Order of the Federal Tax Service of Russia No. ED-7-3/958@ of 25 December 2020 approved a new form, the procedure for completing it, and the format for filing a tax return under the simplified taxation system (hereinafter, the STS), beginning with the reporting for 2021.
In addition, Order of the Ministry of Economic Development of Russia No. 654 of 28 October 2021 set, for the purposes of Chapter 26.2 of the Tax Code of the Russian Federation (hereinafter, the Tax Code), a deflator coefficient for 2022 equal to 1.096. The income amounts fixed by the Tax Code for the purposes of the STS are to be multiplied by that coefficient.
Moving to the STS
The general condition for an organisation or an individual entrepreneur to move to the STS is the filing with the tax authority of a notice of transition to the STS (paragraphs 1 and 2 of Article 346.13 of the Tax Code).
Additional requirements are set for organisations:
- at the end of the nine months of the year in which the organisation files the notice of transition to the STS, income must not exceed 123.3 million roubles (112.5 million roubles multiplied by the deflator coefficient of 1.096) (paragraph 2 of Article 346.12 of the Tax Code);
- the residual value of the organisation's fixed assets, determined in accordance with the accounting legislation of the Russian Federation, must not exceed 150 million roubles (subparagraph 16 of paragraph 3 of Article 346.12 of the Tax Code).
Conditions for using the STS
Under the STS, tax is charged at 6% (where the object of taxation is "income") or at 15% (where the object of taxation is "income minus expenses"), unless the constituent entities of the Russian Federation have set lower rates. The conditions are the same for organisations and for individual entrepreneurs:
- income, determined on a cumulative basis, does not exceed 164.4 million roubles (150 million roubles multiplied by the deflator coefficient of 1.096);
- the average number of employees does not exceed 100;
- throughout the reporting (tax) period, the requirements of subparagraphs 1-11, 13, 14 and 16-21 of paragraph 3 of Article 346.12 and of paragraph 3 of Article 346.14 of the Tax Code are met (including the requirement that the residual value of fixed assets not exceed 150 million roubles according to the accounting records).
Using the STS at the higher tax rates (8% or 20%)
Exceeding the limit on income and/or on the average number of employees does not deprive an organisation or an individual entrepreneur of the right to apply the STS. That follows from paragraph 4.1 of Article 346.13 and from paragraphs 1.1 and 2.1 of Article 346.20 of the Tax Code. The following conditions must, however, be met:
- at the end of the reporting (tax) period, income is more than 164.4 million roubles (150 million roubles multiplied by the deflator coefficient of 1.096) but does not exceed 219.2 million roubles (200 million multiplied by the deflator coefficient of 1.096),
- and/or the average number of employees is from 100 to 130.
A mandatory condition for keeping the right to apply the STS is that, throughout the reporting (tax) period, the requirements of subparagraphs 1-11, 13, 14 and 16-21 of paragraph 3 of Article 346.12 and of paragraph 3 of Article 346.14 of the Tax Code are observed (in particular, the residual value of fixed assets on the accounting records must not exceed 150 million roubles).
If the limits on income and/or on the average number of employees are exceeded within those bounds, the tax is paid at the higher rates: 8% where the object of taxation is "income" (paragraph 1.1 of Article 346.20 of the Tax Code); 20% where the object of taxation is "income minus expenses" (paragraph 2.1 of Article 346.20 of the Tax Code).
Loss of the right to apply the STS
The conditions for losing the right to apply the STS are set out in paragraph 4 of Article 346.13 of the Tax Code, and they are as follows:
- at the end of the reporting (tax) period, income has exceeded 219.2 million roubles (200 million roubles multiplied by the deflator coefficient of 1.096),
- and/or the average number of employees has exceeded 130,
- and/or, during the reporting (tax) period, the requirements of subparagraphs 1-11, 13, 14 and 16-21 of paragraph 3 of Article 346.12 and of paragraph 3 of Article 346.14 of the Tax Code have been breached (in particular, the residual value of fixed assets has exceeded 150 million roubles).
To keep the right to apply the STS, an individual entrepreneur, like an organisation, must monitor the residual value of fixed assets. That follows from explanations by the Ministry of Finance of Russia (for example, letter No. 07-01-10/9691 of 11 February 2022), by the Federal Tax Service of Russia (letters No. SD-3-3/7457@ of 19 October 2018 and No. SD-3-3/5755@ of 22 August 2018) and from court practice (the resolution of the Federal Arbitration Court of the North-Western District of 3 April 2014 in case No. A26-5213/2013 (individual entrepreneur L. L. Beluga); paragraph 6 of the Review of Practice approved by the Presidium of the Supreme Court of the Russian Federation on 4 July 2018; the appellate rulings of the Supreme Court of the Russian Federation of 10 November 2016 in case No. APL16-462 and of 29 November 2016 in case No. APL16-489).
Claims by the tax authorities that individual entrepreneurs have applied the STS unlawfully, because they have not kept within the limit on the residual value of fixed assets, may be raised both in a desk tax audit of STS returns (for example, the resolution of the Arbitration Court of the Volga District of 16 June 2020, No. F06-59893/2020, in case No. A65-12741/2019 (individual entrepreneur A. F. Gimaleeva)) and in a field tax audit (for example, the resolution of the Arbitration Court of the North-Western District of 24 October 2019 in case No. A05-14941/2018 (individual entrepreneur D. I. Danilov)).
In the view of the Ministry of Finance of Russia, set out in letter No. 07-01-10/9691 of 11 February 2022, if an individual entrepreneur applying the STS has used the right not to keep accounting records, the residual value of fixed assets for the purposes of subparagraph 16 of paragraph 3 of Article 346.12 of the Tax Code should be determined by reference to Federal Accounting Standard (FSBU) 6/2020 "Fixed Assets", approved by Order of the Ministry of Finance of Russia No. 204n of 17 September 2020.
More on the application of FSBU 6/2020 is in the article.
More on the risks of failing to comply with the rules of FSBU 6/2020 is in the article.
From 1 July 2022 until 31 December 2027, an automated simplified taxation system will be introduced as an experiment in Moscow, in the Moscow Region and the Kaluga Region, and in the Republic of Tatarstan (Federal Law No. 17-FZ of 25 February 2022). Among its features: the tax period is a calendar month; the average number of employees in the tax period is no more than 5; income in the current calendar year must not exceed 60 million roubles; the residual value of fixed assets must not be more than 150 million roubles; and so on. The automated STS cannot be combined with other tax regimes. No tax return is filed with the tax authorities, and income and expenses are recorded in a personal account on the basis of data transmitted to the tax authorities. The rates are 8% ("income"), 20% ("income minus expenses"), and the minimum tax is 3% of income.
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