Russian Duma Temporarily Exempts Some Entrepreneurs from VAT

The State Duma of the Russian Federation has approved a bill in its second and third readings that will exempt entrepreneurs operating under the simplified tax system (USN) and patent tax system (PSN) from paying VAT until the end of 2026. This was announced on Tuesday, April 14.

The initial version of the law proposed transferring certain tax authorities from the Russian government to the Ministry of Finance of the Russian Federation and other federal agencies.

Deputies also supported several additional amendments aimed at preserving access to specific support measures, enabling businesses to adapt more smoothly to changes. Specifically, from April 1 to December 31, organizations and individual entrepreneurs in the public catering sector using the USN and PSN, who became VAT payers only in the current year, will be exempt from VAT.

This applies to those who have lost their VAT exemption or patent eligibility, provided their income for 2025 did not exceed 60 million rubles, and their service income constituted at least 70 percent of their total revenue.

Sergey Chizhov, a member of the Budget and Tax Committee, emphasized that restaurant and cafe owners will be eligible for significant state benefits. Furthermore, entrepreneurs will no longer be required to meet the criterion of aligning their employees' average salary with the regional average salary until the end of the year.

"We regularly implement measures to support small and medium-sized businesses. The adopted document specifically helps businesses adapt smoothly to the taxes that were increased from January 1," he explained.

Individual entrepreneurs who have lost the right to apply the PSN will be able to utilize the right to deduct VAT on goods, works, and services that were not used in its application. Businesses under the USN will be able to reduce their income by the amount of tax paid under the "simplified" system, received as an advance payment during the period when they were not yet a payer.

Additionally, some entrepreneurs will be able to exclude income from deposit interest when calculating last year's income threshold for VAT exemption until the end of the year.

Individual entrepreneurs who combined PSN with the general tax system and whose income exceeded 20 million rubles last year will be able to switch to the USN from January 1, 2026, if they notify the tax authority no later than June 1. Also, individual entrepreneurs who combined PSN with USN will be able to change their USN tax object.

Furthermore, small and medium-sized enterprises will have the opportunity to combine income from their primary and additional activities, included in government lists, when calculating the required share of income for applying a reduced rate of insurance contributions, according to RIA Novosti.

Meanwhile, customs authorities have begun to charge Russian companies increased duties on goods purchased in the Eurasian Economic Union (EAEU) countries but produced in states classified as unfriendly.