Possible Establishment of Beneficial Rates for Simplified Tax System (STS)

Currently, the State Duma is reviewing a draft federal law No. 237438-5 «On Amendments to Article 346.20 of the Second Part of the Russian Federation Tax Code" submitted by the State Duma of the Stavropol Region as far back as on 27 July 2009.

In early October the Ministry of Finance of Russia has supported the adoption of that draft law. The information on the draft law support was published on the website the Ministry of Finance on October 13, 2009.

Article 1 of the proposed draft law proposes to provide to the RF Subjects the right to establish regional laws for taxpayers who are applying the simplified taxation system and who have selected the object of taxation as the revenues, reduced by the amount of expenditures, a differentiated tax rate ranging from 3% to 6%, depending on the category of a taxpayer.

Currently, in accordance with the current version of Article 346.20 of the Tax Code, if the object of taxation is the income, reduced by the amount of expenditures, differentiated tax rates ranging from 5% to 15% depending on the categories of taxpayers can be established as per the laws of the RF Subjects.

The adoption of this draft law allows the regional authorities to provide substantial reduction in the tax burden, especially to small businesses. It could become an effective measure to support small businesses during the crisis. In combination with the budget subsidies to the newly created small businesses, the RF Ministry of Health Care and Social Development has presented an active measure to anti-crisis support to the small business in mid-October.

D.A. Kazantsev - Senior Legal Analyst