Facing a deepening budget crisis, Russia's government has approved radical tax policy changes. From 2026, the value-added tax (VAT) rate will rise from 20% to 22%, while the turnover threshold for mandatory VAT payment will drop from 60 million rubles to just 10 million per year. This means almost all small and medium businesses—including cafes, beauty salons, and car services—will be required to report and pay the higher tax.
For businesses, this move means not only higher taxes but also the need for more complex accounting, additional declarations, and strict document controls. The changes will hit low-turnover enterprises the hardest, likely leading to lower profitability or outright closures.
The authorities claim the reform targets tax evasion via business splitting. However, experts estimate nearly a million enterprises will be affected nationwide. Surveys indicate that a large majority of businesses plan to raise prices in response, which will further accelerate inflation. Projections show that 20% of marketplace sellers could close by mid-2026.
The main reason for this tax overhaul is Russia's acute budget deficit, driven by soaring military expenditures. The government admits that extra revenue is required primarily to fund defense. However, these measures won't fully cover the deficit: military spending has quadrupled since the war began, while economic growth slows and inflation and key rates remain high.
Business associations are calling for a transition period for adaptation, but concessions are unlikely—budgetary needs are critical now. As a result, many entrepreneurs will have to either raise prices or shut down. The new tax burden threatens to close tens of thousands of businesses, increase unemployment, and deepen the crisis.
