Changes to Russian Business Legislation in 2025: 5 Key Points

Contents:

• VAT for entrepreneurs on the simplified tax system: what you need to know
• Updated limits and tax rates for the simplified tax system in 2025
• Changes in income tax rates: new realities of 2025
• Federal investment tax deduction: new opportunities for business
• Tax amnesty: benefits for business and the consequences of fragmentation
• New tourist tax: what you need to know
• The role of a mentor in modern companies
• Public register of employers without employment contracts

VAT for entrepreneurs on the simplified tax system: what you need to know

Starting January 1, 2025, new tax rules for businesses using the simplified tax system (STS) will come into force. All entrepreneurs on the STS will be required to pay value-added tax (VAT) at the standard rate of 20%. At the same time, preferential options are provided that can reduce the tax burden on small and medium businesses. These changes require careful analysis, as they can significantly impact the financial situation of entrepreneurs. It is recommended to prepare for the changes in advance and consider available benefits to optimize tax liabilities.

Value-added tax (VAT) was previously levied on businesses operating on the simplified tax system (STS) in a number of cases. This applied to situations such as importing goods from abroad, issuing VAT invoices, and cases where an entrepreneur acted as a tax agent for this tax. The application of VAT in these cases required entrepreneurs to comply with certain conditions and rules, which could create additional difficulties in doing business.

The reduced VAT rate varies depending on the entrepreneur's annual income. The main income categories include different levels that can significantly impact tax liabilities. Reduced VAT rates provide an opportunity to reduce the tax burden for small and medium-sized businesses, which contributes to their development and market stability. It is important to remember that proper income classification and compliance with tax requirements allow entrepreneurs to optimize their expenses and ensure financial stability.

• Income up to 60 million rubles per year is exempt from VAT. If revenue exceeds 60 million, VAT will begin to accrue on the first day of the month in which the excess is incurred.
• Income from 60 to 250 million rubles per year — 5% rate.
• Income from 250 to 450 million rubles per year — 7% rate.

When choosing a reduced rate, the taxpayer risks losing the ability to deduct input VAT from their suppliers. This is important to consider, as abandoning the standard rate can negatively impact the financial health of a business. Reduced rates can lead to a decrease in revenue, making a thorough analysis of the financial consequences a necessary step in making a decision.

Choosing a preferential tax rate can be beneficial, especially in situations where goods or services are exempt from value-added tax (VAT). This is relevant for industries such as pharmaceuticals and agriculture. In cases where the volume of input VAT is small, the benefits of using a "preferential" VAT become more obvious. This allows companies to reduce the tax burden and increase their competitiveness in the market. The correct choice of tax scheme can significantly impact the financial results of a business and the optimization of tax expenses.

On the other hand, the standard rate with the possibility of deduction will be more beneficial for companies with high margins and a large volume of input VAT. This will allow receiving tax deductions from counterparties, which in turn will not have a significant impact on the financial results of the business. Choosing this tax scheme can help optimize tax liabilities and improve the company's liquidity.

Updated limits and tax rates for the simplified tax system in 2025

From January 1, 2025, new limits and tax rates for the simplified tax system (STS) come into force in accordance with Federal Law No. 176-FZ of July 12, 2024. These changes are aimed at supporting small and medium-sized businesses, facilitating their development in the face of increased tax burdens. The updated simplified tax system (STS) conditions will help entrepreneurs optimize their tax obligations and improve financial stability.

• The maximum amount of income for nine months has been increased to 337.5 million rubles (previously - 149.5 million rubles).
• The value of fixed assets must not exceed 200 million rubles (instead of 150 million rubles).
• Annual income is now limited to 450 million rubles (instead of 265.8 million rubles).
• The number of employees is no more than 130 people (previously - 100).

It should be taken into account that if the established income limit is exceeded, the business will have to change the tax system. This may lead to additional financial costs.

Tax rates under the simplified taxation system (STS) have been reduced. For the taxable object "Income", the new rate is 6%, which is lower than the previous rate of 8%. For the object "Income minus expenses", the rate has been reduced to 15% from the previous 20%. This change will allow small and medium-sized businesses to reduce their tax liabilities and improve their financial performance.

The changes are aimed at offsetting the effects of the increased tax burden and creating optimal conditions for the growth and development of small businesses. Regions can introduce additional benefits, including reduced rates under the simplified taxation system (STS), which helps improve the business climate and stimulates entrepreneurial activity.

Changes in income tax rates: new realities of 2025

According to Federal Law No. 176-FZ, which was adopted on July 12, 2024, income tax rates for organizations using the general taxation system (OSNO) will increase to 25% starting in 2025. Of this amount, 8% will go to the federal budget, while 17% will go to the budgets of the constituent entities of the Russian Federation. This change in tax legislation may have a significant impact on companies' financial performance, so it's important to consider the new rates when planning your budget and tax obligations.

Previously, the corporate income tax rate was 20%. Of this amount, 2% went to the federal budget, and 18% was distributed among the regions. The introduction of these new changes significantly increases the tax burden on businesses, which may negatively impact their development and investment attractiveness. It should be noted that an increased tax burden may lead to a decrease in company profits, which in turn will affect their ability to expand and create new jobs.

Corporate income tax, unlike indirect taxes such as VAT, is classified as a direct tax. An increase in this tax directly impacts a business's financial performance, which, in turn, affects the investment attractiveness of companies and their ability to pay dividends. Effective tax management is becoming a key factor in maintaining stable growth and business development in the context of changing tax policy.

With the increasing tax burden on business, the implementation of effective government support measures is becoming especially relevant. Subsidies and tax incentives aimed at helping entrepreneurs adapt to changing economic conditions can become key tools. It is important to develop programs that will reduce the tax burden for small and medium-sized businesses, which will allow them to maintain financial stability and competitiveness in the market.

Federal Investment Tax Deduction: New Opportunities for Business

From January 1, 2025, a new tax deduction for organizations operating under the general taxation system (OSNO) will come into effect in Russia. The deduction amount will be 3%. This innovation will reduce tax liabilities to the federal budget throughout the calendar year. As a result, businesses will receive additional financial resources, which will create the conditions for their growth and development. The new tax deduction will become an important tool for supporting businesses, promoting their stability in a changing economic environment.

According to Russian Government Resolution No. 1638 of November 28, 2024, the right to a tax deduction is granted to companies from various economic sectors. This includes organizations engaged in mineral extraction, scientific research, and the provision of hotel and telecommunications services. This expanded opportunity will allow many companies to optimize their tax liabilities and improve their financial performance. The new tax deduction will become an important tool for supporting business and stimulating economic growth in Russia.

To qualify for a deduction, a business must confirm investments in production development or modernization. For example, if a large hotel decides to upgrade air conditioners in all rooms, it will need to provide relevant documents, such as contracts for the purchase, delivery, and installation of the equipment. Based on these documents, the Federal Tax Service can grant a deduction of 3% of the total tax under the general taxation system. Furthermore, if a company regularly upgrades its equipment, it can reuse the deduction in subsequent tax periods. This not only reduces tax liabilities but also maintains state-of-the-art equipment, which positively impacts the quality of services provided and the competitiveness of the business.

According to Article 286.2 of the Tax Code of the Russian Federation, the tax deduction amount is limited and cannot exceed 50% of total business development expenses. For example, if a company invested 1 million rubles in modernization, the maximum tax deduction is 500,000 rubles. This condition should be taken into account when planning a budget in order to effectively use tax advantages and optimize cash flows.

The new tax deduction opens up opportunities for businesses to optimize taxation and reinvest savings in development. Proper use of this tool contributes to the successful growth of the company and increased competitiveness in the market. Using tax deductions allows you to reduce the financial burden and direct resources to key areas of the business, which in turn contributes to increased profits and an improved market position.

Tax Amnesty: Benefits for Business and the Consequences of Splitting

Starting in 2025, companies and sole proprietors who used business splitting methods between 2022 and 2024 will be able to take advantage of a unique opportunity to avoid additional taxes, fines, and penalties. This step contributes to the restoration of tax discipline and the legalization of business, which is essential for the stability of the economic environment. The implementation of these measures will allow for the legalization of previously unreported transactions and increase trust with tax authorities.

To successfully participate in the tax amnesty, entrepreneurs must voluntarily cease the practice of business fragmentation and undergo on-site tax audits in 2025 and 2026. This step will not only help restore their reputation but also establish transparent and trusting relationships with government agencies. The tax amnesty process facilitates business legalization and reduces the risks associated with tax violations.

The amnesty will provide significant advantages for companies wishing to legalize their activities. It will not only reduce financial burdens but also open new horizons for business development within the law. This is an important step towards improving the business environment and increasing the competitiveness of companies in the legal sector.

New tourist tax: what you need to know

Starting January 1, 2025, a tourist tax will come into effect in Russia, replacing the resort fee already introduced in some regions of the country. This new tax was approved by Federal Law No. 176-FZ of July 12, 2024, and is aimed at simplifying the tax system for the tourism industry. The introduction of a tourist tax will allow for more effective regulation of financial flows in the tourism sector, as well as improve the conditions for the development of tourism infrastructure.

At the first stage of introducing the tourist tax, its rate will be 1% of the total cost of temporary accommodation services. Subsequently, during the implementation of the new system, the rate will increase annually by 1% until reaching a maximum of 5% by 2029. This approach will allow for more efficient management of tourist flows and financial resources in the regions, promoting the sustainable development of the tourism industry.

The hotel tax will be paid by both legal entities and individuals providing accommodation services. Facilities covered by the tax register include hotels, hostels, mini-hotels, campsites, and apartments. This means that all operators providing accommodation are required to account for their tax obligations in accordance with current legislation. Hotel taxation plays a significant role in the formation of financial statements and compliance with hospitality business regulations.

Local administrations, as well as federal authorities for cities of federal significance, will decide on the introduction of a tourist tax. Information about the start of tax collection will be available from official sources, which will post information on their websites.

The main goal of introducing a tourist tax is to replenish local budgets and support the development of tourism infrastructure, as well as domestic tourism. The introduction of this tax will improve the quality of services provided and increase the attractiveness of regions for travelers, which, in turn, can stimulate economic growth and create new jobs in the tourism sector. Effective use of tourist tax funds will improve recreational and leisure facilities, attracting more tourists and creating a positive image of the region.

The Role of a Mentor in Modern Companies

On March 1, 2025, a new provision regarding mentoring will come into force in the Labor Code of the Russian Federation. This change is enshrined in Federal Law No. 381-FZ of November 9, 2024, which officially introduces mentoring as an additional form of labor activity. Mentoring will contribute to the development of human resources and the improvement of employee qualifications, which will be an important step in improving professional training and increasing competencies in various industries. The introduction of this provision is aimed at creating a more effective system for training specialists and supporting new employees in the process of adaptation to the work process.

Mentoring is not a mandatory process, which means that the employer does not have the right to force employees to train interns. All responsibilities of the mentor, as well as the form and deadlines for completing tasks, must be clearly spelled out in the employment contract or supplementary agreement. This complies with current labor law requirements and ensures transparency in mentoring in the workplace. Properly organized mentoring facilitates effective training of interns and improves teamwork. The introduction of mentoring opens up new opportunities in work practices, providing a systematic approach to the training, development, and onboarding of new employees. Employees willing to become mentors will receive additional compensation, providing additional motivation to share their knowledge and experience. This approach not only strengthens team spirit but also contributes to the overall development of staff skills, enhancing the professional atmosphere within the company. Mentoring also helps newcomers adapt to the work process more quickly, which ultimately contributes to increased team efficiency.

Public Register of Employers without Employment Contracts

Starting January 1, 2025, Russian Government Resolution No. 1927 of December 27, 2024, will come into effect. It introduces a public register of employers who evade concluding employment contracts with employees. This register will be regularly updated based on effective administrative offense resolutions. This measure is aimed at protecting employee rights and increasing employer accountability, thereby improving the labor market situation. The register will become an important tool for monitoring compliance with labor legislation and ensuring transparency in labor relations.

With the introduction of the register, administrative liability for employers will continue to apply. According to Part 4 of Article 5.27 of the Code of Administrative Offenses of the Russian Federation (CAO), fines for the absence of an employment contract remain significant. For sole proprietors, the fine ranges from 10,000 to 20,000 rubles, while legal entities may face fines of 50,000 to 100,000 rubles. This underscores the importance of complying with labor laws and formalizing employment relationships with employees.

The creation of an employer registry significantly strengthens legal discipline and allows job seekers to assess the reputation of a potential employer in advance. This measure is aimed at protecting workers' rights and promoting trust in employers. The registry will become a useful tool for finding reliable companies, which, in turn, will contribute to a fairer and more transparent labor environment.

This step is part of a larger-scale labor law reform aimed at improving working conditions and protecting workers' rights. A key aspect is the implementation of a system for monitoring employers by government agencies, which ensures more effective oversight of compliance with labor laws and standards. This approach helps create a safe and fair work environment, which in turn has a positive impact on employee productivity and satisfaction.