Patent system of taxation in 2015

Patent system of taxation operates in Russia since January 1st 2013. The system was created for the individual entrepreneurs, conducting their business activity in the regions where it was introduced by the law of a subject of the Russian Federation. 

The following services are subject to the tax: rendering of different repair and consumer services for citizens; motor vehicle servicing; carriage of passengers and cargo by road and by sea; tutoring, caring for children, sick, aged and disabled people; renting of residential and non-residential properties, summer houses, land lots; vending and catering; foodstuff manufacturing and many other things. «Classification of Business Activities, concerning which the law of a subject of the Russian Federation prescribes the application of the patent system of taxation», passed by the Order of Ministry for Taxes and Levies of the Russian Federation as of 02.06.2003 № BG-3-13/285, stipulate for only 63 business activities. It is possible to look through the Order on the Internet portal of the Federal Tax Service of the Russian Federation. 

The patent system of taxation is voluntary. It may be brought in coincidence with other taxation schemes. Individual entrepreneurs are entitled the right not to keep standard accounting records, not to use cash-register equipment in the course of operations with cash and payment cards, are excused from paying value-added tax, individual income tax and personal property tax. 

The tax rate is fixed. It doesn’t depend on the real income level of the individual entrepreneur. The calculation of the tax to be paid is made by the tax authority in the patent directly. The tax is paid in the tax authority where the entity was registered not later than the patent expiry date.

Thus the simplicity, transparency and common practice for many kinds of activity are the obvious advantages of the patent system of taxation.

The significant changes took place in the application practice of the patent system since 2015. It happened as a result of coming into effect of the Federal laws as of 21.07.2014  №244-FZ «Concerning the Introduction of Amendments to Articles 346.43 and 346.45, part two of the Tax Code of the Russian Federation» and as of 13.07.2015 №232-FZ «Concerning the Introduction of Amendments to Article 12, part one and to the part two of the Tax Code of the Russian Federation».

At the present time the patent system of taxation may be used by the individual entrepreneurs whose average number of wage and salary workers for all kinds of business activity doesn’t exceed 15 employees for the tax period and the sales income amounts to no more than RUB 60 million.  

The application of the patent system doesn’t come under the activity within the terms of the simple partnership agreements (joint operation agreements) and fiduciary in property management agreements.

Patent on conducting one kind of business activity effects only within the territory of the administrative subject of the Russian Federation, stated in the patent. By conducting several kinds of business activity it is necessary to have the patent for each activity separately. 

The patent may be filed from any date for the period from 1 to 12 months within the calendar year.

The tax for the individual entrepreneurs being under the patent system of taxation is fixed at the rate of 6% of the potentially-enable receivable annual income for the business activity. The level of this income is set by the law of a subject of the Russian Federation for the calendar year.

Till 2020 the laws of a subject of the Russian Federation may set the exemption from taxes for two years for the individual entrepreneurs being registered for the first time and operating in the industrial, social and scientific spheres.

The tax is paid fully not later than the patent expiry date, in case the patent duration is less than 6 months or at the value of 1/3 of the tax amount not later than 90 calendar days after commence of patent or at the value of 2/3 of the tax amount not later than the patent expiry date – in case the duration of patent is from 6 to 12 months.

Sales income accounting is kept in the income ledger of the individual entrepreneur using the patent system of taxation separately on each patent. At the same time no provision exists for the submission of the tax declaration.  

For the record:

According to United Interdepartmental Statistical Information System the income of the individual entrepreneurs being under the patent system of taxation amounted to RUB 30,19 billion for 2013.

In Saint Petersburg the patent system of taxation is introduced from January 1st 2014 by the Law of Saint Petersburg as of 30.10.2013 №551-98.

For the first 6 months of the system’s effect 486 individual entrepreneurs exercised the right to use it by 37 business activities. The most requested type of business activity by the patent appeared to be renting of residential and non-residential properties, summer houses, land lots, belonging to the individual entrepreneur on the basis of the ownership right – 343 patents or 59% of the total number of issued patents. Taking into account the application of the patent system of taxation, RUB 26 million of taxes went into the Saint Petersburg budget. Thus the average cost of the patent amounted to just over RUB 53 thousand.