VAT exemption and transitional rules for SMEs on the simplified tax system from 2026

Federal Law No. 104-FZ dated 25 April 2026 amended the Tax Code of the Russian Federation, introducing certain VAT relief and transitional mechanisms for small and medium-sized businesses (SMEs) on the simplified tax system.

Individual entrepreneurs on the simplified tax system whose income in 2025 exceeded RUB 20 million solely because of interest on bank deposits and accounts, with total annual income of no more than RUB 60 million, are exempt from VAT from 1 April 2026.

Organisations and individual entrepreneurs on the simplified tax system may now reduce their income under the simplified tax system by the VAT charged in 2026 on advances received earlier, if those advances were included in income before 2026 and the VAT was not charged to the buyer on top of the price of the goods (work, services).