Russian Small Businesses Brace for VAT Hike, Threshold Cut

The Kremlin’s 2026 draft budget would raise the general VAT rate from 20% to 22% and cut the VAT exemption threshold for small businesses from 60 million to 10 million rubles, while also ending some software VAT breaks and raising payroll insurance for IT firms to help fund defense spending and close the deficit. Surveys by the Opora business lobby of roughly 11,000–13,000 entrepreneurs found about 70% plan to raise prices and many said they would shut, move into the informal economy or use tax optimisation, with Opora estimating up to 700,000 firms could be affected. Business groups calculate additional costs to firms could reach about 420 billion rubles, while government estimates of revenue gains vary. Lawmakers and lobbyists — including New People leader Alexei Nechaev and Opora — have urged Finance Minister Anton Siluanov to reconsider the cut, proposing a higher threshold (Opora suggests 30 million rubles) or a staggered phase-down, and officials are discussing alternatives ahead of the bill’s second reading. Analysts and business owners warn the measures risk shop closures, greater informality, regional job losses and damage to the IT sector and broader SME contribution to the economy.