Self-Employment 2023: Pros and Cons

What is self-employment, how it is beneficial and what are the pitfalls – in the material “Kommersant”.

Who are the self-employed

The self-employed are people who work for themselves. These can be nannies, tutors, freelancers or translators. From January 1, 2019, the Russian government launched a special tax regime for them with reduced rates:

From income received from natural persons— 4%

From income received from individual entrepreneurs and legal entities— 6%

The pilot project initially operated in four regions – Moscow, the Moscow and Kaluga regions, and the Republic of Tatarstan. Then the tax experiment spread to another 23 regions, and from July 1, 2020, to the entire country. The special regime is valid until December 31, 2028.

According to the Federal Tax Service (FTS), at the end of 2022, 6.5 million people became self-employed in Russia. The main activities are taxis, construction and marketing services, consulting, renting apartments.

Who can become self-employed

Who is subject to the tax regime? The tax regime can be applied by individuals whose maximum income does not exceed 2.4 million rubles. in a year. You can switch to it voluntarily, and pay tax only when you receive income. Both citizens of Russia and the EAEU states – Armenia, Belarus, Kazakhstan, Kyrgyzstan can become self-employed.

Also, an individual entrepreneur can switch to the tax regime. At the same time, he should not have hired employees working under an employment contract. Exception: self-employed people can hire people under a civil law contract.

The special tax regime cannot be transferred to those who:

1. Extracts or sells minerals
2. Resells goods and property rights
3. Sells excisable and labeled goods
4. Works on commission, surety, agency agreements
5. Deals with delivery. Exception: if there is an online checkout
6. Operates under other special tax regimes

Pension for the self-employed. The law does not oblige the self-employed to pay insurance premiums. You can do this voluntarily. In 2021, the minimum contribution is the same as for individual entrepreneurs – 32,484 rubles. If there are no contributions to the Pension Fund, then the length of service will also not be counted – you can only count on a social pension. Honored Lawyer of Russia, Doctor of Law Ivan Solovyov spoke about this:

“The seniority and pension for self-employed citizens goes and is accrued. But there is one condition here – the citizen must be a conscientious taxpayer and himself calculate and pay the appropriate contributions to the OPS. The length of service is accrued in proportion to the amount of the insurance premium paid, which must not be less than the minimum fixed in the Tax Code of the Russian Federation.

For pensioners applying the special tax regime, the pension and all supplements to it are preserved. Work experience also does not count.

Part of the self-employed tax is automatically transferred to the Compulsory Medical Insurance Fund. Therefore, you can receive free medical care.

Self-employment: pitfalls

• The benefits of self-employment. For the self-employed, low tax rates are provided, simplified registration through the My Tax application, and it is possible to officially confirm your earnings.
• Disadvantages of self-employment The self-employed are not credited with seniority, they cannot hire employees under an employment contract, and there are no social guarantees.

An employer can transfer an employee to a special tax regime. For example, in order not to pay insurance premiums and personal income tax. However, according to Ivan Solovyov, even the most daring tax optimization consultants do not advise their legal entities to do this. There are several reasons here:

“The first is the loss of leverage on the employee by the administration through labor legislation. But in it you can find many norms that skillful and experienced personnel officers use in order to “divide and rule in teams.” The second point is in judicial and law enforcement practice. And here everything is simple. Any information about the self-employed scheme is a tax audit.”