The income threshold for applying VAT under the simplified tax system will remain at 20 million rubles: what does this mean for businesses

Following the recent economic forum, a list of instructions was approved, providing for amendments to tax legislation. One of the most significant decisions for small and medium-sized businesses was maintaining the annual income threshold of 20 million rubles. Above this threshold, taxpayers using the simplified tax system are required to calculate and pay VAT.

The relevant changes have already been enshrined in legislation and will apply to the next planned budget period.

Why this decision matters

Following the tax reform, the procedure for applying the simplified tax system has changed significantly.

While previously the majority of organizations and individual entrepreneurs operating under the simplified tax system were completely exempt from VAT payer obligations, the legislature subsequently introduced a mechanism for gradually reducing the income threshold at which such an obligation arises.

Initially, it was assumed that this limit would be further reduced annually. This would have meant that more and more small businesses would have been forced to transition to VAT administration, which would inevitably have increased the tax and administrative burden.

The refusal to further lower the threshold allows for the preservation of current tax conditions and ensures greater predictability of tax regulation.

What will change for taxpayers

Maintaining the current limit means that organizations and individual entrepreneurs using the simplified tax system will be able to continue to adhere to the 20 million ruble income threshold without having to take into account the previously planned annual reduction.

For business, this has several practical consequences:

• it becomes possible to plan financial indicators more accurately;
• the risk of an unexpected transition to VAT calculation obligations is reduced;
• the stability of the tax model for small and medium-sized businesses is maintained;
• The administrative burden associated with tax accounting and reporting preparation is reduced.

These changes are especially relevant for companies whose annual revenue is close to the established threshold.

Tax burden planning becomes more predictable

For many organizations, the issue of the emergence of the obligation to pay VAT has a significant impact not only on the tax burden, but also on the financial model of the business as a whole.

Changes to the tax regime require revision of contractual terms, pricing, accounting systems, procedures for preparing primary documents, and interactions with counterparties.

Maintaining the current limit allows companies to avoid the need to review such processes annually solely due to changes in legislation.

The instructions also affect other areas of business development.

In addition to tax regulation issues, the list of instructions provides for the development of additional measures to improve the conditions for doing business.

Specifically, it is planned to consider proposals to reduce the administrative burden on small and medium-sized manufacturing enterprises, create a list of priority investment projects, and develop long-term strategies for the development of digital platforms and autonomous technologies.

These directions demonstrate the desire to ensure more stable conditions for the development of entrepreneurship and the implementation of investment projects.

Recommendations  for businesses

Despite the current threshold remaining in place, companies should not abandon regular tax planning.

In order to minimize tax risks, it is advisable to:

• control the amount of income received during the year;
• assess in advance the likelihood of the occurrence of an obligation to pay VAT;
• analyze the impact of changes in the tax regime on existing contracts;
• adjust internal accounting processes in a timely manner;
• assess the tax consequences of implementing investment and large-scale commercial projects.

Particular attention to these issues is recommended for organizations whose revenue is approaching the limit established by law.

Maintaining the income threshold at 20 million rubles can be seen as a measure aimed at ensuring greater stability in tax regulation for small and medium-sized businesses.

For businesses, this means maintaining the current conditions for applying the simplified taxation system, the ability to more confidently plan financially, and reducing the risk of additional administrative costs associated with the premature transition to fulfilling the obligations of a VAT payer.

At the same time, tax legislation continues to rapidly evolve, so companies are advised to regularly assess the impact of new regulatory changes on their operations and promptly adjust their tax strategy to reflect current requirements.