New Year with VAT in a new way
14 January 2022 0 comments
In Russia, restaurants with a turnover of up to 2 billion rubles are exempt from VAT
The relaxation does not apply to the sale of catering products by the culinary departments of organizations and individual entrepreneurs of retail trade, as well as to the procurement business
A new federal law exempting part of catering establishments from value added tax (VAT) comes into force on Saturday.
Russian President Vladimir Putin signed the relevant document on July 2, 2021. According to it, the provision of catering services through public catering facilities (restaurants, cafes, bars, fast food establishments, buffets, cafeterias, canteens, snack bars, culinary departments at these facilities), as well as catering services outside of public catering facilities at the place chosen by the customer (field service) is exempt from taxation. The relaxation does not apply to the sale of catering products by the culinary departments of organizations and individual entrepreneurs of retail trade, as well as to the procurement business.
Thus, in order to be exempt from VAT, the following conditions must be met simultaneously: it is necessary that the amount of annual income of an organization or individual entrepreneur does not exceed 2 billion rubles, the share of income from the sale of catering services in the total amount of income is at least 70%, the average monthly amount of payments and other remuneration accrued by an organization or individual entrepreneur in favor of individuals is not lower than the average monthly accrued salary in each subject of the Russian Federation.
Putin proposed to launch a pilot project for catering enterprises on June 4, 2021 at the plenary session of the St. Petersburg International Economic Forum (SPIEF). He explained that companies using the simplified taxation regime (USN) are obliged to switch to the general tax regime "if they overcome the bar in terms of the number of staff, in terms of revenue."
The President stressed that this means a fiscal burden for entrepreneurs, often this factor "constrains the growth of business, forces them to go to all sorts of tricks like artificial fragmentation of companies." The meaning of the pilot project, according to Putin, is to work out a mechanism for a more comfortable transition from one tax regime to another. He clarified that the Russian authorities will assess what effect the measure will have, including for whitewashing business and stimulating the development of companies.
The law also amends Federal Law No. 209-FZ "On the Development of Small and Medium-sized Businesses in the Russian Federation". Since January 2022, in order to classify SMEs as subjects, they have established a limit value of the average number of employees of individual legal entities and sole proprietors conducting business in the field of catering in the amount of 1.5 thousand people.
Advantages of the measure
The main effect of the abolition of VAT for catering is to stimulate growing companies in this area, according to Anton Stamplevsky, Commissioner for the Protection of the rights of entrepreneurs in the Tver Region. "Such a measure of support is important primarily for those who can become small, medium and large, and not micro, as it is more often the case. Most of the catering enterprises in the regions are under special taxation regimes, so the coverage of the benefit by the number of enterprises is not very high," he stressed.
The public ombudsman in the field of restaurant business in Moscow Sergey Mironov agrees with him. He believes that such a measure will have a positive impact on Russian catering enterprises. "For investors, this is an opportunity to invest money and develop. A restaurant cannot exist on the general taxation system with full VAT, it becomes uncompetitive in relation to other restaurants located on the "simplified". Unfortunately, the restaurant has practically no incoming VAT. If he pays outgoing VAT, he needs to significantly raise prices by 50 percent in order to stay afloat. Accordingly, it is easier for him to close, because no one will simply go to him. The abolition of VAT equalizes it with [the restaurant] on a simplified taxation system," he believes.
More preferences
Among the other most necessary support measures, restaurateurs call "the distribution of reduced insurance premiums for the entire period of remuneration, subsidizing the cost of electricity, assistance in placing employees of enterprises in comfortable dormitories," Stamplevsky noted.
Konstantin Ivanov, a restaurateur and real estate manager, a member of the Party of Growth in Tatarstan, also considers the possibility of paying electricity bills with a discount of 50% relevant. "The measure is simple enough to implement for the state and effective for entrepreneurs. The point of control is OKVED (the All-Russian Classifier of Economic Activities) and a long-term lease agreement for premises," he said.
Mikhail Goncharov, the public commissioner for big business in Moscow, the founder of the Teremok restaurant chain, believes that it is also necessary to extend the measure to catering enterprises whose annual income exceeds 2 billion rubles. "The effect will be absolutely incredible. Companies will have the opportunity to recoup investments and will receive a powerful incentive to develop. That is, we predict a doubling of turnover in five years," he said.
After working out the abolition of VAT for catering enterprises, this measure should be extended to hotels, according to the Support of Russia. "The same catering is massively present in hotels. <...> There is a lot of catering there, more than half - they feed people, but they do not fall under it. Therefore, we also consider it necessary to transfer hoteliers to this regime," concluded Alexander Kalinin, president of the business association.
The relaxation does not apply to the sale of catering products by the culinary departments of organizations and individual entrepreneurs of retail trade, as well as to the procurement business
A new federal law exempting part of catering establishments from value added tax (VAT) comes into force on Saturday.
Russian President Vladimir Putin signed the relevant document on July 2, 2021. According to it, the provision of catering services through public catering facilities (restaurants, cafes, bars, fast food establishments, buffets, cafeterias, canteens, snack bars, culinary departments at these facilities), as well as catering services outside of public catering facilities at the place chosen by the customer (field service) is exempt from taxation. The relaxation does not apply to the sale of catering products by the culinary departments of organizations and individual entrepreneurs of retail trade, as well as to the procurement business.
Thus, in order to be exempt from VAT, the following conditions must be met simultaneously: it is necessary that the amount of annual income of an organization or individual entrepreneur does not exceed 2 billion rubles, the share of income from the sale of catering services in the total amount of income is at least 70%, the average monthly amount of payments and other remuneration accrued by an organization or individual entrepreneur in favor of individuals is not lower than the average monthly accrued salary in each subject of the Russian Federation.
Putin proposed to launch a pilot project for catering enterprises on June 4, 2021 at the plenary session of the St. Petersburg International Economic Forum (SPIEF). He explained that companies using the simplified taxation regime (USN) are obliged to switch to the general tax regime "if they overcome the bar in terms of the number of staff, in terms of revenue."
The President stressed that this means a fiscal burden for entrepreneurs, often this factor "constrains the growth of business, forces them to go to all sorts of tricks like artificial fragmentation of companies." The meaning of the pilot project, according to Putin, is to work out a mechanism for a more comfortable transition from one tax regime to another. He clarified that the Russian authorities will assess what effect the measure will have, including for whitewashing business and stimulating the development of companies.
The law also amends Federal Law No. 209-FZ "On the Development of Small and Medium-sized Businesses in the Russian Federation". Since January 2022, in order to classify SMEs as subjects, they have established a limit value of the average number of employees of individual legal entities and sole proprietors conducting business in the field of catering in the amount of 1.5 thousand people.
Advantages of the measure
The main effect of the abolition of VAT for catering is to stimulate growing companies in this area, according to Anton Stamplevsky, Commissioner for the Protection of the rights of entrepreneurs in the Tver Region. "Such a measure of support is important primarily for those who can become small, medium and large, and not micro, as it is more often the case. Most of the catering enterprises in the regions are under special taxation regimes, so the coverage of the benefit by the number of enterprises is not very high," he stressed.
The public ombudsman in the field of restaurant business in Moscow Sergey Mironov agrees with him. He believes that such a measure will have a positive impact on Russian catering enterprises. "For investors, this is an opportunity to invest money and develop. A restaurant cannot exist on the general taxation system with full VAT, it becomes uncompetitive in relation to other restaurants located on the "simplified". Unfortunately, the restaurant has practically no incoming VAT. If he pays outgoing VAT, he needs to significantly raise prices by 50 percent in order to stay afloat. Accordingly, it is easier for him to close, because no one will simply go to him. The abolition of VAT equalizes it with [the restaurant] on a simplified taxation system," he believes.
More preferences
Among the other most necessary support measures, restaurateurs call "the distribution of reduced insurance premiums for the entire period of remuneration, subsidizing the cost of electricity, assistance in placing employees of enterprises in comfortable dormitories," Stamplevsky noted.
Konstantin Ivanov, a restaurateur and real estate manager, a member of the Party of Growth in Tatarstan, also considers the possibility of paying electricity bills with a discount of 50% relevant. "The measure is simple enough to implement for the state and effective for entrepreneurs. The point of control is OKVED (the All-Russian Classifier of Economic Activities) and a long-term lease agreement for premises," he said.
Mikhail Goncharov, the public commissioner for big business in Moscow, the founder of the Teremok restaurant chain, believes that it is also necessary to extend the measure to catering enterprises whose annual income exceeds 2 billion rubles. "The effect will be absolutely incredible. Companies will have the opportunity to recoup investments and will receive a powerful incentive to develop. That is, we predict a doubling of turnover in five years," he said.
After working out the abolition of VAT for catering enterprises, this measure should be extended to hotels, according to the Support of Russia. "The same catering is massively present in hotels. <...> There is a lot of catering there, more than half - they feed people, but they do not fall under it. Therefore, we also consider it necessary to transfer hoteliers to this regime," concluded Alexander Kalinin, president of the business association.