Russian Minister Outlines Small Business Tax Reforms

by Tatiana Smolenska, Tax-News.com, Moscow

28 March 2002

The Russian government plans to complete the bulk of its tax reforms next year, First Deputy Finance Minister Sergey Shatalov told a news conference yesterday. "In 2003 the main package of tax laws will be passed and the Tax Code will take on a complete form."

The government is systematically reducing the tax burden, he said. In the first year of reform the tax burden was lightened by 2 per cent of GDP, and in the second year by another 2 per cent of GDP. "For the consolidated budget this meant losses of about R200bn," Shatalov said.

However, the government views these lost revenues as "investment" because they should stimulate economic growth.

The minister said that a measure to reduce the profits tax on small businesses from the current 24% to 20% will be considered at the government's meeting on 4 April. To be recognized as a small business a company must have a staff of no more than 20 employees and an annual income of no more than R10m.

Other proposals to be considered at the meeting will include a 100% investment capital allowance, and exemption from VAT, sales tax, property tax and the unified social tax. For two years small businesses will have the right to choose between paying tax via net profit tax or via income tax. At the end of that time net profit tax will become compulsory.

The small business regime will be extended to businesses having an annual income within the range of R10m to R15m for one year only.

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