Tax Reform 2026: Key Changes for Russian Businesses

At the end of November, Russian President Vladimir Putin approved a large-scale tax reform that will affect virtually every entrepreneur and organization in the country. Federal Law No. 425-FZ of November 28, 2025, introduces significant changes to the Russian Tax Code, most of which will come into effect on January 1, 2026. This reform represents the most significant adjustments to tax legislation in recent years and requires significant preparation from businesses.

VAT Basic Rate Increase: What Everyone Needs to Know

The central element of the tax reform was an increase in the basic value-added tax rate from 20% to 22%. This change will affect the vast majority of companies and sole proprietors operating under the general taxation system. VAT is payable by anyone who sells goods, work, or services in Russia, including gratuitous transfers, imports of goods, construction and installation work for their own needs, and the transfer of goods for personal consumption.

At the same time, the preferential VAT rate of 10% will remain in effect for socially significant categories of goods:

• food,
• children’s products,
• periodicals,
• books,
• medical supplies.

The zero rate (0%) will also apply to export transactions, international shipments, and a number of other special cases. However, some goods will lose their eligibility for preferential taxation—in particular, milk-containing products with milk fat substitutes, spreads, and creamy vegetable ghee will now be taxed at the general rate of 22%.

VAT calculation rates will also change accordingly. Instead of the usual 20/120 rate applied for advance payments and other special cases, a 22/122 rate will now be used. The rate for special transactions will also change similarly, from 16.67% to 18.03%. These adjustments will require updating accounting software and revising all document templates containing VAT calculations.

Transitional provisions and practical aspects

Particular attention should be paid to the transitional provisions that determine the rate applicable to contracts concluded before January 1, 2026. The legislator has established a clear rule: the new 22% rate applies to all goods, works, and services shipped or rendered after January 1, 2026, regardless of the date of the contract. The VAT tax base is determined on the earlier of two dates: the day of shipment of goods or the day of receipt of advance payment.

Let’s consider practical situations that businesses will face. If an advance payment is received in 2025, the supplier must calculate VAT at the current rate of 20/120. When the goods are shipped in 2026, the new 22% rate applies. If the shipment occurs in 2025 and payment is received in 2026, the taxable base is determined at the time of shipment at the 20% rate, and no subsequent adjustment is required. However, there is an exception: if a simplified taxpayer becomes a VAT payer for the first time, they are not obligated to pay VAT on goods shipped before this obligation arose.

When returning goods purchased in 2025 or earlier in 2026, the buyer will not be required to pay the 2% difference out of pocket. The refund will be made at the price set at the time of original purchase, and the seller will issue an adjusted invoice for the value of the returned goods. This rule applies regardless of whether the buyer has accepted the goods for accounting.

Changes in the benefits system and new rules

The tax reform brought both restrictions and the preservation of important benefits. The Federal Tax Service has already published a draft of the updated VAT return, which will include new lines to reflect the 22%, 22/122, and 18.03% rates. The new reporting form is planned to be implemented starting in the first quarter of 2026.

A positive development was the continued VAT exemption for the transfer of exclusive rights to domestic software from the Russian software registry. This exemption was initially planned for cancellation, but the business community secured its retention, which is important for the development of the IT industry. However, the banking sector will face new tax obligations: bank card services, including acquiring and processing, are now subject to VAT.

The legislator also expanded the list of transactions not recognized as taxable. It now includes the transfer of real estate seized for state and municipal needs, for which the taxpayer is provided reimbursement or compensation. Furthermore, a zero tax rate is being introduced for the sale of ore, concentrates, and other industrial products containing precious metals for refining.

Legal position of the Constitutional Court

In late November, the Constitutional Court of the Russian Federation heard an important case concerning continuing contracts and changes to the VAT rate. The court ruled that if tax legislation changes after the contract is concluded, and the supplier becomes obligated to pay VAT, the ability to recover the full amount of tax in addition to the price must be limited.

According to the ruling, in the absence of an agreement between the parties to adjust the price or terminate the contract, the court may increase the price by up to half the VAT amount applicable to the transaction if continued performance of the contract deprives the supplier of the expected result at the time of conclusion of the contract.

Revolutionary changes in the simplified tax system

The simplified tax system is undergoing one of the most extensive changes in its history. Legislators continue to move toward aligning the simplified tax system with the general tax system, radically changing the operating conditions for hundreds of thousands of entrepreneurs across the country.

New income thresholds and VAT liability

The key innovation is a gradual reduction in the income limits above which simplified taxpayers are required to calculate and pay VAT. Initially, a sharp reduction in the threshold from 60 million to 10 million rubles was discussed, but the authorities compromised and established a three-year transition period for businesses to adapt.

In 2026, the threshold will be 20 million rubles, decreasing to 15 million in 2027, and then remaining at 10 million rubles from 2028 onward. The obligation to pay VAT arises in two cases: if income for the previous year exceeded the established limit, the taxpayer becomes a VAT payer on January 1 of the current year; if the limit is exceeded during the current year, the obligation arises on the first of the month following the month in which the limit was exceeded.

This means that if a company or individual entrepreneur’s income exceeded 20 million rubles in 2025, they must begin fulfilling all VAT payer obligations starting January 1, 2026: calculating and paying the tax, maintaining purchase and sales ledgers, and filing a tax return. Similarly, if income exceeds 20 million rubles during 2026, VAT payer status will begin the month following the limit being exceeded.

Special VAT rates for simplified taxpayers

Reduced special rates are available for simplified taxpayers who become VAT payers. These rates depend on their income. For incomes between 20 million and 250 million rubles (up to 272.5 million rubles, subject to indexation in 2026), a 5% rate applies. For incomes between 250 million and 450 million rubles (up to 490.5 million rubles, subject to a 1.090 deflator in 2026), a 7% rate applies.

In a significant relief for businesses, the authorities have decided not to hold simplified taxpayers liable for late submission of their first VAT return in 2026. The current moratorium on fines for late filing has been extended for the entire next year. If a taxpayer fails to file a return on time but manages to do so by the end of 2026, no penalties will be imposed.

Expanding capabilities for expense accounting

Positive changes are coming for those using the “income minus expenses” tax base. The list of expenses that can be taken into account when calculating the tax base is significantly expanded. Firstly, it now includes costs for the completion, retrofitting, reconstruction, modernization, and technical re-equipment of intangible assets—previously, only the costs of their acquisition or creation could be included.

But the most significant change is that the list of expenses is now open-ended. A new section has been added, defining “other expenses” according to the rules of Chapter 25 of the Tax Code, similar to corporate income tax. This gives entrepreneurs significantly more freedom to optimize their tax base. However, as with corporate income tax, expenses must meet three criteria: be economically justified, documented, and aimed at generating income.

Other adjustments include the exclusion of interest on deposits in Russian banks from income when calculating the tax base under the simplified tax system. This income will now be included in the calculation of corporate income tax and personal income tax for individual entrepreneurs, resulting in a more uniform tax system.

Changes in the application of special VAT rates

To help businesses adapt to the new conditions, a significant relaxation will be introduced starting January 1, 2026: simplified taxpayers who have switched to the reduced VAT rates of 5% or 7% will be allowed to voluntarily return to the general 22% rate early. This can be done within the first four quarters of the special rates’ application, whereas previously they were required to apply them continuously for 12 quarters, or three years.

This innovation is especially important for those entrepreneurs who, after starting to work with reduced rates, find that the basic rate is more advantageous. For example, if a company’s main counterparties are also VAT payers and can deduct the tax, working at the 22% rate may be preferable, as it allows counterparties to fully reimburse their input VAT. The accelerated transition is only available to those who first became VAT payers at the 5% or 7% rates.

Limitations on regional benefits

Starting in 2026, the procedure for establishing reduced tax rates under the simplified tax system at the regional level will undergo significant changes. Currently, constituent entities of the Russian Federation have broad powers to introduce tax rates below federal standards through their own laws: from 1% to 6% for the “income” tax base, from 5% to 15% for the “income minus expenses” tax base, as well as zero rates when establishing tax holidays.

The new rules introduce a federal framework for regional preferences. The Russian government will approve a closed list of activities for which regions will be able to establish reduced rates, as well as the criteria taxpayers must meet to qualify for these benefits. Regions will be required to consider the general requirements established at the federal level when developing their business support programs. This change is aimed at unifying tax policy across the country and preventing unfair optimization schemes through selective registration of the region.

Patent taxation system: new boundaries of application

Individual entrepreneurs using the patent taxation system will also face significant changes. The main change concerns the income threshold, exceeding which disqualifies them from using this special regime.

1. Gradual reduction of the income threshold

Similar to the simplified system, a gradual reduction in the income limit for patents is being introduced. Starting in 2026, entrepreneurs will lose the right to use the patent tax system if their income for 2025 or during 2026 exceeds 20 million rubles. In 2027, this threshold will be reduced to 15 million rubles, and starting in 2028, it will be set at 10 million rubles.

This measure is aimed at combating widespread business fragmentation schemes, whereby large enterprises are artificially divided into several smaller units to retain the right to preferential tax regimes. Lowering the threshold should significantly limit the scope for such optimization and ensure fairer taxation.

• New procedure for tax recalculation

The procedure for reducing the number of objects or physical indicators used in business activities is established by law. If an individual entrepreneur has reduced, for example, their retail space or the number of vehicles specified in their patent, they can apply for a new patent to replace the one previously issued.

The application must be submitted within ten days of the change in physical parameters. In this case, the tax authority will recalculate the tax amount for the previous patent based on its actual validity period—from the effective date to the date preceding the start of the new patent. This rule allows entrepreneurs to more flexibly manage their tax burden as the scale of their operations changes.

Technology Levy: A New Payment for Electronics Importers and Manufacturers

Starting September 1, 2026, Russia will introduce a completely new mandatory payment—a technology tax on the import and production of electronics. This tax will be non-tax and will be established as a separate article in the Federal Law on Industrial Policy.

1. Basic collection parameters

Payers of the technological fee will be legal entities and individual entrepreneurs engaged in the production or import of electronic components (electronic modules) or industrial products containing such components. The fee will be levied for each unit of product imported into Russia or manufactured within its territory, including the continental shelf and exclusive economic zone.

The specific rates for the technological fee will be determined by the Russian Government. They will be set as fixed amounts in rubles per unit of electronic product, depending on its type, as defined by the Commodity Nomenclature of Foreign Economic Activity of the Eurasian Economic Union and the All-Russian Classifier of Products by Type of Economic Activity. The law sets the maximum fee at 5,000 rubles per unit.

The government will also approve the procedure for calculating, paying, and refunding overpaid amounts of the technological fee. The list of specific types of electronic products subject to the fee will be determined by the Cabinet of Ministers in a separate regulation. Funds from the technological fee will go to the federal budget.

• Expected consequences

Experts estimate that the technology levy will affect a wide range of electronic devices—from smartphones and tablets to servers and industrial equipment. Given the maximum levy of 5,000 rubles per unit, a significant increase in retail prices for electronics for end consumers is expected. Manufacturers and importers will inevitably pass on some of the additional costs to consumers.

The introduction of a technology levy is justified by the need to stimulate the development of the domestic electronics industry and import substitution in high-tech sectors. The funds collected are expected to be used to finance programs supporting Russian electronics manufacturers and the development of critical technologies. However, in the short term, this will create an additional burden on businesses producing electronic products.

Other important changes for business

The 2026 tax reform includes many other adjustments that also deserve the attention of the business community.

1. Preservation and extension of preferential mechanisms

A positive development was the retention of the accelerated declarative VAT refund procedure without a bank guarantee. This mechanism allows taxpayers to receive their refund before the completion of the desk audit of their tax return, significantly improving companies’ financial standing. According to Andrei Makarov, Chairman of the State Duma Committee on Budget and Taxes, the Russian Government supported the idea of permanently introducing the declarative procedure, and this initiative will be developed in the near future.

IT companies retain the zero VAT rate for transferring rights to Russian software. Although the initial draft of the bill planned to eliminate this benefit, the idea was abandoned after intense industry opposition. This is important for supporting the competitiveness of domestic software developers in the Russian and international markets.

The special procedure for calculating penalties for organizations, with differentiated rates depending on the period of delay, is being extended into 2026. For the first 30 calendar days of delay, penalties are calculated at one three-hundredth of the Bank of Russia’s key rate; from the 31st to the 90th day, they are calculated at one one- hundred-fiftieth ; and starting from the 91st day, the rate of one three-hundredth is again applied. This mechanism was introduced in 2025 and has proven to be an effective support measure for conscientious taxpayers temporarily experiencing financial difficulties.

• Restrictions for certain categories of taxpayers

Small and medium-sized businesses, as well as IT companies, will face reduced benefits for insurance premiums. The specific parameters of these restrictions will be defined by bylaws, but it is already clear that this will lead to an increase in mandatory payments for employees.

The tax system for bookmakers and gambling operators is undergoing radical changes. Instead of the current fixed rates, the tax will be levied at 7% on the difference between bets received and winnings paid out. This system more accurately reflects the actual profits of companies in this industry and should ensure fair taxation.

• Easing international tax restrictions

suspension of international double taxation agreements on businesses will remain in effect until the end of 2028. These provisions apply to certain types of income and are intended to minimize the negative impact of the geopolitical situation on companies operating internationally. The extension of these measures will provide certainty for businesses in the medium term.

Financial expectations and impact on the economy

According to the financial and economic justification for the tax reform law, implementation of the entire set of amendments will generate significant additional federal budget revenues. Approximately 1.538 trillion rubles in additional tax and non-tax revenues are expected in 2026, approximately 2.371 trillion rubles in 2027, and approximately 2.750 trillion rubles in 2028.

These figures demonstrate the scale of the tax reform and its significance for public finances. However, for businesses, this means a significant increase in the tax burden and the need to revise financial plans, pricing policies, and business models. Companies and entrepreneurs will need to carefully analyze the impact of each change on their operations and develop strategies to adapt to the new conditions.