Every county has its own laws about taxation and regulator rules which are applied to businesses. I would like to share my experience related to opening an individual entrepreneur (self-employed) account and registering this business unit in Russia. It is treated as a Company, however it is much easier in terms of tax and money management.
So, this guide contains tips about saving money and time while you’re still following regulatory procedure. I will describe a way to reduce tax payments from 13% + 20% VAT to almost 0%.
For me, the biggest challenge was to avoid visiting the tax office in person because of a lack of time and the distance I needed to travel (I live in different city). To do so you need to have an electronic key with a personal signed certificate, it gives the ability to process all the documents digitally.
Opening self-employed account
To start this process you need to have an account within Gosuslugi.
If you have an operating system which is NOT Windows, you need to download and use a Virtual Machine with it. These links should be helpful: VirtualBox and Free Windows Image. The token and certificate works only on Windows.
Start the process with Gosuslugi - send documents in electronic format.
You need to print and prepare all required documents, scan them and sign with the token on a Windows machine.
In step 4 during the last stage you need to attach a signed file with your request and finally send it to the tax service.
With all your documents including your request you can prepare and send the documents for transfer to the reduced tax schema called USN. This process will make it possible for you to pay just 6% from your profit.
After the individual entrepreneur is registered, again, you can reduce taxes by moving to the Patent Tax Schema.
For switching to the Patent Tax Schema you need to have an account for an individual entrepreneur with Nalog.ru.
Beware that tax patents can be applied just for one area of the services you provide, find your area and the tax rate for it here. For me, this is “Providing services or works in computer software development and consulting about it”.
To start the process follow the link. This will work only under a Windows virtual machine (point 3).
When the patent is issued, it will be shown at an entrepreneur website (point. 9). The payment for the patent is determined by two amounts. For the first amount you need to pay within 3 months from the date of issue, and for the second you will have until the end of the patent. I do recommend paying both from the beginning to avoid later problems.
Since you have the Patent Tax Schema you can provide your service with no extra payment to the tax department.
The key things about Patent Tax Schema
Patent schema significantly simplifies a tax year report.
Each patent has an amount calculated for every country’s region and occupation — this is called potential profit.
Patent allows the earning of up to 60 million RUB per year.
Patent allows one to have up 15 employees.
Fixed tax payment for the profit above 300k RUB.
I want to clarify a bit more about the fixed payment above 300k.
In the general schema the individual entrepreneur needs to pay 1% of profit which is on top of 300k. So, the formula looks like this:
(profit — 300k) * 1%
In the Patent Tax Schema the formula is the following:
(potential profit — 300k) * 1%
Potential profit is written on the patent paper and it’s a fixed number. So, in the case when it is below 300k — you don’t need to pay extra taxes at all, instead it will be a fixed amount per year. The key thing here, potential profit is a prediction of tax service for one year. In reality you can earn much more.
Here is a list of charges to be paid once per year.
1 000 RUB issue of a token
9 000 RUB patent for 1 year — different amount from city to city.
36 238 RUB pension and medical fees
12 000 RUB business bank account
12 000 RUB software — helping with documentation, invoices, reports, etc. First year free
70 238 RUB payments and fees.
60 million RUB maximum profit allowed by the patent schema.
The effective tax rate will be about 0.11% in this case.
The opening of a self-employed account is a quite complicated procedure, especially if you complete it in person. The digital way is much more efficient and fast. There are many tax schemas available for the businesses in Russia. Some of them are more clear and simple, USN and Patent are just a few examples of these. They significantly reduce taxes and fees which have to be payed. Apart from that you will be able to do your business with less pain behind it.
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