Accountants in the Hot Seat: Bracing for the 2025 Tax Reforms in Russia
"Is expansion and escalation necessary for businesses to thrive and succeed?"
April saw "Business Quarter" hosting a roundtable discussion with top accounting executives to delve into the consequences and implications of the 2025 tax overhaul in the Russian business scene.
Central to the conversation was the Tax Code reform, implemented in 2024, that brought about significant shifts including the revised profit tax rate to 25%, plus the necessity for VAT registration for organizations and intellectual property (IP) that surpassed 60 million rubles in revenues every year. Additionally, a tax amnesty for business splits came into effect starting that year.
Amidst discussions, industry experts shared their observations, providing valuable insights for entrepreneurs and the Federal Tax Service (FTS) regarding upcoming changes in the competitive landscape.
Challenges on the Entrepreneurial Front
The CEO of consulting company "Accountant" Yulia Mazeina revealed that anticipating the flexibility in their business operations started as early as 2024, allowing entrepreneurs to transition tax regimes by year's end.
Despite sufficient early preparation, many businesses ran into trouble due to the lack of well-articulated financial strategies, a pitfall discussed by Olga Ekimovskikh, Head of Outsourcing Accounting Department at Audit and Consulting Group "Capital".
According to Yevgeny Stolbovsky, Partner and Managing Director of "FinExpert-Ekaterinburg", the state initially announced that the reform would primarily impact 5% of businesses operating under the simplified tax system. However, upon closer examination of their client base, they realized that a significantly larger percentage of companies exceeding their 60 million rubles revenue limit were operating on the USN.
Igor Kazakov, Commercial Director of "Outsourcing Bureau Lefortovo", concurred with fellow panelists, emphasizing the importance of business preparedness.
Kazakov also spoke about the conflicting tendencies that have emerged in today's environment. On one hand, the enforcement of VAT by the state on companies with revenues over 60 million rubles suggests that entrepreneurs may subtly be incentivized to split their businesses. However, with the rollout of a tax amnesty for splitting businesses, the authorities seemingly possess the tools to intensify their surveillance over such activities. As such, Kazakov's advice is to avoid business splitting, given the potential for closer scrutiny.
The Market Whirlwind: 2025 and Beyond
Across the board, all roundtable participants agreed that the fast-evolving nature of tax legislation was making it harder for businesses to self-manage their accounting and assess risks, even with digitalization of services.
Yulia Mazeina, owner of the consulting company Accountant, confirmed the difficulty in retaining professional bookkeepers within a company's ranks. As such, there has been an increase in requests for outsourcing companies to assist in finding staff.
The focus on marketplaces and sellers by the tax authorities constitutes a key trend according to Eugene Stolbovsky, Partner and managing director of "FinExpert-Ekaterinburg". This aggressive attention is due primarily to the rapid growth of the market in the past years, and the need to establish proper control over it.
Igor Kazakov of "Outsourcing Bureau Leftevoroy" highlighted the lack of management accounting as the main hurdle for most sellers.
Yulia Mazeina also commented on the rise in bankruptcy cases for businesses that experienced a surge in revenue during the pandemic, but failed to establish proper accounting.
Extra Insight:
- During the roundtable discussion, another emerging trend that has gained traction among entrepreneurs is questioning whether to expand and grow their businesses at all.
- Experts believe that businesses that prioritize professional accounting, risk assessment, and financial modeling have a better chance of surviving and even thriving in the competitive landscape of 2025 and beyond.
- Yulia Mazeina, the CEO of consulting company Accountant, expressed concerns about escalating tax burdens on businesses, stating that the situation appears designed to move the burden onto consumers.
- Olga Ekimovskikh, Head of Outsourcing Accounting Department at Audit and Consulting Group Capital, pinpointed the absence of a financial model as the key challenge for businesses, preventing them from understanding the impact of the tax reform on their fiscal health.
- Yevgeny Stolbovsky, Partner and Managing Director of FinExpert-Ekaterinburg, discussed the increase in tax burden for businesses with revenues between 60 and 150 million rubles, emphasizing the potential for increased financial strain and the possibility of regulatory changes.
- Igor Kazakov, Commercial Director of Outsourcing Bureau Lefortovo, stressed the importance of business preparedness, especially regarding the potential eradication of tax special regimes and the transition to VAT.
- Kazakov reinforced the need for businesses to avoid business splitting, considering the potential for increased scrutiny in light of the tax amnesty for business splits.
- Olga Eikimovskikh noted the challenge of finding qualified accountants for small and medium-sized businesses, explaining the increasing demand for outsourcing services to find full-time accountants.
- Eugene Stolbovsky highlighted the need for stricter oversight of marketplaces and sellers, suggesting that administrators might reassess the practice of sellers calculating income based solely on cash flow.
