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Why are they abandoning the simplified tax system?

Refusal from simplification can be voluntary or forced. We think it would be unnecessary to decipher these concepts in detail - in one case, we make a decision based on our own, and in the other, you are forced by law to abandon the simplified tax system. It’s better to take a closer look at the exact reasons why failure occurs in both options.

Voluntary refusal of the simplified tax system

Most often, entrepreneurs decide to switch to other taxation systems for the following reasons:

• problems with VAT when buying and selling;
• opening new branches or representative offices;
• the need to increase the number of employees;
• merger of companies;
• desire to join the partnership.

Of course, these are not all the reasons, but only the most common ones.

Example: A company begins to work with customers using OSNO and places its main emphasis on them. And for those, in turn, it is simply not profitable to cooperate with enterprises using the simplified tax system, because they cannot deduct VAT and therefore overpay taxes.

Forced refusal to use the simplified tax system

Forced refusal occurs due to the fact that the company loses the right to use the “simplified” system. Here are the cases in which this happens:

• Exceeding the income limit. When your income for the reporting period exceeds 112,500,000 rubles.
• Exceeding the residual value of fixed assets. It also should not be higher than 150,000,000 rubles in order to be eligible for the simplified tax system.
• Excess number of employees. During the reporting period, the number of employees should not exceed 100 people.
• Creation of branches. Companies with branches lose the opportunity to use the simplified tax system.
• Share of participation of other organizations. It is prohibited to apply the simplified tax system to organizations in which the share of participation of other organizations is more than 25%.
• Participation in a simple partnership agreement. Taxpayers who are parties to a simple partnership agreement (joint activity agreement) or a property trust management agreement use income reduced by the amount of expenses as an object of taxation.

Example: The company was doing well and had the opportunity to increase the number of sales points and expand production. The number of employees begins to exceed 100 people, which means that applying the simplified tax system further becomes impossible.

When does an LLC have the right to refuse the simplified tax system?

Any company has the right to refuse the simplified tax system and switch to another tax regime , subject to compliance with the requirements of tax legislation.

In addition to the voluntary transfer to another system, the LLC is transferred forcibly. This option is possible in case of violation of the terms of application of the simplified tax system .

In the first option, the head of the company decides to refuse if the “simplified” version is not suitable for the enterprise to carry out its core activities and interact with counterparties. For example, a purchasing company or customer paying VAT, when working with a company using the simplified tax system, will not be able to issue a deduction for value added tax, since it is not a VAT payer.

Refusal to apply the simplified regime means transfer of the enterprise to another system and termination of obligations arising in connection with the use of the simplified tax system. Also, the termination of the preferential system implies the end of the exemption from the group of tax payments.

The procedure for refusing the simplified tax system

Refusal from the simplified tax system is carried out according to the procedure specified in Article 346.13 of the Tax Code of the Russian Federation . By law, the founder of an enterprise is obliged to contact the Federal Tax Service at the place of registration of the LLC with an application in form 26.2-3 . You can view and download here: [ Sample application for refusal of the simplified tax system for 2021 ]. This document indicates the company's intention to stop using the simplified system.

A notice of refusal to apply the simplified tax system is submitted at the place where the company is registered during the tax period by January 15 of the next year. The right to use the simplified tax system ends from the next period.

If a company wishes to make a transition to the tax regime, then it should submit a form in the prescribed form, for example, to transfer to UTII. In the absence of an application, the company remains under the general tax regime. After submitting the application, the founder of the LLC receives a decision to terminate the right to use the system.

A return to the “simplified” system is possible only in the future by submitting a corresponding application to the Federal Tax Service. This is only possible when the enterprise complies with the conditions for applying the regime. If the requirements of the law have been violated, the company will not be transferred to the simplified regime.

An example of refusing the simplified tax system

Semyon F. transferred his company to “simplified”. I worked on preferential treatment for several years, but the company expanded its scope of activities, which required a larger staff. Also, the volume of incoming revenue to the enterprise’s cash desk and current account has increased significantly, but has not yet exceeded the established limit.

In order not to end up in the general regime, the businessman decided to play it safe and abandon the simplified tax system in advance, transferring his enterprise to the unified agricultural tax. Having submitted an application to the Federal Tax Service, the founder received a decision to terminate the simplified tax system.

Semyon began to apply the unified agricultural tax after receiving the specified document. At the end of the year, the man did not submit a declaration under the simplified tax system to the inspectorate. , fines were imposed on enterprises . Semyon also had to fill out the KUDiR, on the basis of which the declaration is drawn up.

The founder of the LLC applied to the Federal Tax Service department to have the imposed penalties cancelled, because he filed an official application for refusal to use the simplified tax system and received a decision. The man’s application was refused, since according to the law, the use of a different tax system begins with the future reporting period. Accordingly, reporting for the past period must be submitted in full.

Conclusion

In conclusion, several conclusions can be drawn:

1. How to abandon the simplified tax system in 2021
   is described by the provisions of the current tax legislation.
2. You can stop using the simplified system voluntarily or forcibly. Forced transfer to another regime is carried out in case of violation of the requirements of the law, and is carried out voluntarily at the request of the applicant.
3. The result of the procedure is the termination of the exemption from payment of a group of tax payments.
4. January 15 is the deadline when you can refuse the simplified tax system by sending an application to the inspectorate, and the right to use ends at the end of the tax period.
5. The application is submitted on the prescribed form and after the decision is made by the Federal Tax Service, the company receives a corresponding notification.
6. A return to the simplified tax system is possible only if the company has not lost its rights and all conditions for applying the regime have been met.
7. To return to the simplified tax system, the founder should also submit an application in the established form to the Federal Tax Service Inspectorate and, subject to compliance with the requirements of the law, receive a notification about the application of the simplified tax system.

The most popular questions and answers to them regarding refusal of the simplified tax system

Question: Hello. My name is Marina Dmitrievna. I am the CEO of a plumbing sales company. Six months ago, after registering a company, a specialist advised me to switch to the simplified tax system at a rate of 6% “income” . After working for several months, I realized that this regime was not suitable for us. The company has many expenses that we cannot take into account, the payment is large, and large buyers refuse to cooperate with us, since VAT is not allocated in the company’s invoices.

Now I was advised to switch to OSNO. Tell me, can I do this immediately voluntarily upon application or will I have to wait for some time?

Answer: Hello, Marina Dmitrievna. Article 346.25 specifies the procedure for abandoning the simplified tax system and switching to OSNO. In your situation, you will need to submit an application to the tax office in the prescribed form before January 15. You will only be able to stop using the simplified version starting next year.

As a result of the application, you will receive a decision from the Federal Tax Service to terminate the application of the simplified tax system, which begins to take effect at the end of the reporting period and after submitting a mandatory declaration , so you will have to use the preferential regime until the end of the year.

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List of laws

• Article 346.25 of the Tax Code of the Russian Federation
• Article 346.13 of the Tax Code of the Russian Federation

Samples of applications and forms

You will need the following sample documents:

• Sample application for refusal of the simplified tax system

You may be

Pros and cons of refusing the simplified tax system

The procedure for refusing the simplified tax system

First, you need to notify the tax authority of the refusal. The application is submitted at the place of registration, if we are talking about an individual entrepreneur, or at the location, if a legal entity wants to issue the refusal. The notification is filled out in accordance with the established form No. 26.2-3 (). The form must indicate the full name of the entrepreneur or the name of the organization, as well as the date from which the taxpayer plans to switch to another tax regime.

Deadline for refusal of the simplified tax system

The application for refusal can be submitted until January 15 of the year in which you decide to switch to another regime.

Take notice deadlines seriously! If you are late, you will have to wait until next year.

How to stop paying tax according to the simplified tax system if no activity was carried out

For a payer, in order to stop being on the simplified tax system, it is not enough to simply stop paying tax and submit reports.
It is important to notify the fiscal authority about this in a timely manner, because otherwise the tax authorities will not know that the simplified tax system is no longer applied, and they are not obliged to identify this fact on their own. This rule does not apply in the following cases:

• termination of commercial activities of the individual entrepreneur and deregistration;
• liquidation of a legal entity.

In these cases, the status of the person using the special regime is automatically lost. No notification is required in this situation.

If the activity under the simplified tax system was not carried out due to liquidation or deregistration, the payer should, within 15 days from the date of its completion, send the completed form 26.2-8 to the tax authorities (clause 8 of article 346.13 of the Tax Code of the Russian Federation). It must indicate the completion date of the work according to the simplified tax system.

Read more information on the topic in the ready-made “ConsultantPlus” solution by signing up for a free trial access.

Form 26.2-8 and a sample of how to fill it out can be downloaded at the beginning of the article.

If you want to switch from the simplified tax system to a patent, read our material on this topic.

How not to make a mistake when choosing a tax regime?

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