Russia Relaxes VAT Threshold Payments For Its SMEs by 50%

The Russian government has accounted for the wishes of businesses and members of parliament and proposed a gradual transition to VAT payment for small- and medium-sized businesses on a simplified tax system, lowering the payment revenue mechanism from a threshold of ₽20 million (US$245,000) to ₽10 million (US$125,000) over the coming three years, Prime Minister Mikhail Mishustin has stated. Businesses with turnovers less than this will not be obliged to pay VAT, which in Russia is 22% from 1^st January 2026.

He said that “The amendments have been accounted for and reported in detail to the president. The terms and conditions for applying VAT on small- and medium-sized businesses should be relaxed, with a gradual change in the payment thresholds, starting with revenues of ₽20 million in 2026, ₽15 million in 2027, and ₽10 million in 2028.”

This equates to tax breaks for SMEs based upon the current requirements of up to ₽3 million (US$37,000) in 2027 and to ₽1.5 million (US$18,500) per annum by 2028.

The moves are set to assist the Russian startup SME sector and will encourage more Russian entrepreneurs to set up their own businesses. The current share of SMEs to GDP in Russia is currently estimated at being about 20-25% of the total. However, this is significantly lower than in developed and developing countries.

Mishustin also said that a moratorium on prosecution may be established to eliminate potential risks for taxpayers who violate VAT payments for the first time in accordance with the new regulations given the government’s authority.

It is also proposed to give small businesses that are becoming VAT payers for the first time “a one-time option in the first year to refuse the application of the reduced VAT rate before the expiration of the three-year term, in order to minimize the risks of such newcomers incorrectly assessing all existing VAT options for their business.” Finance Minister Anton Siluanov has stated.