What Changed
Until 2025, businesses operating under Russia’s simplified tax regime (USN) were fully exempt from VAT. This exemption was one of the regime’s main advantages.
From 2025, mandatory VAT was introduced for USN companies with annual revenue exceeding 60 million rubles. Those who cross the threshold must pay VAT at either 5% (without input tax credits) or 20% (with input tax credits).
According to reports from the business community, 2026 may see the threshold lowered from 60 million to 20 million rubles. If that happens, the majority of medium-sized USN businesses will become VAT payers.
Why the Old Business-Splitting Schemes No Longer Work
A classic tax optimisation technique: when a company’s revenue approaches a threshold, it is split into several legal entities — each of which formally “stays below” the limit.
With the introduction of ASK VAT-3 and expanded tax monitoring, this scheme has lost its viability. The system automatically detects affiliation through:
- shared directors and founders,
- a single IP address used for filing returns,
- shared counterparties and banks,
- interdependent cash flows.
When signs of business fragmentation are detected, the tax authority consolidates the revenue of all affiliated entities and assesses additional taxes, penalties, and interest across the entire group.
Choosing the Right VAT Rate Under the USN
If you are required to pay VAT, you face a choice of rate:
5% rate without input credits. Suitable when you have little incoming VAT — for example, when you work with USN suppliers and purchase modest amounts of raw materials. Simple administration and a low burden when input VAT is small.
20% rate with input credits. Advantageous when you have significant incoming VAT expenses — procuring goods or materials from standard VAT payers, or renting from large landlords. More complex accounting, but when input credits are high, the net tax burden can be lower than under the 5% rate.
Rate selection is a strategic decision made in light of your expense structure, planned business partners, and projected P&L. A wrong choice at the outset can cost the company millions of rubles in overpaid taxes.
Conflict of Interest Between Partners
The introduction of VAT for USN businesses creates an unexpected source of conflict in companies with multiple participants. A typical situation:
- The managing partner wants the 20% rate with credits — more paperwork, but lower tax when large procurement costs are involved.
- The passive investor wants the 5% rate — less complexity, a predictable tax expense.
If the shareholders’ agreement does not set out how tax decisions are made, this conflict may be irresolvable without court intervention.
Recommendation: add a clause to the shareholders’ agreement or the company’s articles of association establishing the procedure for making tax strategy decisions — including rate selection when revenue crosses threshold values.
Read Also
- ASK VAT-3: How the Tax Authority’s AI Checks Your Business
- Insurance Contributions for LLC Directors in 2026: New Obligations Even for Dormant Companies
Is your company approaching a VAT threshold, or are you unsure which rate to choose? Contact us for a written tax opinion — we will calculate the optimal strategy based on your business’s specific cost structure.