On the abolition of UTII in 2021, Finance Minister Anton Siluanov said back in the summer of 2020 during his speech in the Federation Council. He said the final decision on this issue and also about the need for raising measures from the tax authorities for a smooth transition of business to other modes. The Ministry of Finance and top economic experts system of taxation of imputed income was found to be ineffective and outdated. Therefore this tax needs to be replaced by more productive mode that will show the true profitability of the enterprises and taxed in accordance with these data.
Change of regime will come into force from 2021. The feasibility of application of this tax discussion was already held long ago. It wanted to abolish in 2018, recommending businesses to use the patent system, however, it has not become popular. In 2020, the Finance Minister said that the extension of the application of the tax on imputed income is not possible. Therefore, complete care from this system of taxation is a matter of time.
Appropriate legislative base was prepared for a long period. It applies not only to the regime but also involves other changes in the tax laws, many of which will become effective in 2021. Law No. 325-FZ ratifying changes to the first and second parts of the Tax code of the Russian Federation, was signed by President Vladimir Putin 29.09.2020. In accordance with the articles of the law the abolition of imputed income from 1 January 2021 to apply to a certain category of products that require mandatory labeling of means of identification under Federal law:
- shoes and footwear products;
- garments and their accessories and other articles of fur.
The validity of the tax regime
If the new September act States that where canceled imputed income in 2021, and restrictions on the use of partial, the act of June 2016 was finally approved by the time of its existence (law No. 178). In the document, which entered into force in January 2017, provided that the special regime of unified tax on imputed income for certain types of activities will be valid until 2021.
Thus, from January 2021 organizations and individual entrepreneurs, which, in turn, use the imputed income will have to go to another taxation regime. Those entrepreneurs who are engaged in the sale of goods that require mandatory labeling and prescribed by act No. 325 of September 2020, will have to go to another system already from 01 January 2021.
The pros and cons cancel
Unified tax on imputed income was introduced into operation in 2002. He helped to solve the problem of control over the turnover of funds of entrepreneurs of medium and small link. It also helped to simplify the administration of business, replacing multiple taxes with a single payment. UTII has become a tool that in the 2000s, allowed to teach entrepreneurs to pay taxes and withdraw the business from the shadows. And municipal budgets began to receive funds to replenish local coffers. At that time it was virtually impossible to determine the actual turnover of the enterprise, therefore, the application of such tax regime is the most right decision.
Almost 20 years later the situation has changed significantly. Therefore, economic experts, working closely with the government, believe that the system regime has long outlived its usefulness and is inefficient for the state and for small businesses. It does not help increase tax revenues, and creates a barrier to healthy competition between the micro-businesses and large companies.
One of the reasons for the abolition of UTII, which was led by the Minister of Finance Anton Siluanov, the operation of this tax by unscrupulous businessmen for their own selfish purposes. The use of imputed income significantly reduces the tax burden for large businesses hiding under the guise of small business. In practice, the widely used scheme of “artificial fragmentation” in which large companies use controlled UI and form many small businesses. Each of them operates on a system of unified tax on imputed income (that is taxed is not actual and estimated revenue), what allows to save a large company a significant amount. Perhaps such a scheme and had in mind the Minister of Finance when he said in his speech in the Federation Council on “significant tax evasion”. However, it is not entirely correct to use the word “evasion”. Rather, it is the use of legitimate measures to reduce taxation.
However, this statement can be attributed only to large enterprises. For micro imputed income is most beneficial and allows you to work honestly, pay the required taxes to the Treasury and thus to income. The abolition of the tax will create an additional tax burden, as a result, many small businesses will be forced to close his business. These circumstances appear among the opponents of the innovations in taxation.
The government suggests that the transition to other tax regimes will not cause much difficulty for several reasons:
- To select a different tax system provides for a transitional period until 2021 (for those businesses that fall under the scope of act No. 325, the period lasts until 2021).
- Imputed income only applies to certain types of activities, therefore, for process optimization it will be possible to use the mode that is used for rest of activities.
- Organizations that work UTII with 01.07.2020 should use online cash, so the upcoming transition to the other modes (such as the patent or the simplified tax system) should not cause difficulties.