Home • Blog • Blog for entrepreneurs • Tax holidays for individual entrepreneurs in 2020
Tax holidays for individual entrepreneurs in 2021 continue. For the first time, registered entrepreneurs using the simplified tax system and special tax system can use a 0% rate until 2024. This is indicated in Federal Law-266 dated July 31, 2020.
Reasons for extending tax holidays
Tax holidays have been in effect since 2015. They were originally planned until 2021. But due to economic fluctuations in the country, they were repeatedly extended. In 2021, the reason for extending tax holidays has again appeared - the spread of coronavirus infection, as a result of which a pandemic was declared throughout the world. Entrepreneurs in many areas of activity temporarily stopped working, which could not but affect the economic situation.
“Panic sentiment” among entrepreneurs further worsened the situation. Many began to be afraid to open their own business so as not to incur losses. To support “young” entrepreneurs and attract new taxpayers, the Government decided to extend the tax holiday. They are focused primarily on small businesses.
Economic interaction with mainland Russia
It is worth considering the fact that any activity of companies implies compliance with the general provisions of the Tax Code of the Russian Federation, and benefits for FEZ participants are provided only in certain cases. Such preferential provisions may be applied in favor of activities carried out by the company within the framework of the Free Economic Zone.
In other cases, benefits may only be applicable if separate accounting is maintained, the rules and regulations of which are also at the development and planning stage. It turns out that separate accounting can be difficult due to certain specifics of the company’s activities, when it is necessary to determine the scope of the agreement and those items for which business is conducted on a general basis.
Example: an entity is engaged in consulting, providing consultations both in the Crimea and in another region of Russia. Moreover, the organization is registered in a free economic zone, the central office is located here, and branches are located throughout the mainland. But the law does not provide for any restrictions or prohibitions for SEZ participants when expanding business activities to other regions of Russia.
Another option in which the working conditions in the SEZ will be of interest to mainland businessmen is the absence of prohibitions on the use of various types of transport outside the zone. That is, after a SEZ participant purchases vehicles, they can subsequently be used in operation on the mainland and in international transport.
These are primarily specialized types of transport intended for the transport of passengers and goods: buses, tractors, tractors, air, rail and water transport. However, there are some nuances here too.
Firstly, it will be impossible to use transport for personal purposes. And secondly, subsequently such vehicles will be limited in terms of their stay on the territory of mainland Russia.
Conditions for using the grace period
Tax holidays are a period during which entrepreneurs have the right to work with zero tax rates.
Preferential conditions are provided for “simplified” entrepreneurs and individual entrepreneurs with a patent who registered as entrepreneurs for the first time. There are requirements regarding the type of activity:
- Production of goods;
- work in the field of science;
- social sphere;
- provision of household services to the population;
- Providing the population with places of temporary residence (hotels, hotels).
It is worth noting that types of activities can be established on an individual basis. You need to check with local authorities about which ones operate in a particular region.
These categories of taxpayers are allowed to use zero rates if they register as individual entrepreneurs before January 1, 2024. The right to provide benefits has been transferred to regional authorities.
Another condition for using tax holidays for individual entrepreneurs in 2020 is that the share from the sale of goods, services or work is 70% or more of total income. That is, profit from preferential activities should prevail in the total profitability.
Tax holidays for individual entrepreneurs are valid for two tax periods.
Tax benefits available to individual entrepreneurs in 2021
Individual entrepreneurs from all over Russia are today listed in the Unified State Register of Small and Medium Enterprises (SMEs). It is available online, and any private entrepreneur has the opportunity to check that his individual entrepreneur is included in this list by entering his details (TIN, OGRNIP or simply full name) into the fields of the request form.
Photo gallery: online request forms to the register of small and medium-sized businesses
One detail is enough to check information about your individual entrepreneur in the SME register
You can now check whether you are included in the register of small and medium-sized enterprises in Russia online
Find out by the TIN what information is presented in the SME register for a particular enterprise.
Presence in the SME register allows an individual entrepreneur to qualify for support from the state, so if information about your company is not presented there or the existing data is incorrect, you should send an application through the website and provide the correct information about yourself.
Presence in the SME register allows individual entrepreneurs to claim certain benefits
Benefits for beginning entrepreneurs
For individual entrepreneurs who are just starting their business, Russian legislation provides some benefits. One of these benefits includes the recently introduced tax holidays. They imply temporary exemption of an individual entrepreneur from the obligation to pay taxes. Federal Law No. 477 of December 29, 2014 states that individual entrepreneurs that were registered for the first time have the opportunity to apply a 0% tax rate for no more than 2 tax periods.
Such tax benefits are not available for all types of individual entrepreneurs, but only for those that meet the specified criteria:
- An individual entrepreneur has been registered for the first time in the name of a specific individual. If you want to liquidate one individual entrepreneur and open another one instead, you will not be able to get a tax holiday;
- The individual entrepreneur operates in one of the following areas: production,
- scientific work,
- social work.
For individual entrepreneurs on a simplified system, the tax period is equal to a year; for individual entrepreneurs on a patent system, the tax period is set by the duration of the patent. In other words, if the patent is taken for one month, then the tax period will be equal to a month, and the tax grace period will last only two months. A novice businessman can legally work in this mode and not pay taxes completely legally for no more than 2 years from the date of registration of his company.
Tax holidays for individual entrepreneurs on the simplified tax system are regulated by paragraph 4 of Article 346.20 of the Tax Code; for detailed information about holidays for individual entrepreneurs on patents, it is recommended to refer to paragraph 3 of Article 346.50 of the Tax Code of the Russian Federation.
The activities of a businessman working under preferential treatment are strictly monitored. If for some reason the individual entrepreneur ceases to meet the above criteria, the tax holiday will be terminated.
The list of activities for which tax holidays are permitted may vary for different regions of the country. For example, in the Novgorod region, preferential taxation applies to hairdressers, beauty studios, enterprises that repair household goods and personal consumption, as well as individual entrepreneurs working in the field of providing funeral services.
In the regions, additional tax benefits for individual entrepreneurs may apply. You can find out whether tax holidays and other benefits are available to enterprises in your region by calling the Federal Tax Service hotline: 8–800–222–22–22 or here.
Intangible but useful benefits also include the guaranteed absence of any inspections by government authorities in the first three years after registration of an individual entrepreneur. It is important that it is guaranteed only if there are no complaints against the individual entrepreneur.
Video: tax holidays for individual entrepreneurs on simplified or patent taxation systems
Preferences for individual entrepreneurs-pensioners
From a legal point of view, retired entrepreneurs do not differ from ordinary individual entrepreneurs and do not enjoy benefits in paying taxes and contributions to the budget. Along with ordinary individual entrepreneurs, pensioners are required to answer their debts with all their property; it is for this reason that it is recommended not to give in to offers from friends and acquaintances to register a business in your name. Pensioners are guaranteed the right to enjoy benefits only as individuals.
Video: insurance premiums for individual entrepreneurs-pensioners
Benefits for individual entrepreneurs with many children
Individual entrepreneurs who care for three or more children under the age of 16 may be exempt from paying state fees upon registration. Today there are no other tax breaks for entrepreneurs with many children.
In order to exercise his right not to pay the state fee, when registering an individual entrepreneur, the entrepreneur must provide the documents specified by law:
- a certificate of the quantitative composition of your family;
- a certificate of your income for the last 6 calendar months;
- photocopies of birth certificates of all children under 16 years of age;
- application for benefits in free form.
Benefits for disabled individual entrepreneurs
Having an individual entrepreneur with a degree of disability also does not provide significant advantages when interacting with the tax service. There are only a few exceptions:
- A disabled individual entrepreneur of categories 1, 2 or 3 has the opportunity not to pay the unified social tax (UST) if the revenue of his enterprise for the year does not reach 100 thousand rubles;
- A disabled individual entrepreneur can also receive some transport tax benefits, but only in cases where this is allowed by regional legislation.
The Ministry of Finance fears that the introduction of additional special benefits for disabled entrepreneurs may provoke a massive re-registration of individual entrepreneurs for disabled people, and this will negatively affect budget revenues from individual entrepreneurs. Disabled people of groups 1 and 2, as well as children with disabilities, when paying personal income tax, can receive a tax deduction of 500 rubles for each month of the reporting tax period (see paragraph 1.2 of Article 218 of the Tax Code of the Russian Federation).
Video: benefits for disabled entrepreneurs
Restrictions
Local authorities have the right to independently determine restrictions that apply to the activities of entrepreneurs using tax holidays:
- the number of employees;
- profitability.
Important! Tax holidays apply only to the simplified taxation system and special taxation system. If an entrepreneur works on several taxation systems, according to others he pays the tax in full.
Despite the temporary exemption from tax, insurance premiums must be paid throughout the tax holiday period - contributions are made to the Pension Fund for yourself and for employees. It is also important to understand that at the end of the year a declaration is submitted indicating a 0% tariff. Tax holidays are valid until 01/01/2024.
“Young” entrepreneurs have enough time to register with the Federal Tax Service and save money.
How to apply for tax exemption and how to report?
How to apply for tax holidays for individual entrepreneurs? Do I need to notify the tax authority that an individual entrepreneur is subject to tax holidays? The law does not require this. But it is better for the entrepreneur to check with his inspection whether any additional papers are needed from him in this regard.
Practice shows that sometimes additional clarification is indispensable - inspectors may not see any reason to apply a zero rate to individual entrepreneurs. This may be due to technical difficulties in correctly qualifying individual activities.
Tax authorities may deny an individual entrepreneur a zero rate if the wording in the regional law and the name of its type of activity look different. Then the individual entrepreneur can give the necessary explanations in writing, which will help convince controllers and obtain the right to a zero rate.
Attention! Hint from ConsultantPlus It is possible that you paid the cost of a patent or tax under the simplified tax system, and then found out about tax holidays. If they apply to you, then... (for more details, see K+). Trial access to K+ is free.
Holidays for individual entrepreneurs exempt them from taxes, but do not require reporting - individual entrepreneurs using the simplified tax system as usual submit a declaration at the end of the year indicating a zero tax rate. Entrepreneurs with a patent do not need to report to the tax office.
The individual entrepreneur is not required to submit any additional reports related to the application of the zero rate during the holidays.
Is there a benefit for re-registered individual entrepreneurs?
Consider the following situation. The entrepreneur stopped his activities, and then decided to register as an individual entrepreneur again. Moreover, he did this after the law on tax holidays was approved. Is it possible to take advantage of the benefit in this case or does it not apply to those who register again?
Initially, Letter No. 03-11-11/40882 dated July 12, 2021 stated that tax holidays cannot be used by individual entrepreneurs who suspended their activities and then re-registered as individual entrepreneurs.
But the Supreme Court refutes these data. According to his decision, entrepreneurs who were previously registered as individual entrepreneurs, then ceased their activities, then resumed them after the approval of tax holidays, are not excluded from the list of “beneficiaries”. Each case is considered individually.
Of course, all individual entrepreneurs receive the right to tax holidays in 2021 and beyond only if they meet the stated requirements.
Land use and construction on the territory of the Crimean SEZ
Article 17 of Federal Law 377 defines certain procedures relating to land use and construction on the territory of the SEZ. The law will come into force in January 2021, and its application in practice will concern the placement of those facilities that are considered necessary for the implementation of investment projects planned by participants.
At the same time, it is also quite important that the land plots necessary for the participant to implement the plans will be provided by the municipality or the state for rent for a period agreed in advance - without any bidding options.
The planning of the territory of the FEZ and the development of relevant documentation, as well as decision-making in this direction will be dealt with by the Council of Ministers of Crimea or the Government of Sevastopol. Documentation on the planning of the territory and the placement of objects on it must be prepared by the participants at their own expense. Objects will be located by prior approval of the location, or in accordance with the layout of the territory. There will be no public hearings when approving the location of facilities by the Federal executive authorities. Moreover, urban planning regulations do not apply to areas intended for the placement of objects.
Preparatory work can begin even before the actual issuance of a construction permit - from the date of submission of design documents. Local authorized bodies are able to determine lists of types of preparatory work. And the permits for the construction of facilities, as well as for the commissioning of facilities, are issued by the Council of Ministers of the Republic of Crimea and the authorities of Sevastopol.
How to take advantage of tax holidays
In order to join the ranks of “beneficiaries” and pay tax at a 0% rate, individual entrepreneurs using the simplified tax system or PSN do not have to submit any special documents. Immediately after registration with the Federal Tax Service or within 30 days after registration, a standard application is submitted according to f. 26.2-1 or 26.5-1 (depending on which taxation regime is planned to be used). The 0% tax rate is indicated when submitting the declaration.
Note! If you make advance payments during the year, even if the individual entrepreneur had the right to a tax holiday, it will not be possible to return the funds spent. You will have to file a tax return showing the interest rate at which the payments were made.
Legal framework, innovations
The possibility of using tax breaks is stipulated by Federal Law No. 477 of December 29, 2014. According to this regulatory act, you can take advantage of tax holidays one-time for a certain period of time. However, this opportunity is not available in all regions of Russia. Regional authorities of the subjects in which benefits are allowed have the right to adjust the conditions for implementing the regulatory legal act at their discretion. The adjustment directly depends on the economic situation in a particular region.
List of subjects of the Russian Federation
Currently, only a few regions have extended the preferential rate until 2024. For others, this issue is under active discussion. In Moscow itself and the Moscow region there is still no accurate information about the extension of tax holidays. According to official data, the preferential treatment in the capital and district ends on December 31, 2020.
Detailed information is in the table. Of course, this is not final data. The list will be updated as new information becomes available.
Regions that have decided not to introduce preferential treatment on their territory have the right to do so legally. In this case, entrepreneurs are deprived of the opportunity to apply a 0% rate, even if all conditions are met.
| Read and ask questions: What taxes does an individual entrepreneur pay on the simplified tax system? |
SEZ management bodies
- Ministry of the Russian Federation for Crimean Affairs (regulatory and legal support for the functioning of the SEZ, maintaining a register of SEZ participants, etc.). — Address: 295000, Simferopol, st. Karl Marx, 28/10, “Liter B”. — Phone/fax: +7 10 38 (0652) 788-428. — Official website: https://mincrimea.gov.ru/
- Expert advice on SEZ issues on the territory of the Republic of Crimea and the city of Sevastopol (review and decision-making on the conclusion of agreements on the conditions of activity in the SEZ for projects with a capital investment volume of over 100 million rubles).
- Council of Ministers of the Republic of Crimea (authorized body - Ministry of Economic Development of the Republic of Crimea) and the Government of Sevastopol (authorized body - Main Directorate of Economic Development) (organizational and logistical support for the activities of expert councils, acceptance and consideration of documents, conclusion of agreements on the conditions of activity in the SEZ for projects with a volume of capital investments of up to 100 million rubles, monitoring the implementation of the terms of contracts, preparing an annual report on the results of the functioning of the SEZ).
- Ministry of Economic Development of the Republic of Crimea - Address: 295000, Simferopol, Kirova Avenue, 13 - Telephone/fax: +7 10 38 (0652) 544-294, 274-404. — Official website: https://minek.rk.gov.ru/
- Main Directorate of Economic Development of the Department of Economic Policy and Finance of the Government of the City of Sevastopol - Address: 299011, Sevastopol, st. Lenina, 2, - Office tel., reception tel.: +7 (8692) 54-47-73, fax
Prepared based on materials from the CrimeaBusinessConsulting information agency
Accounting for income and expenses during tax holidays
Despite the tax rate being calculated at 0%, entrepreneurs are required to keep records of income and expenses in a special journal (KUDiR). According to Order of the Ministry of Finance No. 135n, a businessman reflects in this document the reliability, continuity and completeness of his activities. The tax base is determined from the accounting log, which in this case is necessary for calculating insurance premiums.
The advantages of KUDiR are obvious even during the grace period:
- the procedure for filling out the KUDiR involves the daily recording of monetary amounts, which is not directly related to the calculation of tax (for example, this helps to determine the revenue limits allowed for the simplified tax system);
- if KUDiR is absent from the workplace, the entrepreneur faces penalties of 10,000 rubles.
Data from KUDiR, first of all, is required by the entrepreneur himself.
Is it possible to save on insurance premiums?
Taxes carry a serious financial burden for any businessman. However, during the tax holiday for individual entrepreneurs for 2021 and subsequent years, insurance premiums will have to be paid. The benefit does not apply to them. This means that during the year you will have to make insurance contributions according to the same scheme as before. This applies equally to payments for yourself and employees.
The government explains this as follows: individual entrepreneurship is not only a way to make money, but also involves certain risks. In particular, employees of an enterprise should not lose contributions to the Pension Fund and other contributions if the employer temporarily works at a preferential rate.
Features of taxation in Crimea and Sevastopol
Income tax in the Crimean economic zone is the most pleasant and profitable, because FEZ participants pay corporate income taxes at reduced rates. This is the case when it comes to taxes to the regional budget. And residents are completely exempt from paying taxes to the federal budget - for 10 years from the date of receipt of the first profit. Tax rates are determined by the highest executive bodies of Crimea and Sevastopol, but their amounts will not exceed the established maximum. For example, for the first 3 years a participant pays 2% income tax to the local budget, from 4 to 8 years of activity - 6%, starting from the 9th year of operation - 13.5%.
No less comfortable is the fact that participants in the free economic zone are also exempt from taxation in relation to property on the balance sheet of organizations. The important point is that tax-free property must be acquired or created for the purpose of carrying out certain activities in the territory of the FEZ. The property must also be located within the zone. Participants are exempt for 10 years, the countdown of which begins from the next month after the property is registered.
This type of property includes not only the property of organizations, but also property transferred by local governments to the balance sheet of the enterprise. It is believed that the most relevant benefits in this area will be for the housing and communal services sector and those organizations that manage a large number of property holdings.
A similar option is a discount on land taxes. The criteria for providing benefits are practically the same - the location of the land plot on the territory of the SEZ, as well as its operation in order to implement the terms of the agreement in the territory of the zone. The validity period of these benefits is 3 years from the month the FEZ participant entered into ownership of a specific plot if all necessary conditions are met.
Premiums are paid at 7.6% over a 10-year period. This benefit applies to residents who received the status of a FEZ participant no later than a 3-year period from the date of formation of the free economic zone on the Crimean peninsula.
Compliance with all rules, conditions, benefits will be fully monitored. But although all tax audits will be carried out by the Federal Tax Service, any unscheduled audits must be strictly coordinated with the Ministry of Crimea and individual economic bodies of the constituent entities.
Examples of calculations
Let's look at how to calculate tax for different types of activities.
Example 1
The individual entrepreneur is registered in a region in which tax holidays apply. “Simpler” chose “Income minus expenses” as the object of taxation, but is engaged in different types of activities. Some qualify for preferential treatment, others do not.
Based on the results of work for the calendar year, the profit amounted to 9,890,000 rubles. By type of activity, “net” income was distributed as follows:
- 7,500,500 rubles (preferential type of activity).
- 1,078,540 rubles.
- 1,310,960 rubles.
First, let's calculate the share of profit from preferential activities:
7,500,500 / 9,890,000 = 0.758. That is, 75.8%.
This figure exceeds the maximum norm of 70%, so the entrepreneur has the right to count on benefits. He does not calculate tax on the first type of activity, since the rate on it is 0%.
Example 2
An entrepreneur earned 10 million rubles during the tax period (calendar year). "net" profit. Of this, earnings from preferential activities amounted to 6,500,000 rubles.
Calculation of the percentage of profit on the benefit:
6,500,000 / 10,000,000 = 0.65 or 65%.
This is less than the established minimum, so the individual entrepreneur is not entitled to a 0% rate. The entrepreneur calculates the tax amount according to the standard tariff.
Need help with your taxes?
Don’t waste time, we will provide a free consultation and help with financial reporting for individual entrepreneurs.
Installment payment of taxes for individual entrepreneurs
In addition to choosing the right tax regime, businessmen can take advantage of other forms of support from the state in order to optimize their payments and minimize problems of interaction with regulatory authorities. Individual entrepreneurs have grounds to apply for an installment plan for payment of payments and contributions due to an unfavorable financial condition that arises in one of the following cases:
- the property of the individual entrepreneur was damaged by force majeure factors, for example, flood, fire, man-made disaster, and so on;
- the individual entrepreneur faces the danger of bankruptcy or partial insolvency;
- The individual entrepreneur does not have enough funds to make a one-time payment in full;
- Individual entrepreneurs are required to pay taxes related to import/export procedures across the borders of the Customs Union;
- Individual entrepreneur works seasonally;
- The individual entrepreneur did not receive funds from the budget in a timely manner (subsidies or payment for services from the customer under government contracts).
To receive benefits justified by these factors, you must provide evidence of what happened to the Federal Tax Service. Installment payment can be given for a period of no more than one year. To receive it, you must provide the necessary documents to the regional branch of the Federal Tax Service:
- an application requesting payment in installments;
- certificates from banks reflecting the movements of the individual entrepreneur’s finances over the last 6 months and the status of the individual entrepreneur’s accounts;
- list of debtors and copies of contracts under which obligations were violated;
- the individual entrepreneur’s obligation on the planned settlement with the Federal Tax Service and an approximate debt payment schedule.
To the application and the certificates listed above, it is necessary to add a conclusion about what damage the individual entrepreneur caused due to circumstances of an insurmountable nature, as well as reports on the assessment of the losses caused. In the event of a shortfall in budget funds, it is necessary to provide confirmation from the manager of budget funds with information about the status of settlements between the individual entrepreneur and the state organization.
Detailed information about the conditions for obtaining installment plans for paying taxes can be easily found on the tax service website.
The procedure for granting deferment and installment plans for the payment of taxes and fees is of an application nature. The application form and the Procedure for changing the tax payment deadline were approved by Order of the Federal Tax Service of Russia dated September 28, 2010 No. ММВ-7–8/ [email protected] (as amended on March 19, 2012). The application is submitted to the Federal Tax Service Office for the constituent entity of the Russian Federation at the location (place of residence) of the interested person.
The list of documents that the taxpayer must attach to the application is established by Art. 64 Tax Code of the Russian Federation.
www.nalog.ru
Video: installment plan for paying taxes
Exemption from VAT for individual entrepreneurs on OSN
If you have chosen the OSN tax regime for your individual entrepreneur, it is possible to receive certain concessions. Private businessmen who keep accounts under the OSN have legally guaranteed grounds not to pay value added tax. According to Article 145 of the Tax Code of the Russian Federation, this is allowed when revenue for the previous 3 months does not exceed 2 million rubles. This rule applies only to non-excisable goods. To apply it, you must, before the 20th day of the calendar month from which you would like not to pay VAT, provide proper notification in writing and other requested documents to the Federal Tax Service office at the place of registration of the company.
The appropriate notification form can be easily found via this link.
Individual entrepreneurs on the general taxation system can qualify for VAT exemption
Table: list of documents for obtaining VAT exemption
| No. | Title of the document | Document Format |
| 1 | Extract from the sales book | in free form |
| 2 | Extract from the book of accounting of income, expenses and business transactions | in free form |
