The Federal Tax Service has explained how small and medium enterprises should apply reduced social insurance contribution rates
The Federal Tax Service has explained how small and medium enterprises should apply reduced social insurance contribution rates.[1]
Small and medium enterprises (SMEs) have been entitled since April 1, 2020 to apply social insurance contribution rates reduced from 30% down to 15% on payments to individuals exceeding the minimum wage.
This has given rise to questions in practice as SMEs wonder from when they should apply these reduced rates. According to the Federal Tax Service, the right to apply reduced social insurance contribution rates arises on the 1st of the month in which companies are recorded in the SME register, but not before April 1, 2020. The Federal Tax Service draws this conclusion from the fact that being in the SME register is necessary for companies to be deemed SMEs. Although we believe that this position is highly questionable, applying reduced social insurance contribution rates before being recorded in the SME register might trigger disputes with tax authorities.
In its letter, the Federal Tax Service also provides a useful method to calculate social insurance contributions when SMEs apply reduced rates.
It is worth mentioning that limited liability companies with even 100% foreign participation may be included in the SME register if they and their shareholders meet the following conditions simultaneously:
- Their revenues do not exceed RUB 2 billion;
- Their average staff headcount does not exceed 250;
- And foreign shareholders are not based in an offshore zone.
For more detailed information, please click on the link
If you have any questions, please do not hesitate to contact us. We would also be pleased to assist you in getting recorded in the SME register and discuss whether you could apply reduced social insurance contribution rates before being in the SME register as well as the prospects of getting a refund of any contributions overpaid from April 1, 2020 to the date of inclusion in the SME register.
If you have any questions or would like to discuss the current situation, please write to Anton Kabakov.
Truly yours,
[1] Federal Tax Service Letter No. БС-4-11/7300@ dated April 29, 2020 https://www.nalog.ru/rn77/about_fts/about_nalog/9755980/