Russian entrepreneurs, thanks to recent legislative innovations at the level of amendments to the Tax Code, have a unique opportunity to work and completely not pay fees to the budget. The authorities of the Russian Federation, therefore, introduced something like “tax holidays” in the country. True, not all businessmen can apply for such a preference. The assessments of the corresponding initiative in the Russian business community are also mixed. However, the very fact that the state pays attention to business development finds, of course, a positive response among experts and entrepreneurs themselves. What is the essence of tax holidays? Which businesses and in which areas are entitled to apply for the use of appropriate preferences?
Legislative innovations
The so-called tax holidays for Russian entrepreneurs were introduced at the level of amendments to the Tax Code of the Russian Federation adopted in December 2014. In accordance with these legislative activities, article 346.20 of the Tax Code of the Russian Federation was supplemented by several points. In particular, this is clause 4, according to which regional authorities received the right to set a rate of 0 percent for entrepreneurs registered in this status for the first time since the amendments to the Tax Code came into force. Consider the provisions of this paragraph, which was added to the Tax Code, in more detail.
New Provisions of the Tax Code: Clause 4 in Article 346.20
Apart from the provisions under which the authorities of the constituent entities of the Russian Federation received the right to introduce tax holidays for entrepreneurs in the form of a zero rate, in paragraph 4 of Article 346.20 of the Tax Code there are a number of noteworthy language. So, individual entrepreneurs can use the preferences in question, starting from the moment of state registration and for another 2 years. At the same time, the minimum tax introduced by the provisions of Article 346.18 of the Tax Code of the Russian Federation may also not be paid by entrepreneurs.
Areas of activity during tax holidays
The legislator has established a number of restrictions, introducing tax holidays for SP. Activities, in accordance with the provisions of paragraph 4 of Article 346.20 of the Tax Code, they are limited to three main areas - production, social services, as well as science. The specific varieties of commercial activities should also be established by the authorities of the constituent entities of the Russian Federation, based on the provisions of the OKN and OKVED. Another criterion prescribed in the legislation and guaranteeing the right of an individual entrepreneur to use the privileges in question is the company's income from the corresponding areas of activity in the total revenue should not be less than 70 percent.
At the same time, the authorities of the Russian regions have the right to adopt laws restricting the use of zero interest rates by entrepreneurs. These may be limitations:
- correlating with the number of employees hired by the individual entrepreneur;
- correlating with the maximum size of sales proceeds, which is determined in accordance with the provisions of Article 249 of the Tax Code for those types of activities that are taxed at zero rate.
Another limitation that a regional legislator has the right to establish may be related to the maximum amount of revenue extracted under the simplified tax system.
Rules work important
Another noteworthy formulation is that tax holidays for entrepreneurs will remain relevant only if they do not commit violations when using the corresponding preferences. If an entrepreneur allows any indicators to be exceeded with respect to established restrictions, then he will lose the right to pay tax at a zero rate.True, here is an example of a liberal approach of the legislator - in that part, that the individual entrepreneur loses the right to tax holidays temporarily - for only one tax period. Provided, of course, that in the next he will conduct business in full compliance with the criteria established by law.
The amendments under consideration in the Tax Code of the Russian Federation also referred to Article 346.50 of the Code. We will study them in more detail.
New Provisions of the Tax Code: Clause 3 of Article 346.50
Among other noteworthy provisions of Article 346.50 of the Tax Code of the Russian Federation are those contained in paragraph 3, which was also introduced in the form of amendments in December 2014. So, in the considered part of the Tax Code of the Russian Federation it is indicated that taxpayers who are active in engaging the patent system for those types of activities for which the zero rate is set should keep separate accounting of revenue relative to activities under other taxation schemes.
New Provisions of the Tax Code: Clause 3 of Article 346.51
The amendments also related to the introduction of paragraph 3 c. article 346.51 Tax Code of the Russian Federation. The current version of this part of the Tax Code states that taxpayers who have lost the right to apply a zero rate must pay tax at a time not exceeding those that correspond to the completion of the patent.
It can also be noted that the provisions that contain paragraphs 4 of article 346.20 of the Tax Code of the Russian Federation, 3 articles 346.50, 2 and 3 of article 346.51 of the Tax Code of the Russian Federation came into force on 01.01.2015. In turn, paragraphs 4 of article 346.20 and 3 of article 346.50 of the Tax Code The Russian Federation has legal force only until the end of 2020.
Amendment Procedure
Having considered what tax holidays are for individual entrepreneurs, we will study in more detail the procedure during which the relevant amendments to the Tax Code were adopted.
The bill, including relevant initiatives, was submitted to the State Duma in October 2014. An explanatory note to it stated that the introduction of the proposed amendments to the Tax Code of the Russian Federation would increase the level of citizens' interest in official registration as an individual entrepreneur. The bill successfully passed all the readings, the necessary parliamentary procedures and was signed by the President of the Russian Federation in December 2014. In the Russian media there is evidence that the amendments to the Tax Code of the Russian Federation, which establish tax holidays, were initiated by the Government of the Russian Federation.
The two-year period during which individual entrepreneurs will be able to take the opportunity not to pay taxes to the budget was due to the fact that it approximately corresponds to the period when the business proves its stability. That is, if the company did not close in the first 2 years, then it is highly likely to continue its presence in the market. In turn, the fact that the law on tax holidays provides for the use of individual entrepreneurs by appropriate preferences only until 2020 may indicate that the government has not yet undertaken to assess the conditions under which private entrepreneurs can conduct business in correlation with longer cycles. Although a number of experts believe that this period is quite sufficient to launch a mechanism in the Russian Federation to stimulate citizens' interests in business and ensure its necessary dynamics.
The adoption of the amendments under consideration in the Tax Code of the Russian Federation, according to some analysts, received an additional impetus due to statements by the President of the Russian Federation during his message to the Federal Assembly.
Positive assessment of the initiative
The law on tax holidays is completely unique for Russia and for many other countries of the world. Not every state can afford a zero interest rate for businesses. At the same time, the legislative innovation under consideration caused an ambiguous reaction in the Russian expert community.
On the one hand, many entrepreneurs and analysts praised the corresponding initiative of the Russian government. Indeed, many Russians who are employed informally in these areas can receive a tangible incentive to start their own business, to register with the Federal Tax Service as a full-fledged entrepreneur.
There are the most positive assessments of the fact that the Russian legislator introduced tax holidays for entrepreneurs. The types of activities in which individual entrepreneurs may not pay taxes are somehow presented, as experts say, in a very wide range.So, with regard to the manufacturing sector, the activities compatible with tax holidays include agriculture, construction, fishing, and machine manufacturing. As for the social sphere, the types of activities related to it in which you can not pay taxes include the provision of services in the field of education, health care, the provision of social assistance to citizens, the organization of sports events, and the development of tourism.
A potentially wide range of activities opens up for individuals in the research field. Many scientists, as analysts say, are ready to open their own business, but fear just the same high tax burden. Therefore, having learned that the law approving tax holidays has been adopted, they may well take a unique opportunity to launch their own enterprise and bring it to the development market.
Speaking about the positive assessments of the initiative under consideration, many experts highly appreciate the structure of the legislative provisions of the amendments to the Tax Code of the Russian Federation. So, the formulations that appeared in the corresponding source of law have a very clear focus - they are designed to attract newcomers to the business. The provisions of the amendments expressly state that tax holidays apply only to new businesses. The fears of many members of the business community that arose during the parliamentary debate on the bill regarding the possibility of entrepreneurs re-registering en masse in order to take advantage of preferences did not materialize.
Another criterion for the unambiguous focus of the law on tax holidays is that its provisions are an incentive for attracting, in the first place, individuals in the status of individual entrepreneurs. Thus, tax holidays are designed to create a feeling of determination among people who doubt whether to open a business or not.
At the same time, the legislator nevertheless left a certain loophole for those business entities who want to take advantage of the considered preferences. The fact is that no one is stopping existing entrepreneurs from re-registering their business with their closest relatives, asking them to open as an individual entrepreneur. De jure, the owner of the business will be a person who has the right to benefits, de facto - the former entrepreneur. Tax holidays in the field of even those areas that we mentioned above - manufacturing, social services, science - will only be welcomed by existing businesses.
Negative Assessment Initiative
On the other hand, some representatives of the Russian business community say that tax holidays for small businesses can have a very limited positive impact on the economy. Firstly, this may be due to the fact that all the activities for which entrepreneurs may not pay taxes represent a relatively small percentage of the total set of economic activities. Secondly, a person applying for tax holidays can conduct business only as an individual entrepreneur, while it would be more convenient for many entrepreneurs to carry out commercial activities as the founder of an LLC. Thirdly, the current scheme exempts entrepreneurs from taxes, but at the same time does not remove their obligations to transfer contributions to state funds - PFR, FSS and FFOMS, which, at the same time, allow current legislation to be counted as part of taxes. Therefore, in practice, the noted reforms have a less obvious advantage, experts say.
Some analysts believe that the law that established the tax holidays for small businesses has not been passed. The fact is that the current economic situation in Russia requires not so much the agitation of citizens to open their own business as the active state support of already operating enterprises.Therefore, these certainly positive initiatives, as some representatives of the business community believe, only divert public attention from the real problems that have arisen in the commercial sphere.
Do regions need a large amount of authority?
To a large extent, a critical assessment in the Russian expert community was caused by the fact that a large amount of authority to legislatively regulate tax holidays was transferred to the level of regions. As we noted above, the authorities of the constituent entities of the Russian Federation have the right to establish a variety of restrictions on the right of entrepreneurs to use the corresponding preferences. In practice, this may lead, analysts believe, that IPs will have unequal opportunities in different regions. Tax holidays in the Rostov region may be more or less profitable than, for example, in the Leningrad region. The authorities, according to representatives of the business community, should have concentrated a greater amount of powers to implement tax policy in this direction at the federal level.
But there is an opposite assessment of the relevant initiatives of the legislator. Its supporters believe that the level of development of Russian regions is sometimes completely incomparable. In addition, in some constituent entities of the Russian Federation, some industries are better developed, while in others they are completely different. Therefore, due to the significant amount of authority regarding regulation of tax holidays, regional authorities will be able to give greater priority to specific types of economic activities in determining benefits for entrepreneurs.
It can be noted that even critics of the state’s initiative in general support it and consider it a good example of positive regulation by the federal center of economic processes. According to experts, such initiatives become especially significant during the crisis period, when the national economy needs to look for new effective growth drivers. One of these may well be the development of private business.
Small Business Tax Vacation
