Tax Planning

Planning for Russia’s Simplified Tax System: What the 20-Million Ruble VAT Threshold Means for Small Businesses

With the VAT-free threshold under Russia’s USN (simplified system) formally extended until 2029, small businesses have a multi-year window to plan growth without unexpectedly becoming subject to VAT.

By NomadicTax Research Team • 5-8 min read • August 10, 2026

## What Is This Threshold About? The threshold refers to the income limit under the **simplified tax system (УСН)** beyond which businesses must register for and pay **Value Added Tax (VAT)**. Initially set at **20 million rubles** for 2026, a new law passed on **4 July 2026** (Federal Law № 228-ФЗ) ensures this threshold **remains at 20 million rubles** through **2027-2029**. ([nalog.gov.ru](https://www.nalog.gov.ru/rn46/news/activities_fts/16636927/?utm_source=openai)) ## Why Businesses Should Care - Once revenue crosses the threshold, the business becomes a **general VAT taxpayer** — more complex reporting, tax invoices, refunds. - Up front costs of changing financial systems, adoption of accounting software that supports VAT, staff training. - Pricing, contracts, supplier relationships may need revision. ## Planning Tactics for SMEs ### a) Forecast Revenue Carefully If your revenue in 2025 exceeded or is projected to exceed 20 million rubles, you must prepare for VAT registration starting in 2026. If you're close, explore ways to manage timing of sales and recognize income strategically across financial years. ### b) Choose Between USN Options There are different USN tax objects: - **Income only**, simplified calculations, fewer deductions. - **Income minus expenses**, more complex, potential VAT impacts. Evaluate trade-offs especially due to VAT applicability and cash basis issues. ### c) Maintain Good Records from Day One Even before crossing the threshold, maintain records and invoices in ways that will be required under VAT status — detailed receipts/invoices, tracking input VAT where applicable. This avoids scrambling later. ### d) Adjust Pricing, Contract Terms VAT-paying customers may expect you to issue tax invoices; your suppliers will expect VAT-inclusive purchase costs. Consider whether customer segments are price sensitive, and how VAT included/excluded pricing may affect competitiveness. ### Example Application Imagine a small craft brewery in Russia, earning 18 million rubles in 2025, and expecting 22 million in 2026. Since exceeding the 20 million threshold, VAT registration is mandatory as of sales allowing forecast. They need to implement VAT collection, enforce input invoice handling, and possibly adjust consumer prices. ## Longer-Term Strategy Because the threshold is now stable until 2029, businesses can pace their growth, plan capital investments, and digitalize accounting without sudden shocks. This provides a buffer to modernize operations before dealing with VAT’s complexity. **Tip**: Consult with a tax professional about whether accelerated accounting methods, regional incentives, or sector-specific exemptions apply, especially if you are in agriculture, trade, or services with cross-border components.