‘The benefit cannot be provided forever’: businesses in the simplified tax system will retain the 5% rate for another year
The Tatarstan government proposed to extend benefits for “simplified” taxpayers working in production
What kind of ‘gas’ companies are using the simplified tax system? As far as I know, so far we have one competitor — KAMAZ-Energo gas transportation company. Well, Engineering Solutions (Editor’s note: a resident of the Khimgrad technopolis) is trying to create something. What other organizations on the simplified tax system are engaged in gas distribution?’ CEO of Gazprom Transgaz Kazan Rustem Usmanov persistently extracted secret information from the authors of the preferential regime for the simplified tax system. The Tatarstan Ministry of Economy submitted a republican bill on extending the reduced rate of 5% for the tax base of ‘income minus expenses’ for those working in priority sectors of the economy for discussion. Its authors argued that only about 1.7% of entrepreneurs are engaged in business in the manufacturing industries and they need incentives. Members of the Tatarstan State Council Committee on Budget, Taxes and Finance approved the initiative but asked to be ready to disclose the “beneficiaries” of the benefits at the upcoming session on 23 December. Read more about it in a report of Realnoe Vremya.
Almost “failed”?
The Tatarstan authorities' initiative to extend preferential tax rates for entrepreneurs on the simplified tax system has finally reached parliament, but with a clear delay. Interested business circles of the republic discussed the benefits back in the fall, but for some reason, it did not come to specific actions with the introduction of a package of proposals to the draft budget. Whether they “failed” or froze, but one way or another, the benefits did not fit into the draft republican budget for 2025 and the planning period of 2026-2027. The main financial law of the republic was adopted on 28 November without benefits for the simplified tax system, and on 2 December 2024, it was signed by Rais of Tatarstan Rustam Minnikhanov. It would seem that the entrance to 2025 budget is closed and entrepreneurs on the simplified tax system are left without the usual preferences
Despite the stalling at the start, the republican bill on benefits for SMEs got a chance to be published. The Ministry of Economy of Tatarstan today submitted it for discussion at a joint meeting of the State Council Committee of the Republic of Tatarstan on Budget, Taxes and Finance and the expert council under the committee. And the head of the budget committee Leonid Yakunin made it clear that the benefits will be given a go, although “the bill had a hard time passing and the budget was adopted taking into account the receipts from the simplified tax system.” And if the bill is approved, then “we will have to make adjustments to the approved budget for 2025.”
Benefits for industrialists
The legislative initiative was presented by Deputy Minister of Economy of Tatarstan Natalia Kondratova. She proposed to extend the reduced rate of 5% for the taxable unit “income minus expenses” for another year — until 1 January 2026. Currently, the base rate for this tax regime is 15%, that is, three times higher.
Preferential rates for the simplified tax system are extended in order to develop manufacturing in the republic, explained the deputy minister of economy. According to her, not many entrepreneurs work in industry and they need to be supported. Therefore, only those companies whose economy activity includes activities in manufacturing, construction and distribution of electricity, gas and water (Editor’s note: that is, in three priority sectors of the economy) will be able to take advantage of the benefits. Natalya Kondratova estimated the coverage of tax benefits at 32,000 entrepreneurs. The total amount will be 300 million rubles.
Tax preferences are extended against the backdrop of tax reform. As is known, starting next year, entrepreneurs may face an increase in the tax burden on business. Only basic rates under the simplified tax system are applied: 6% for the taxable object of “income” and 15% for the taxable object of “income minus expenses.” In addition, increased rates under the simplified tax system, which were in effect when the limits were exceeded (8% for the taxable object of “income” and 20% for the taxable object of “income minus expenses”), have been cancelled. Instead, “simplified” taxpayers become VAT payers if their revenue exceeds 60 million rubles.
The burden on SMEs has been increased by 39%
Fearing pressure, the leadership of the Chamber of Commerce and Industry asked to extend the benefits back in October. During the discussion of the draft budget in parliament, Deputy Head of the Chamber of Commerce and Industry Sergey Karpushin drew attention to the fact that the draft budget includes a sharp increase — by more than 39% — in income in the form of tax from small businesses using the simplified taxation system. According to him, the Ministry of Finance of Tatarstan plans to receive an additional 6.24 billion rubles, and in total, revenues of 22.18 billion rubles are included.
“Back in July 2024, the Chamber of Commerce and Industry officially appealed to the State Council and the Government of Tatarstan with a request to once again extend the reduced rates under the simplified taxation system for two years. There is no positive decision on this issue yet. The specified rates will cease to apply on 1 January 2025, and then a single rate of 15% will come into effect. In this case, the burden will increase by at least 50%, and at most — three times. This will hit small businesses in the republic hard,” he said.
Apparently, the voice of the Chamber of Commerce and Industry of the Republic of Tatarstan was heard, and the deputies decided to meet the wishes of businesses. Deputy Dmitry Samarenkin asked why the Ministry of Economy of the Republic of Tatarstan proposes to extend the benefits for a year, and not for three years at once? But instead of Kondratova, the head of the budget committee Leonid Yakunin took the floor.
“This is a recent practice because the situation is changing. The benefit cannot be given everywhere, for life, and is given to solve certain problems of the current moment. If some problem needs to be solved, as a regulator to solve the problem. There was a time when issues were considered when it was necessary to create jobs. Now, thank God, there is no such need. Now there is something else on the agenda — investments in economic development and support for entrepreneurs in the manufacturing sector. What part of business works in industry? It seems to be only 1.7%, and this sector needs to be increased,” he explained.
Who is sitting on the pipe?
“What kind of ‘gas’ companies are using the ‘simplified’ system?” CEO of Gazprom Transgaz Kazan Rustem Usmanov joined the conversation. “As far as I know, so far we have one competitor — KAMAZ-Energo gas transportation company. Well, Inzhenernye Resheniya (Editor’s note: a resident of the Khimgrad technopolis) is trying to create something. What other organizations on the ‘simplified’ system are engaged in gas distribution?” he extracted secret information from the authors of the preferential regime for the simplified tax system
Another deputy, Fadbir Safin, calculated that each beneficiary receives only 10,000 rubles and whether they can really help businesses.
In conclusion, the deputies considered it fair that it is necessary to know who will be provided with benefits for 300 million rubles.
“By the beginning of the session, I ask you to prepare a list of organisations that are eligible for the benefit so that you can answer. Usmanov asked the right question — they are also engaged in gas distribution, and the benefits do not apply to them,” Leonid Yakunin smiled.
It is expected that the bill will be considered on 23 December at three readings at once.