- July 25, 2018
VAT rate in Russia will be increased from 18% to 20% as of January 1, 2019
Vladimir Putin signed a bill increasing the rate of Value Added Tax from 18% to 20%. The increase will be effective starting from January 1, 2019. At the same time, Russia will keep the current reduced VAT rates (10% and 0%) for socially important goods and services.
Thus, by the end of 2019 the budget will receive an additional RUB 620 bln, which will be used to implement President Putin’s spending plan.
The good news is that the law will also freeze the current rate of contributions to the Pension Fund (22% of an employee’s salary, up to a maximum of RUB 1,021,000, and 10% of any excess salary above this). Previously it was announced that the pension contribution rate would be raised to 26% after 2021.
While experts keep arguing about possible inflation hikes and other negative impacts that the increase of VAT rate may bring, let’s have a look at benefits that will go along with the increased VAT rate:
- The threshold of paid taxes and fees for VAT refunds will be lowered and the refund process itself will be speeded up.
- The period of desk audits for VAT refunds will be shortened.
- The tax on movable property (the so-called “modernization tax”) will be abolished.