Tax holidays for individual entrepreneurs in 2021: types of work activities

In Russia, one of the main problems for many small business owners is the lack of financing (for example, savings on personnel and advertising), which in turn affects its development. Many people don’t even know that in the Russian Federation there is support for small businesses, designed to reduce the financial burden when accounting for personnel, reduce tax payments, etc. You will learn about what benefits small businesses can count on from our article.

But before you find out about government support measures, you need to find out whether your business meets certain criteria by which it can be classified as an SME.

Criteria for distinguishing small businesses from medium and large businesses in 2021

The income of SMEs is strictly regulated and should not exceed the limits specified in Government Decree No. 265 dated April 4, 2016. In 2021, it is necessary to calculate not only profit from sales, but also all income for tax accounting, and only after that you will be able to understand whether your company belongs to the category of small business.

Firstly, for a company to be considered small it is necessary:

• have income less than 800 million rubles. in year;
• the total number of personnel should not exceed 100 people.

Secondly, the total share of investments in the authorized capital of your organization from other companies should not exceed the following numbers:

• up to 25% for government entities, religious and public organizations, as well as various types of funds;
• up to 49% for legal entities (LLC, OJSC, etc.), including foreign companies;

For legal entities that themselves belong to SMEs, these restrictions are lifted.

In August 2021, the Unified Register of SMEs was launched, which uses statistical reporting data. Any citizen can use this register; to do this, you need to go to the website of the Federal Tax Service (FTS). They usually visit it to check the correctness of the information about a particular business indicated in it. To view the data, you need to indicate the full name of the individual entrepreneur, or the name of the company, OGRN, INN or OGRNIP.

This data bank on SMEs is very important, because if your company or enterprise is included in it, it gives you a chance to take advantage of specific benefits that are intended for small businesses. And if you check the data, you did not find information about your organization or the information provided is incorrect, then make sure that it is corrected. To do this, complete and submit an application, providing correct information.

Amount of contributions for compulsory medical insurance for individual entrepreneurs

Changes have been made to the procedure for calculating insurance premiums for individual entrepreneurs. In particular, individual entrepreneurs will have to pay a specific amount to the budget. It amounts to 26,545 rubles for one year. The type of activity of an individual entrepreneur, turnover, amount of income do not matter. The amount is the same for everyone.

There is, however, one condition. The income of an individual entrepreneur for a year should not exceed three hundred thousand rubles. In monthly terms, this is only twenty-five thousand rubles. This is a fixed contribution for an individual entrepreneur. Obviously, many entrepreneurs will exceed this amount. They will have to pay an additional one percent.

Example: An individual entrepreneur earned half a million rubles in 2021. He must pay a fixed tax of 26,545 rubles, plus 1% of the amount that exceeds 300 thousand. In this case it is 200 thousand rubles. Thus, the total tax of individual entrepreneurs will be 28,545 rubles.

However, for individual entrepreneurs who earn much more, a limit value has been set for the maximum contribution paid, which is equal to the amount of 212,360 rubles.

This is the principle of differentiation, which the Ministry of Finance clarified in its letter of July 27, 2021.

Tax holidays

If an individual entrepreneur opens for the first time (closed and then open individual entrepreneurs do not participate), then they have the opportunity to take advantage of a benefit that will exempt them from paying taxes for a certain period (tax holidays). This support from the state was developed at the right time, during the period of the ongoing economic crisis - January 1, 2015. Tax holidays, as legislators say, should ensure an increase in the share of new business openings against the backdrop of a general decline in the Russian economy.

The Government of the Russian Federation approved Federal Law No. 477 of December 29, 2014, which defines the period during which individual entrepreneurs registered for the first time have the right to enjoy zero tax rates until the end of 2021. To qualify for the zero rate, an entrepreneur must meet the following criteria:

• tax regime of PSN or simplified tax system;
• the scope of activity of the individual entrepreneur belongs to the industrial, scientific or social category;
• a zero interest rate applicable to work, goods or services, which in the aggregate must be at least 70% of the total income of the enterprise.

Important! The effect of tax holidays cannot be more than two tax periods from the date of registration of the individual entrepreneur.

The regional government of the constituent entities of the Russian Federation has the right to introduce additional categories of activities that will be subject to tax benefits, and they can also extend or shorten the duration of the holidays. Therefore, an entrepreneur, depending on the region, can count on one to two years of vacation. Also, regional legislators can limit the maximum number of average number of employees or the maximum amount of income.

Before claiming your right to benefits, you need to check with the relevant authorities what criteria an individual entrepreneur must meet to participate in the program. For example, in the Novgorod region, from August 1, 2016, holidays began to extend to the following areas of activity that were previously not on the list:

• repair of personal and household items;
• laundries including dry cleaners;
• hairdressing services (beauty salons);
• funeral services.

In the Moscow region (excluding Moscow), tax holidays were set until 2021. But as the chairman of the regional parliament, Igor Bryntsalov, said at a press conference at RIAMO, “The Moscow Regional Duma plans to extend tax holidays for individual entrepreneurs until 2021,” he said. So stay tuned for changes.

Statistics: Guarantee support for small and medium-sized businesses

Installment payment of taxes for individual entrepreneurs

In addition to choosing the right tax regime, businessmen can take advantage of other forms of support from the state in order to optimize their payments and minimize problems of interaction with regulatory authorities. Individual entrepreneurs have grounds to apply for an installment plan for payment of payments and contributions due to an unfavorable financial condition that arises in one of the following cases:

• the property of the individual entrepreneur was damaged by force majeure factors, for example, flood, fire, man-made disaster, and so on;
• the individual entrepreneur faces the danger of bankruptcy or partial insolvency;
• The individual entrepreneur does not have enough funds to make a one-time payment in full;
• Individual entrepreneurs are required to pay taxes related to import/export procedures across the borders of the Customs Union;
• Individual entrepreneur works seasonally;
• The individual entrepreneur did not receive funds from the budget in a timely manner (subsidies or payment for services from the customer under government contracts).

To receive benefits justified by these factors, you must provide evidence of what happened to the Federal Tax Service. Installment payment can be given for a period of no more than one year. To receive it, you must provide the necessary documents to the regional branch of the Federal Tax Service:

• an application requesting payment in installments;
• certificates from banks reflecting the movements of the individual entrepreneur’s finances over the last 6 months and the status of the individual entrepreneur’s accounts;
• list of debtors and copies of contracts under which obligations were violated;
• the individual entrepreneur’s obligation on the planned settlement with the Federal Tax Service and an approximate debt payment schedule.

To the application and the certificates listed above, it is necessary to add a conclusion about what damage the individual entrepreneur caused due to circumstances of an insurmountable nature, as well as reports on the assessment of the losses caused. In the event of a shortfall in budget funds, it is necessary to provide confirmation from the manager of budget funds with information about the status of settlements between the individual entrepreneur and the state organization.

Detailed information about the conditions for obtaining installment plans for paying taxes can be easily found on the tax service website.

The procedure for granting deferment and installment plans for the payment of taxes and fees is of an application nature. The application form and the Procedure for changing the tax payment deadline were approved by Order of the Federal Tax Service of Russia dated September 28, 2010 No. ММВ-7–8/ [email protected] (as amended on March 19, 2012). The application is submitted to the Federal Tax Service Office for the constituent entity of the Russian Federation at the location (place of residence) of the interested person.

The list of documents that the taxpayer must attach to the application is established by Art. 64 Tax Code of the Russian Federation.

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Video: installment plan for paying taxes

Exemption from VAT for individual entrepreneurs on OSN

If you have chosen the OSN tax regime for your individual entrepreneur, it is possible to receive certain concessions. Private businessmen who keep accounts under the OSN have legally guaranteed grounds not to pay value added tax. According to Article 145 of the Tax Code of the Russian Federation, this is allowed when revenue for the previous 3 months does not exceed 2 million rubles. This rule applies only to non-excisable goods. To apply it, you must, before the 20th day of the calendar month from which you would like not to pay VAT, provide proper notification in writing and other requested documents to the Federal Tax Service office at the place of registration of the company.

The appropriate notification form can be easily found via this link.

Individual entrepreneurs on the general taxation system can qualify for VAT exemption

Table: list of documents for obtaining VAT exemption

Video: VAT exemption

Bill on “supervisory holidays”

The Supervision Holiday is a temporary measure that will only apply from 2015 to 2021. During this time period, state (federal and regional) and municipal regulatory authorities are required to limit themselves in conducting scheduled inspections of micro and small enterprises.

Important! This support from the state in the form of “supervisory holidays” applies to registered or already established businesses that do not have significant violations of the law. Also, this relaxation does not apply to companies operating in the social, healthcare and educational sectors.

In addition to the above, vacations are not provided for the categories of state control specified in Federal Law No. 294, Part 6, Art. 26.1 dated December 26, 2008.

If a business owner finds himself in the register of scheduled inspections, he can send a corresponding application to the supervisory control authorities to exclude himself from this list, only on the condition that the inspection is illegal. The official reviewing the application must make a decision on it within 10 days from the date of its adoption. If the decision is positive, the inspection will be canceled and deleted from the inspection register. So that the unexpected arrival of supervisory authorities does not come as a surprise to the entrepreneur, he must “monitor” the consolidated annual inspection plan, which is publicly available on the website of the Prosecutor General’s Office of the Russian Federation.

Also, legislators have significantly reduced the time frame for checking the activities of small businesses; Article 13 of Federal Law No. 294 states:

• the inspection should be conducted for no more than 50 hours per year (this is the total time period allocated to each supervisory agency);
• if the inspection is unscheduled, it should not exceed 20 working days for each department.

What taxes and fees will you have to pay anyway?

The tax holiday regime for small businesses in the form of individual entrepreneurs in 2018 does not exempt from all taxes. An entrepreneur will not pay only a single tax (if a “simplified tax” is used) or the cost of a patent.

In this case you need to pay:

• transport tax,
• property tax based on cadastral value,
• all required insurance premiums for the individual entrepreneur and hired workers,
• income tax for employees.

Thus, tax holidays are a rather arbitrary term.

Entrepreneurs are exempt from only one tax for two calendar years, but at the same time they need to make quite significant insurance contributions for themselves and their employees, as well as pay some other taxes. The business plan must be calculated in sufficient detail.

What tax incentives are available at the regional level?

This support measure is being introduced by local governments. And a businessman should find out the latest information on his own by visiting the entrepreneurship support center in person, or by going online to their website. So, for example, for Moscow businessmen who own a small company, they have the right to declare a benefit expressed in a tax deduction on property equal to 300 square meters of area at cadastral value (this provision is contained in Law No. 64 of Moscow dated November 5, 2003. ).

What's in the total balance

Main conclusions regarding the tax holiday regime for small businesses in Russia in 2021:

• Only individual entrepreneurs have the right to use vacations, while those who have just registered
• Individual entrepreneurs must conduct a specific type of activity,
• tax holidays do not exist everywhere, you need to check with the tax office whether there is a similar regime in your region,
• regions have the right to establish additional restrictions, you should also find out about them,
• Many taxes and social contributions must be paid from the very beginning of business.