What businesses need to know about the reduction in the revenue threshold for VAT payments
The Russian government has decided to gradually adjust the annual revenue threshold at which small and medium-sized enterprises (SMEs) on the simplified taxation system (STS) are required to become VAT payers. This was announced by Mikhail Mishustin at a meeting of the Cabinet of Ministers.
According to the announced parameters of the reform:
• From 2026, the threshold will be 20 million rubles.
• From 2027, it will be 15 million rubles.
• From 2028, it will be 10 million rubles.
Previously, a sharp reduction in the limit to 10 million rubles was considered as early as 2025, but after consultations with business representatives, it was decided to implement the reform gradually to give companies time to adapt.
Who will be affected by the changes
The new rules will apply to both legal entities (LLCs, JSCs) and individual entrepreneurs (IEs) using the simplified tax system. The same revenue thresholds and a uniform procedure for transitioning to VAT payment when these thresholds are exceeded have been established for both categories.
For many companies on the simplified tax system, this means that in the coming years they may fall under VAT liability, even if their revenue threshold is significantly higher today. If the established limit is exceeded, the company will be required to issue invoices with VAT, keep records in the purchase and sales ledger, and file returns more frequently.
What businesses should do
1. Analyze your revenue: assess whether you will exceed the specified limits in the coming years.
2. Adapt accounting: prepare an accounting system: if the transition to VAT becomes inevitable, you will need to keep a purchase ledger and a sales ledger, and issue invoices.
3. Calculate the tax burden: assess how profitability and pricing will change when VAT is charged.
4. Monitor changes in legislation: the bill is under review, and there may be clarifications related to the conditions for applying the transition and business support during the initial transition.
The reform of VAT thresholds is a signal to businesses that the tax burden for USN entities will gradually increase. Companies and individual entrepreneurs whose income is approaching the range of 10-20 million rubles should prepare in advance for the change in rules in order to minimize risks and correctly plan their accounting and reporting.
