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Tax Regulations for Self-Employed Extending to 19 More Regions

Ministry of Finance of the Russian Federation has proposed to expand the area of application of special tax regulations for the self-employed to 19 more regions of the country. The bill drafted by the ministry was posted at the portal of draft regulatory legal acts.

From 1 January 2020, self-employment tax will be levied in St. Petersburg, Bashkiria, Krasnoyarsk and Perm territories, Nenets, Yamal-Nenets and Khanty-Mansiysk autonomous districts, as well as in the Voronezh, Volgograd, Leningrad, Nizhny Novgorod, Novosibirsk, Omsk, Rostov, Samara, Sakhalin, Sverdlovsk, Tyumen and Chelyabinsk regions. According to the project charter, the anti-corruption expert appraisal is scheduled to be completed on 5 November 2019. Earlier, Anton Siluanov, first deputy prime minister and Minister of Finance, said that since January 2020, self-employed Russians living in Russia’s another 13 constituent territories would be able to take advantage of simpler tax regulations. Relevant agreements with the Federal Tax Service have already been made. The aforementioned agency provides the self-employed with an opportunity to choose a special tax scheme in the same format that has been used in four experimental regions of the Russian Federation since the beginning of this year. All the regions included in the pilot project belong to the category of donors with a high level of fiscal capacity. As stated by Siluanov, in January-June 2020, the special scheme will be available to self-employed individuals in 19 subjects. As of July, it is expected to function throughout the country. Within the time bracket before July, the ministry has to develop an algorithm that will prevent unscrupulous entrepreneurs from becoming self-employed and thus trying to minimize paying taxes. The earned income tax (EIT) was introduced earlier this year. Moscow, the Moscow and Kaluga regions, as well as the Republic of Tatarstan were selected as pilot regions. This tax was levied as another attempt of the authorities to bring self-employed individuals out from the shadow. According to experts, their number in the country exceeds 25 million people. The authorities hope the people whose income does not exceed 2.4 million rubles a year will become the payers of the EIT. They will have to pay taxes at the rate of 4% or 6%. The rate will depend on the contractors, with whom the self-employed cooperate. In Russia, 240,000 people have registered to date, and 90% of them have received “gray” revenues in the past. According to Mikhail Mishustin, the head of the Federal Tax Service, the total income of the registered self-employed is 10 billion rubles. Most often, Russians providing passenger transportation, tutoring services, programming and renting of premises obtain registration as the self-employed. Reports say all of them have become users of My Tax application and since the beginning of 2019they have paid taxes in the amount of 350 million rubles.