Alexander Filinov
Russia has a special Register for small and medium-sized enterprises (SMEs). Companies listed in it, benefit of certain tax and administrative advantages. For many years, the list was not really appreciated by most SMEs and the benefits were considered to be moderate. This has changed.
During the pandemic, the Russian government rapidly introduced a number of supporting measures aimed at supporting SMEs, including foreign-owned ones. The changes relating to the SME Register and the advantages of being listed considerably raised the attractiveness of this instrument.
What are the benefits?
(*introduced during pandemic)
- *Reduced rate for social contributions (payroll taxes) – from 30% to 15% (applicable for salaries exceeding the minimum salary of 12 KRUB)
- *Preferential lending from banks, subsidized by the government
- *Moratorium on inspections from state authorities till the end of 2021
- Simplified requirements for HR administration
- Simplified requirements during government tenders
- Simplified requirements for book-keeping and reporting
- Possibility of replacing fines for violations with warnings
Most significant benefits were introduced during the pandemic. The reduction of social contributions rates is seen to be the most important one, as it helps listed SMEs to save around 10-13% on payroll cost according to our calculations and practical experience over the last few months. Moreover, the government announced that this change to be a long-term measure, that will be maintained beyond the pandemic.
“10-13% savings on salary costs for an SME in Russia”
What are the criteria to be listed in the SME Register?
For Russian-owned SMEs:
- Revenue: < 2 billion RUB annually (approx. 26 million USD)
- Staff: < 250 employees in average
- Ownership: > 51% of company shares belonging to individuals or another SME
For foreign-owned SMEs: 2 additional criteria apply
- The mother company needs also to meet Russian SME criteria on revenue and average staff
- The mother company is not a resident of a country from the offshore-countries list
How can a company get listed in the SME Register?
For Russian-owned SMEs: The Russian Tax Service includes the companies automatically on a monthly basis if the criteria are met.
For foreign-owned SMEs: Receiving SME status for subsidiaries is done “manually” based on an audit of the mother company. A certified Russian auditor should verify the criteria based on the official reporting of the mother company and then submit this information to the Russian Tax Service with a demand for inclusion into the SME list. This verification procedure is required annually.
As an entrepreneur-lead SME, tax advisory, payroll and accounting provider as well as certified auditor company, we have at Bellerage Alinga all the prerequisites for advising international SMEs on entering the Russian market and developing their businesses.
XLNC ARCHIVE | 13 April 2021