Self-employed individuals and entrepreneurs operating in the territory of Moscow, the Moscow Region, the Kaluga Region, and the Republic of Tatarstan will likely be able to voluntarily switch to a new tax regime called “Tax on Professional Income.” The corresponding bill was approved by the State Duma in the first reading at the plenary session on October 25.
What is Professional Income?
According to the draft law, professional income is an individual's income from activities in which they do not have an employer nor employees under employment contracts. Usually, these activities are carried out by those who provide various services to individuals - tutors, babysitters, cleaners, etc.
The new tax regime will operate in an experimental regime lasting from January 1, 2019 to December 31, 2028. Based to its results, the regime might be extended to the entire territory of the Russian Federation.
Advantages of the New Regime
The new tax system has a number of significant advantages over other tax regimes. Self-employed individuals will be able to independently register and start working legally without visiting a tax inspection office. Instead, a special mobile application called “My Tax” is being developed. It will enable electronic document management with the tax authorities, and transfer payments for the Tax on Professional Income to the state.
According to the bill, the new regime will have the current rates.
- 4% in respect to income received by taxpayers from the sale of goods (works, services, property rights) to individuals;
- 6% in respect of income received by taxpayers from the sale of goods (works, services, property rights) to individual entrepreneurs for use in businesses and/or other legal entities.
It is assumed that 1.5% of the estimated tax amount will go to the Mandatory Medical Insurance Fund. There will be no obligatory deductions to the Pension Fund. This means that an individual will have to independently decide whether to pay contributions for a future pension or not.
In general, the new regime is advantageous. Recall that the tax rate on personal income tax is 13%, according to Russia's Simplified Taxation regime it is 6 or 15 percent. Those using tax patents pay 6 percent.
In addition, persons who paid the Tax on Professional Income will be able to take advantage of a special tax deduction and reduce the calculated amount of tax by up to 10 thousand rubles.
Who Can Not Use The New Regime
The new tax system has a number of serious limitations. In particular, the special regime will not be able to apply the following categories of taxpayers:
- persons selling excisable goods and goods subject to mandatory labeling;
- persons engaged in the resale of goods or property rights, with the exception of the sale of property used by them for personal, household and (or) other similar needs;
- persons engaged in the extraction and (or) sale of minerals;
- persons who have employees working on employment contracts;
- persons engaged in business activities in the interests of another person on the basis of a commission contract, commission agreement, or agency contracts, with the exception of persons providing services for the delivery of goods and receiving (transfer) payments for specified goods (works, services) in the interests of other persons;
- taxpayers whose income exceeds 2.4 million rubles for the calendar year.
Recall that the bill in question has only passed the first reading in the State Duma. By the second reading, which is tentatively held in mid-November, deputies can make amendments to the bill.
Translated by Alinga Consulting Group.
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| ||Source: buhonline.ru|| |