses on the Simplified Tax System (STS)

· What’s changing: The annual revenue threshold at which businesses on the STS are required to pay VAT will be sharply reduced—from 60 million to 10 million rubles.

· Reason: To combat the practice of “business splitting” (creating multiple legal entities) to artificially understate revenue and avoid VAT.

· Consequence: Companies and individual entrepreneurs with an annual income exceeding 10 million rubles will be required to become VAT payers and submit the corresponding tax returns.

As the Ministry of Finance explains, lowering the threshold to 10 million rubles will make it more effective to combat “splitting” and will provide growing businesses with a smoother transition to the general taxation terms.

The proposed changes are aimed at increasing tax revenues to the budget, primarily to fund the security and defense sector, as well as at closing popular tax optimization schemes for businesses.