Taxpayers on the simplified taxation system will pay VAT from 2025

Changes to the tax code are expected in 2025. The adoption of Bill No. 639663-8 will lead to radical changes in the application of the STS from the beginning of next year. According to the bill, simplified tax payers will also become VAT payers.

Changes for SIMPLIFIED TAXATION SYSTEM  payers regarding VAT

If simplified tax collectors are currently automatically exempt from VAT, then according to the draft law, from January 1, 2025, all of them will become VAT payers. However, it is possible to obtain an exemption in accordance with Article 145 of the Tax Code of the Russian Federation if one of the conditions is met:

1. A company or individual entrepreneur begins to apply the exemption in the same calendar year in which they switch to the simplified taxation system (SIMPLIFIED TAXATION SYSTEM ). This applies to those who switch to the STS from 2025, including newly registered taxpayers after January 1, 2025.
2. Tax income for the previous calendar year — no more than 60 million rubles. Income is calculated according to the rules of clause 1 of Article 346.15 and clauses 1, 3 of clause 1 of Article 346.25 of the Tax Code of the Russian Federation. This is a condition for those who apply the STS as of December 31, 2024 and continue to apply in 2025.

VAT exemption does not apply when goods are imported into the Russian Federation (clause 3 of Article 145 of the Tax Code of the Russian Federation).

Taxpayers on a simplified system who have received an exemption will not be able to opt out of it at will. If the income during the tax period exceeds 60 million rubles, then the right to exemption will be canceled from the first day of the month in which this threshold was exceeded.

In order to receive VAT exemption, all simplified taxpayers wishing to be exempt from January 1, 2025, will have to submit a notification to the Federal Tax Service no later than January 20, 2025 in accordance with paragraph 3 of Article 145 of the Tax Code of the Russian Federation.

Further, annually until the 20th day of the month following the expired 12 calendar months of the use of the exemption, it will be necessary to provide documents to confirm the right to continue applying the exemption in accordance with paragraph 4 of Article 145 of the Tax Code of the Russian Federation.

The notification and documents for the extension of the exemption can be sent by registered mail, electronically via the TCS or through the taxpayer’s personal account. The form and format of the notification will be approved by the Federal Tax Service, and the currently valid forms and formats (by Order of the Ministry of Finance dated 12/26/2018 No. 286n, letter of the Federal Tax Service dated 11/25/2021 No. EA-4-15/16426@) will be canceled.

Taxpayers on the STS who do not receive an exemption will be able to choose between two VAT payment options: general or special.

• If the general procedure for VAT payment is chosen, it will be necessary to fully comply with the rules of Chapter 21 of the Tax Code of the Russian Federation, including the following steps:

• Calculate and pay VAT at the general rates (20%, 10%, 0%, settlement rates);
• Issue invoices, keep records of sales and purchases;
• Use the right to apply deductions;
• Submit VAT tax returns.

• Special order

This procedure applies if the taxpayer did not use the right to VAT exemption in the year of transition to the SIMPLIFIED TAXATION SYSTEM  or lost the right to exemption:

– The VAT rate is 5% without deductions if two conditions are met:

1. Tax income for the previous calendar year did not exceed 250 million rubles;
2. Tax income in the current calendar year also did not exceed 250 million rubles.

– The VAT rate is 7% without deductions:

1. From the month in which the tax income in the current calendar year exceeded 250 million rubles;
2. Or from the beginning of the year, if the tax income for the previous calendar year exceeded 250 million rubles.

The limit for applying the 5% and 7% rates will be indexed annually.

Simplified taxpayers who have chosen a special procedure for paying VAT apply the 0% VAT rate to certain transactions specified in the relevant articles of the Tax Code of the Russian Federation.

The amounts of VAT paid upon purchase or import of goods, works, services, property rights, OS and IA under a special VAT payment procedure are not included in the cost of such goods and services. When using the object of taxation “Income minus expenses”, the simplified tax will be able to take into account such VAT in expenses, including cases of sale of goods and services with a VAT rate of 0%.

The special procedure for paying VAT according to the draft law applies only to incomes up to 450 million rubles per year. However, this amount corresponds to the new limit for the SIMPLIFIED TAXATION SYSTEM . If this income is exceeded, the taxpayer is deprived of the right to apply the STS and is obliged to pay VAT according to the general procedure.

Thus, the purpose of such a restriction for the application of a special VAT payment procedure remains unclear.

There are no special rules in the draft law regarding invoicing and reporting with a special procedure for paying VAT. Taxpayers who have chosen a special procedure will probably need to issue invoices, keep records of sales, etc.