Tax reform for small businesses: key changes and their impact on entrepreneurs
The government is proposing to update taxation mechanisms for companies operating under the simplified tax system (STS). These initiatives could become one of the most significant adjustments to small business support in recent years. The goal of the reforms is to reduce the burden on entrepreneurs, increase transparency, and adapt the tax model to current economic conditions. However, any changes to the basic tax rules inevitably entail a range of legal and organizational consequences.
Key Parameters of the Proposed Changes
The government’s proposals include several key adjustments that could impact the growth of small businesses.
Reduction of Tax Rates Based on Revenue:
• For companies with annual turnover of 15 to 20 million rubles, the simplified tax system tax rate is proposed to be reduced to 3%.
• For businesses with revenue of 10 to 15 million rubles, the rate is planned to be set at 1%, starting in 2028.
This differentiation creates a smoother transition between small business categories and reduces incentives for artificially fragmenting companies.
One of the key elements of the reform is the ability to take into account a wider range of expenses when calculating the tax base. This is especially important for companies whose activities involve significant operating costs, including those in the service, manufacturing, and marketing sectors.
The project also provides for a gradual reduction in the revenue threshold above which taxpayers are obligated to pay VAT. This will reduce the administrative burden and simplify the transition of businesses to the next level of tax regulation.
Possible economic and legal consequences
If the reform is adopted, small businesses can expect a significant reduction in their tax burden.
• Increased entrepreneurial activity: the reduction in the simplified tax system rate creates the conditions for project development, increased turnover, and the legalization of previously unrecorded income. For aspiring entrepreneurs, this means a reduced risk of premature transition to more complex tax regimes.
• Fair formation of the tax base: the ability to account for actual expenses will improve the accuracy of calculations, bringing the simplified tax system closer to the tax principles familiar to medium-sized businesses, while maintaining administrative simplicity.
• Mitigation of the “tax hole effect”: a gradual reduction in the thresholds for transitioning to VAT will allow companies to develop more evenly, without limiting growth due to fears of ending up in a different tax bracket. • Increased requirements for accounting discipline: despite the reduced burden, entrepreneurs must take into account that tax authorities’ requirements for documenting expenses, maintaining accurate records, and complying with the simplified tax system will remain unchanged, and in some cases, will become more stringent. This increases the demand for professional accounting and legal support.
Potential Risks and Challenges for Business
The proposed reform brings not only advantages but also a number of significant challenges for which businesses must prepare in advance.
• Budget constraints: reducing rates will lead to a reduction in budget revenues, so the project may be adjusted during discussions. A revision of rates, effective dates, or requirements for taxpayers cannot be ruled out.
• The need for precise regulation of expenses: expanding the list of expenses requires clear instructions. An overly broad list will provoke disputes during tax audits; an overly narrow list will reduce the reform’s impact.
• Adaptation of government systems and methodology: correct implementation of the reforms will require updates to the Federal Tax Service’s IT infrastructure, changes to methodological letters, and control algorithms. The transition period may be accompanied by errors and differences in the interpretation of regulations, which will increase the number of disputes and requests for clarification.
• Risks of unfair schemes: lowering revenue thresholds may encourage new forms of tax evasion. This will lead to further strengthening of tax controls, which will increase the burden on entrepreneurs.
The proposed changes create a more flexible, predictable, and growth-oriented tax model for small businesses. Reducing rates, expanding the scope of eligible expenses, and adjusting thresholds strengthen the environment for business planning and scaling.
However, the success of the reform will depend on the precision of its implementation and the willingness of entrepreneurs to adapt their processes. Companies that proactively review their financial models, update internal regulations, and build a high-quality expense verification system will gain a significant competitive advantage.
For others, professional legal and tax support will be critical to minimize risks and maximize the reform’s opportunities.
