New personal income tax and profit tax rates from the Ministry of Finance. Future changes to the tax system
The Ministry of Finance of the Russian Federation has drafted and submitted to the government a new piece of legislation on future changes to the tax system. From now on, it is proposed to introduce a five-stage personal income tax scale, increase the growth of profit tax to 25%, expand the threshold for application of the simplified taxation system and amnesty for ‘splitting’.
The draft law on changes in the taxation system developed by the Ministry of Finance covers personal income tax, corporate income tax, as well as the tax on mineral extraction, the draft revises the capacity of the simplified taxation system. The expected date of entry into force of this draft law after the adoption of innovations by the State Duma is 1 January 2025. Earlier recommendations came from the State Duma itself, a lower income threshold for the progression of personal income tax was proposed.
The revenues generated by this project are expected to be used for socio-economic development, financing of national projects and improvement of infrastructure, support for entrepreneurship and financing in modern technologies. This project considers the establishment of financial balance in society.
New personal income tax system
The current two-tier income system will change to five tiers –
from 13% and 15% to the following:
– 13% for income up to RUB 200,000/month. (2.4 million rubles per year);
– 15% for income in the range of 200 – 416.7 thousand rubles/month (2.4 – 5 million rubles per year). (2.4 – 5 million roubles per year);
– 18% for income in the range of 416.7 thousand – 1.67 million RUB/month (5-20 million RUB/year); 18% for income in the range of 416.7 thousand – 1.67 million RUB/month (5-20 million RUB/year). (5-20 million roubles per year);
– 20% for income in the range of 1.67-4.17 million per month (20-50 million rubles per year);
– 22% for income over Rb 4.17m per month (Rb 50m per year).
According to the Ministry of Finance, the update will affect 2 million people out of 64 million PIT payers. Rosstat says that 1.1 million Russian workers received a salary of more than 200 thousand rubles.
The marginal income under the condition of 13% coincides with the income of the self-employed: the tax on professional income of 4-6% is paid on profits not exceeding the threshold of 2.4 million rubles.
Unearned income
The rates of 13% and 15% will be retained for the taxation of profits from securities. But 15% will apply to income exceeding 2.4 million rubles without progression. This will ensure that the development of the stock market will not be affected.
Regarding real estate – the new personal income tax rates will apply to the net profit from the sale, but not to the entire income from the sale. The same scheme applies in this area – 13% up to 2.4 million rubles and 15% for larger amounts. Currently, according to the Tax Code of the Russian Federation – the 15% rate does not apply to income from the sale of real estate, even if the sale amount exceeds 5 million rubles.
Corporate profit
It is proposed to increase the profit tax rate from 20% to 25%. Entrepreneurs previously allowed to increase it up to 30%, but with the provision of investment incentives. The tax increase will allow for the elimination of negotiable levies, such as exchange rate-dependent export duties introduced for a large range of industries, which were extended in the spring of 2024.
The income tax increase will also initiate an indefinite extension of the investment tax deduction mechanism in the regions and introduce a federal tax deduction for companies from priority industries.
‘’Transitional‘’ business
With regard to the simplified taxation system, there are plans to extend its permissible value for application. That is, the simplified taxation system will also be applied to income of up to 450 million roubles. The threshold for the residual value of fixed assets – from 150 million to 200 million rubles.
The increased rates of the simplified taxation system are cancelled – 8% on the basis of ‘income’ and 20% on the basis of ‘income minus expenses’, which are valid for profits from 199.35 million in 2024 and the number of employees from 100 people. Thus, all business on the simplified taxation system will apply base rates of 6% at the base of ‘income’ and 15%.
But such terms of the simplified taxation system will be applied with the payment of VAT (for companies that receive income exceeding 60 million rubles), which currently users of the simplified taxation system are not obliged to pay. Payment of VAT may be under the following conditions:
– general rate – VAT 25% (10% for certain types of goods, with the possibility to apply deductions);
– a rate of % for income up to 250 million rubles per year and a rate of 7% for income in the range of 250-450 million rubles per year (without the right to deductions).
These updates will affect the areas of trade, property rental and restaurants.
