New regions of special tax treatment for the self-employed

LEGAL DIGEST, NEWS \ 20.01.2020

Starting from January 1, 2020, the limits of the  applicability of special tax treatment for self-employed citizens –tax on earned income (TEI) – have expanded.

Initially, the special tax treatment was established on an experimental basis and was applicable in the following regions: Moscow and the Moscow Region, the Kaluga region and the Republic of Tatarstan. Now citizens performing activities in one of the following regions will also be able to apply TEI: in St. Petersburg, in the Volgograd, Voronezh, Leningrad, Nizhny Novgorod, Novosibirsk, Omsk, Rostov, Samara, Sakhalin, Sverdlovsk, Tyumen, Chelyabinsk regions, in the Krasnoyarsk and Perm territories, in the Nenets Autonomous District and Khanty-Mansijsk Autonomous District, in the Yugra, Yamalo-Nenets Autonomous District, and in the Republic of Bashkortostan.

TEI may be applied by individuals with an annual income of not more than 2.4 million rubles, who:

– have not been registered for taxation as individual entrepreneurs (IE) and provide services of their own production; or

– are IE and do not apply other special treatments (the Simplified Taxation Scheme, or Unified Tax on Imputed Income).

When applying this treatment, citizens do not pay personal income tax, insurance premiums for themselves and VAT. Income is taxed at the rate of:

– 4% – for sales to individuals;

– 6% – for sales to legal entities.

The law provides for a restriction: the income of a dismissed employee from his or her former employer within two years after dismissal will not be subject to special tax treatment.

Companies should keep in mind that, when working with self-employed citizens, it is necessary to enter into civil law contracts, as well as it being mandatory to ask them for cheques generated in the “My tax” CRM application – this is what will allow these expenses to be taken into account for income tax purposes.

At the same time, for the conclusion of a civil law contract instead of a labour contract, an employer faces administrative liability in the form of a fine:

• For officers – in the amount of 10,000 – 20,000 rubles;
• For legal entities – in the amount of 50,000 – 100,000 rubles;

If the violation is repeated, the punishment will be upgraded:

• For officers – disqualification for a period from 1 to 3 years;
• For legal entities – a fine in the amount of 100,000 – 200,000 rubles;

On issues relating to the application of tax legislation, please contact Acsour’s specialists.