VAT reduced to zero – Kommersant FM

The authorities will abolish VAT for businesses in a larger number of industries. The experiment with a zero tax for public catering turned out to be successful, and they plan to expand it, said First Deputy Prime Minister Andrei Belousov. In the summer of 2023, the Ministry of Finance did not rule out that such a regime could extend to security companies and retail trade in non-food goods. In this way, the authorities hope to motivate enterprises to leave the gray zone. The topic will be continued by Daniil Babkin.

Recently, the authorities have introduced new duties for exportersapproved forced-voluntary collection from large businesses and doubled the VAT on burgers. Finance Minister Anton Siluanov said that in three years they will return to discussing basic taxes, including on personal income.

All the more surprising against this background are the plans to expand the experiment with zero VAT to a larger number of industries, voiced by Deputy Prime Minister Andrei Belousov, known for his ability to call on businesses to be socially responsible.

Although this tax regime, as planned, should both increase budget revenues and help business. That is, enterprises are offered not to pay VAT, stimulating them to leave the gray zone, explained Dmitry Kirillov, adviser to the law firm Lidings:

“As part of the experiment in the restaurant industry, by zeroing the tax rate, it was proposed to allow the industry itself to save money. Saving on VAT provides an incentive for the business to stay afloat and have money to develop.

On the other hand, there has been a serious crackdown on abuse in the restaurant industry. A lot of schemes were discovered when, for example, parallel cash registers were used, and the proceeds from the operation of the establishment went to the accounts of completely different companies.”

The temptation to go into the gray zone arose among restaurants whose turnover no longer allowed them to pay reduced taxes on a simplified basis. But, of course, such risks exist in all industries.

In June 2023, the Ministry of Finance said that zero VAT could also be introduced for security companies and in the trade of non-food goods. True, it may not be possible to whitewash non-food retail in this way, says tax lawyer Boris Lutset:

“In the structure of public catering there is a large share of, firstly, VAT at a reduced rate of 10%, and, secondly, the ratio of costs for purchasing products and paying labor there is completely different than in the trade of non-food goods. Still, the latter is not always a human-intensive industry.

If we take the trade in household appliances as an example, then the share of material costs in it is much higher in relation to wages than in public catering. In security activities, obviously, this figure is quite high, that is, the share of labor costs in total expenses.”

Both the Ministry of Finance and the Federation of Restaurateurs and Hoteliers are extremely pleased with the results of the zero VAT regime. Some received more income, others received more contributions to the budget. But Kommersant FM’s interlocutors draw attention to new risks for business. In particular, deputies from the Communist Party of the Russian Federation introduced a bill on the introduction of the so-called restaurant tax, when 1% of each check is transferred to the support fund for SVO participants.

And the government did not give a clear negative opinion on the initiative. At least, this is how tax lawyer Boris Lutset interprets it: “It should not be discounted. Industries whitewashed in this way will be very fertile ground for introducing a prototype of VAT or something similar. Naturally, I do not anticipate this, but the government issued an opinion with a proposal to seriously refine this bill.

Thus, the introduction of this fee is not conceptually denied. It could eventually turn into a sales tax, and not only in restaurants and bars, as it is written there now, but in certain industries that will be whitewashed by that time.”

Although for now the tax policy of the authorities is still different: the tightening mainly affects large companies and exporters. On the contrary, the rest of the business is promised more support and it is expected that by 2030, enterprises will have been operating for more than 13 years on average. Now their lifespan does not exceed nine.

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