The most recent wave of tax increases in Russia, designed to strengthen the state’s finances in the context of the ongoing war in Ukraine, will heavily impact a tenth of small businesses. Many Russian business owners say they will have no choice but to close or move into the grey area of the economy, reports Reuters.
Russia has gradually increased local taxes since 2023, the second year of the war, including personal income and corporate profit taxes, to keep up with military expenditures, which are now at their highest level since the Cold War.
The new tax regime, including a measure to lower the annual revenue threshold for VAT exemption for small businesses, to 10 million rubles (i.e. 123,000 dollars) from 60 million rubles, is set to come into effect in 2026, pending approval by Parliament.
“This is a shock for all small businesses,” said Sergey Borisov, head of the representative body for small businesses Opora, who last week, along with other representative bodies, sent a letter to the presidents of both chambers of Parliament, in an attempt to stop the initiative.
Under the tax proposals, businesses with annual revenues between 10 and 250 million rubles, currently exempt from VAT, will have to pay up to 5% VAT and will need to hire accountants to handle their tax documents.
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