Simplified taxation system for individual entrepreneurs: why it is beneficial and how to use it

When transitioning or initially choosing a simplified taxation system, the relevant business entities must immediately determine which simplified tax rates they will use in 2021. There are two options: applying a fixed tax rate to the total amount of income received or an increased rate to income, but reduced by expenses incurred. The amount of tax, the procedure for its calculation and the rules for accounting for costly transactions depend on the object of taxation. We'll tell you how much the simplified version will cost today.

Base rates

When a choice of taxation principle has been made, the question arises: according to the simplified tax system, which rate is more profitable and how to apply them in practice. Article 346.20 of the Tax Code of the Russian Federation fixes two base rates for simplifiers:

• 6% – if the taxable object is only a complex of income receipts;
• 15% – provided that the tax is levied on income minus expenses recognized as justified.

In the second option, only those costs that were aimed at obtaining material benefits and are included in the legally approved list are taken into account. It is enshrined in Art. 346.16 Tax Code of the Russian Federation. Moreover, for expenses, tax law provides for different dates for their recognition depending on the type of expenses incurred.

Subject of taxation according to the simplified tax system

The subject of taxation, according to legislative article number 346 of the Tax Code of the Russian Federation, is any provision of service and work, sale of goods, property, materialization of profits and losses that meet the criteria of price, quantitative or physical parameters, the presence of which, according to taxation law, imposes duty reimbursement on the employer.
Private entrepreneurs have the opportunity to independently choose the subject of taxation, except in the case where employers are members of a simple partnership transaction or a property trust transaction.

The object can be both direct income and income with deduction of costs. For exceptional cases, only the second option is used.

Regional rates

In the constituent entities of the Russian Federation, according to the simplified tax system “Income minus Expenses”, the rate may be less than the base value. Thus, the current rules allow for legislative approval of rates of this type in the range of 5–15% at the level of an individual region. To reduce the tax burden in relation to the activities of simplifiers, the authorities of a constituent entity of the Russian Federation must issue a law changing the size of the rate under the simplified tax system. Regional authorities have also been granted the right to adjust the tax rate in relation to the simplified tax system rate in 2021 for the “Revenue” object. Fluctuations in this percentage tax rate are allowed within 1 – 6%. Each update of the value of this indicator must also be supported by legislation.

Changes due to coronavirus

The outbreak of coronavirus infection has dealt a powerful blow to the Russian economy. The President of Russia together with the government are taking a number of measures to support the population and business. The main type of assistance for organizations and individual entrepreneurs was the reduction of the tax burden, and even the complete abolition of taxes and contributions.

For businessmen who use preferential tax regimes, it was decided to extend the reduced simplified tax rate in 2021 by region due to the pandemic. But only regional authorities have the right to make such a decision (Clause 4, Article 4 of the Tax Code of the Russian Federation). Moreover, it is necessary to make amendments to regional legislation in the period from January 1 to December 31, 2021. Officials have the right to extend preferential taxation not only under the simplified tax regime, but also under other special taxation regimes (clauses 1 - 3 and 5, clause 2 of Article 18 of the Tax Code of the Russian Federation) and other regional obligations.

A benefit in the form of a reduction in simplified rates is provided for small and medium-sized enterprises (SMEs) that operate in the sectors of the economy most affected by the coronavirus.

SMP is an individual entrepreneur or organization with an income of 2 billion rubles per year, a staff of up to 250 people and meeting the conditions for a participation share in the authorized capital (clause “a”, clause 1, part 1.1, article 4 of Law No. 209-FZ).

The list of affected sectors of the economy is fixed by Decree of the Government of the Russian Federation dated 04/03/2020 No. 434 (as amended on 05/26/2020).

Rates for individual entrepreneurs on the simplified tax system

Paragraph 4 of Article 346.20 of the Tax Code of the Russian Federation regulates special conditions for taxation of individual entrepreneurs:

• specializing in the production of products;
• conducting main activities in the social or scientific sphere;
• providing household services to the population.

Under the simplified tax system, tax rates for this category of payers may be zero. This benefit is allowed for use during the first 2 years after state registration, subject to a number of conditions:

• an individual registered for the first time as an individual entrepreneur;
• at the end of the tax period, at least 70% of income is allocated to preferential types of activities.

Tax payment procedure

The method of payment and the timing of transfer of payments under the simplified tax system do not differ in any way from similar manipulations on the part of an individual entrepreneur or LLC, subject to a different tax system.

Tax payment is divided into an advance payment and an annual payment:

• The advance payment occurs at the end of the quarter - before the 25th day of the month following it. By this time, a report on the company's activities for this time period should be prepared.
• Payment of state duty for the year is carried out upon completion of the tax period, taking into account quarterly contributions. For an LLC, the deadline for transferring funds according to the declaration is until March 31 of the coming year, and for individual entrepreneurs - no later than April 30 of the coming year.

If the deadline for payment falls on a non-working day or holiday, the deadline is moved to the next working day. All payments are made at the location of the organization.

Attention! If an organization, according to the simplified tax system, pays the minimum tax, then it is calculated and paid only at the end of the calendar year, and not quarterly.

Minimum payments

If an enterprise applies the simplified tax system “Income – Expenses”, the tax rate must be at least 1%, regardless of the amount of income. An exception is made for situations where no income was recorded for the entire tax period.

When receiving even a small income that turns out to be less than or equal to the expenses incurred, the tax must be calculated at a minimum one percent rate.

For business entities that use a simplified taxation system, rates of 1% are relevant if the following conditions are met:

• tax liability is calculated according to the “Income minus Expenses” principle;
• during the reporting period, revenue receipts were recorded;
• the difference between cash receipts and production expenses turned out to be zero or negative.

In the described situation, according to the simplified tax system, the 2021 rates in the minimum amount are applied to the amount of income received during the reporting period of time.

For more information about this, see “Payment of the minimum tax under the simplified tax system.”

Liability of individual entrepreneurs for violation of payment deadlines

The Tax Code of the Russian Federation provides for liability for all entrepreneurs for the following types of violations:

• failure to comply with legal requirements regarding timely registration with the Unified State Register of Individual Entrepreneurs;
• violation of the reporting tax discipline of individual entrepreneurs;
• violation of financial discipline when paying taxes;

In the Tax Code of the Russian Federation, carrying out business activities without registration, as a rule, entails a fine of 10,000-40,000 rubles; in the Criminal Code of the Russian Federation there is article 171 - “Illegal entrepreneurship”, which provides for malicious violators fines reaching up to half a million rubles, or deprivation freedom for up to five years.

For tax offenses, penalties are lighter, but it is better to avoid them. So, the first thing that can happen in case of violation of tax discipline, when an individual entrepreneur does not submit a declaration within the prescribed period, is the blocking of the entrepreneur’s current account or his personal card.

Seizing a bank account is an extremely unpleasant procedure; it can be unblocked no earlier than in a day

An individual entrepreneur is responsible for all personal property, therefore the personal accounts of a businessman as an individual. persons are subject to tax sanctions.

Today the Federal Tax Service Inspectorate does this quickly: as soon as the deadline for submitting tax reports is overdue by more than 10 days, the Federal Tax Service Inspectorate has the right to freeze all online accounts of a businessman. And this is done without any warning. Tax authorities will quickly unblock the individual entrepreneur’s account, but only if the debt is fully repaid, as well as penalties and fines on it.

To avoid sanctions, it is recommended to control the timing of reporting and payments to the budget. It is better to pay tax fees and contributions at least 1-3 days before the due date, so as not to receive notifications and not run into fines and penalties.

Even if an entrepreneur does not agree with the accrued tax levies, when receiving a demand for payment, it is better to first pay off the debt. But then you can go to the tax office and court to prove that you are right. Otherwise, considerable fines and penalties will accrue, and the courts, as a rule, side with the Federal Tax Service when it comes to tax collections. It is better to pay and then return the overpaid amount than to pay off accrued interest plus fines.

Table: articles of the Tax Code of the Russian Federation and sanctions for violation of reporting and payment discipline

Video: individual entrepreneur fines for non-payment of taxes

Obviously, if a business without employees does not have such a serious tax burden and insurance burden, then simplification with employees is not so easy. Any report submitted at the wrong time or in the wrong form is subject to sanctions. There are fines that directly depend on the amount of tax and insurance fees. Therefore, we recommend: correctly maintain a simplified book of income and expenses, and be attentive to all payment and reporting formalities. After all, everything that concerns interaction with tax authorities is very serious.

Regional differences

In some regions of the Russian Federation, to improve the business climate, laws have been adopted to reduce rates under the simplified taxation regime.

Thus, for entrepreneurs registered in Moscow, the rate for the tax object “Income – Expenses” is 10%. The norm is provided for by the Law of the capital dated October 7, 2009, No. 41. The conditions for its application are as follows:

• the preferential line of activity must bring at least 75% of total revenue;
• a commercial structure specializes in the provision of social services, is engaged in the field of sports, manufacturing, agriculture (livestock or crop production).

For those who have switched to or chosen the simplified tax system, rates by region in 2018 will vary. Thus, in more than 70% of Russian regions, preferential conditions have been adopted for the “Income minus Costs” scheme, and in other regions, reduced rates are also applied to the amount of income.

It should be noted that the benefits established by regional authorities often extend only to certain areas of business. Typically, the allocation of benefits for areas of business is aimed at enhancing commercial and industrial activities in segments with a low level of popularity among entrepreneurs and small firms due to their low profitability (as a rule).

EXAMPLE

In the Lipetsk region, for simplified people under the “Income minus Expenses” system, a differentiated rate applies - 5% and 10%. These values ​​are relevant for 31 and 42 activities, respectively. The minimum rate is applied to business entities engaged in agriculture, science, education, and information systems.

Also see “Changes to the simplified tax system in 2021”.

Read also

14.03.2018

How to calculate income under the simplified tax system with the object “income”

Income is considered all the money that an individual entrepreneur received while running a business. Basically, this is income from sales (i.e. income from the sale of goods, work or services). For example, an individual entrepreneur developed a website and received 100,000 rubles for it. This amount must be recorded as income and tax must be paid on it.

There are also non-operating incomes that are not directly related to the business, but they also need to be taken into account. For example, these include:

• interest on bank deposits of individual entrepreneurs;
• fines and penalties from partners for violation of contract terms;
• compensation received from the insurance company;
• gifts and other free property received;
• other income listed in Article 250 of the Tax Code of the Russian Federation.

Most often, an individual entrepreneur receives income in cash. But there are non-monetary incomes (for example, during barter, when one product is exchanged for another, or during netting). Such income also needs to be taken into account - in rubles at the market value of a similar product.

Reduction of tax on insurance premiums

The tax on the simplified tax system with the object “income” can be reduced by insurance premiums. In this case, the following rules must be taken into account:

1. Individual entrepreneurs without employees can reduce the tax on insurance premiums completely, and individual entrepreneurs with employees and LLCs - in an amount not exceeding 50% of the tax amount.

2. The tax is reduced by:

• personal insurance premiums for individual entrepreneurs. In 2021, pension contributions for income not exceeding 300,000 rubles are 26,545 rubles, and medical contributions are 5,840 rubles. Plus, you must pay 1% of income over 300,000 rubles to the Pension Fund (but not more than the maximum contribution amount, which in 2021 is equal to 212,360 rubles);
• contributions for employees for pension, medical and social insurance in case of temporary disability and in connection with maternity (transferred to the Federal Tax Service), as well as contributions to the Social Insurance Fund “for injuries”;
• sick leave for the first three days of an employee’s illness;
• contributions for employees for voluntary health insurance.

3. Contributions can be taken into account provided they are transferred in the same period for which the tax is calculated. For example, the single tax under the simplified tax system for the first quarter can be reduced by insurance premiums paid from January 1 to March 31. It does not matter for what period these contributions were made.

Calculate contributions “for yourself”, tax according to the simplified tax system, fill out payments in the web service Fill out for free

Also see “Insurance premiums of individual entrepreneurs on the simplified tax system: the Ministry of Finance explained why expenses cannot be taken into account when calculating.”

Reduction of sales tax in Moscow

Entrepreneurs who are registered in Moscow and pay a trade tax can reduce the single tax under the simplified tax system by the amount of this fee. But if an individual entrepreneur trades in the capital, but is registered in another region, then the tax will have to be paid without taking into account the amount of the trading fee.

The tax under the simplified tax system can be reduced by the trade fee in full. The restriction on tax reduction to only 50%, as is provided for insurance premiums of LLCs and individual entrepreneurs with employees, does not apply to the trade tax. This is due to the fact that the amount of the trade tax reduces the tax in addition to the amount of insurance premiums. The final amount of tax payable may be zero.

Fill out and submit notifications TS-1 and TS-2 via the Internet; fill out a payment form to pay the trade fee