Simplified Taxation System: First Estimates of 2024 Changes in Tax Legislation

Abstract

Changes to the simplified taxation system (STS) introduced in the course of the tax system fine-tuning will significantly alter its design: income limit requirements will be expanded and STS payers will be recognized as VAT payers. The objective of this study is to find out what percentage of STS and CIT payers will be affected by these changes. For this purpose, a distribution of STS and CIT payers by income level was plotted. Information from tax forms of the Russian Federal Tax Service, Registers of SMEs and the SPARK database for the period 2019–2022 was used as input data. It was found that there is a shift in the structure of both STS and CIT taxpayers towards lower incomes: about 70% of CIT payers and about 90% of STS payers earn less than RUB 60 million per year. The analysis revealed that for 85% of STS payers the reform will be neutral, while for 9% the situation will slightly worsen. The winners of the reform will be those companies that will switch from CIT to STS. This transition will be formally available for 87% of CIT payers, and most of them will switch due to the possibility to pay VAT. Expansion of income limits under STS may become a decisive factor for only 10% of CIT payers.

Keywords

• sme
• simplified tax system
• cit
• tax reform
• taxpayers