Russia Softens VAT Plans Amid Small Business Concerns
The Russian government has modified its proposal to increase VAT for small businesses after public backlash. Originally exempt firms will now face phased tax thresholds from 2026. Business groups worry the VAT hike, aimed at funding military operations in Ukraine, might force closures, affecting millions employed in SMEs.
The Russian government has amended its plan to raise value-added tax (VAT) for small businesses, responding to widespread criticism from business owners. Prime Minister Mikhail Mishustin announced the changes on Thursday.
Initially, the draft budget for 2026 aimed to impose VAT on businesses with annual revenues between 10 million and 250 million roubles, previously VAT-exempt. Business organizations voiced concerns that the tax could impact one in ten small businesses, potentially leading to closures due to financial strain.
To address these concerns, the government has introduced a phased approach, reducing the tax-free revenue threshold gradually from 60 million roubles to 10 million by 2028. Although some believe this falls short of desired compromises, the new proposal aims to ease the transition for small and medium-sized enterprises (SMEs), which contribute significantly to Russia's GDP and workforce.
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