Tax migration: how businesses in Russia are looking for “internal offshores” in 2025

In 2025, Russian companies expect a number of changes in tax legislation that may lead to a new wave of tax migration. On the one hand, raising the thresholds for applying the simplified tax system (STS) will allow more entrepreneurs to take advantage of this special regime. On the other hand, introducing the obligation to pay VAT for some entrepreneurs may make tax optimization schemes through moving businesses to regions with preferential conditions more attractive.

What awaits businesses in 2025?

• Raising thresholds for the STS: In 2025, businesses with 9-month income of no more than 337.5 million rubles will be able to use the STS. It will be possible to remain on this tax system with income of up to 450 million rubles per year and a residual value of fixed assets of up to 200 million rubles. This will expand the range of entrepreneurs who will be able to use the “simplified system”.
• Introduction of VAT for some entrepreneurs: In parallel with the expansion of the simplified tax system, new obligations to pay VAT are being introduced for some categories of businesses. This may prompt companies to look for more favorable tax conditions.

“Internal offshore” regions:

• Mordovia and Kalmykia: Experts are already calling these regions analogous to the Russian “internal offshore” that existed in the 1990s. Regional authorities are offering preferential rates for the simplified tax system, which may attract businesses that want to optimize tax payments.
• Other regions: Almost all regions of Russia have preferential conditions for the simplified tax system, which may be of interest to businesses. Specific conditions depend on the field of activity and the specific region.

Risks of tax migration:

• Fictitious registration: The Federal Tax Service warns that if tax migration turns out to be fictitious, and activity in the new region of registration is not carried out or is minimal, the courts will side with the tax service.
• Risk of loss of business reputation: Moving to a region with lower tax rates may cause a negative reaction from partners and clients.

Increasing the thresholds for the simplified tax system and the introduction of VAT for some entrepreneurs may provoke a new wave of tax migration in Russia. It is important for businesses to carefully study the possible options and choose the most profitable and safe way to optimize tax payments.