What taxes should an individual entrepreneur pay?
This depends on the chosen taxation system.
General taxation system
OSN (or OSNO) is the default tax system. It applies if the entrepreneur has not switched to any other regime from those that we will talk about later.
Individual entrepreneurs pay the following taxes on OSN:
- Personal income tax – 13%, for except certain types of income; from part of the profit exceeding 5 million – 15%. In this case, it is the profit that will be taxed. To determine it, business expenses are subtracted from revenue. If expenses cannot be supported by documents, the professional deduction will be equal to 20%. You can apply other tax deductions available to individuals – for the purchase of housing, treatment or education. The tax is paid during the year in three advance payments, the balance is paid before July 15 of the following year.
- Value added tax on the sale of goods and services, when importing goods from abroad, and so on – depending on their type – 0, 10 or 20%. VAT paid in the current quarter for the previous one. The total amount is divided into three parts and paid monthly until the 28th. Can get exemption from VAT if over the last three months the revenue excluding tax did not exceed 2 million.
Simplified taxation system
An entrepreneur can switch to a simplified system (STS) if he writes a tax notice. However, there are restrictions: it is available to those who have no more than 100 employees, income no more than 150 million, or a residual value of fixed assets no more than 100 million. Moreover, previously, if an individual entrepreneur reached one of the indicators, he was automatically transferred to the general taxation regime. Now he can remain on the simplified tax system if he has exceeded the bar, but he has no more than 130 employees, annual income does not exceed 200 million rubles, or the residual value of fixed assets is no more than 150 million. You will just have to pay tax at new rates. They are subject to taxation of income from the beginning of the quarter in which there was an excess.
The simplified tax system allows you to choose how an entrepreneur wants to pay taxes:
- 6% on all income, but 8% if there are from 100 to 130 employees, income from 150 to 200 million or the residual value of fixed assets – from 100 to 150 million;
- 15% of the difference between income and expenses (but not less than 1% of revenue) or 20% if it falls within the transition range.
Regions may reduce rates for all individual entrepreneurs or for certain types of activities. In addition, for new entrepreneurs provided tax holidays for up to two years, when deductions are not allowed to be made at all. But only entrepreneurs working in the production, social, scientific spheres, as well as providing household services to the population, can take advantage of the benefit.
Tax on the simplified tax system is paid quarterly – no later than the 28th day of the month following the reporting period. An exception is made only for the last payment: it must be made no later than April 28 of the following year.
Keep in mind: when paying 6% of all income, an individual entrepreneur can deduct the transferred insurance premiums from the tax amount – in full if there are no employees, or no more than 50% if there are any.
Patent tax system
Patent tax system (PTS) available only for some activities. Among them, for example:
- shoe repair, cleaning, painting and sewing;
- hairdressing and beauty services;
- dry cleaning, clothing dyeing and laundry services;
- production and repair of metal haberdashery, keys, license plates, street signs.
Moreover, one individual entrepreneur may have several patents. To switch to this taxation system, the company must have fewer than 15 employees, and total annual revenue must not exceed 60 million rubles.
An entrepreneur buys a patent for a certain type of activity – and that’s it, no other taxes need to be paid. But this does not exempt you from insurance premiums.
The cost of a patent is set by regional authorities based on the average earnings of a business in this area. Payment terms depend on the validity period.
- If the patent is issued for a period of less than 6 months, then the money is paid while it is valid in one payment.
- If the patent is issued for a period of more than 6 months, then a third of the amount is paid within 90 days from the date of its receipt, the rest – before the expiration of validity.
A patent is issued only within one calendar year, so you won’t be able to get it for 12 months in May—until December 31st at most.
The cost of a patent can also be reduced by the amount of insurance premiums paid. Here, as with the simplified tax system – entirely, if there are no employees, or no more than 50%, if there are any.
Unified agricultural tax
Unified agricultural tax is suitable for those who grow, process or sell agricultural products. To calculate it, income minus expenses and losses from previous years is multiplied by the tax rate. By default it is 6%, but regions can reduce it down to zero.
The tax is paid in two stages:
- advance payment for the first half of the year – until July 28;
- payment at the end of the year – until March 28 of the next year.
In addition, entrepreneurs on the Unified Agricultural Tax must pay VAT (details about this tax were in the paragraph on the general taxation system), but you can get an exemption.
Automated simplified taxation system
This is an experimental tax regime that operates in Moscow, the Moscow and Kaluga regions and Tatarstan. You can choose the rate for it:
- 8% of income;
- 20% of the difference between income and expenses.
At the same time, businesses on the AUSN do not have to pay insurance premiums for employees, except for contributions for insurance against industrial accidents. There is no need to submit declarations yet. The tax office itself will calculate how much the entrepreneur owes it. The tax is transferred monthly.
But only those entrepreneurs whose annual income does not exceed 60 million and who have no more than five people on staff can switch to this regime. In addition, the current account must be opened in a bank from special list.
Professional income tax
An individual entrepreneur can work as self-employed. Then he will have to pay the state 4% on income received from individuals, and 6% from legal entities.
But this mode is not suitable for everyone. Entrepreneurs without employees whose annual income does not exceed 2.4 million rubles can switch to it. There are restrictions on the type of activity. For example, self-employed people cannot resell goods.
To switch to NAP, you need to register in the “My Tax” application and notify the Federal Tax Service of your refusal to use any other tax regime.
What insurance premiums should an individual entrepreneur pay for himself?
All entrepreneurs must deduct them, except for the self-employed and those on the AUSN. It’s pretty easy to figure out. Previously, it was necessary to pay separate contributions for compulsory pension (OPS) and medical (CHI) insurance. Now it’s a single amount for everything. In 2024 it is equal to 49,500 rubles. If annual income exceeds 300 thousand rubles, you will also have to pay 1% on the excess.
For example, from 500 thousand you will have to transfer this amount:
49,500 + 1% (500,000 – 300,000) = 51,500 rubles.
At the same time, insurance premiums for compulsory health insurance have a limit that is equal to eight times the amount of the fixed contribution. In 2024 it is 277,571 rubles. Individual entrepreneurs will not be charged any more, even with impressive earnings.
It is worth considering that fixed contributions are paid even with zero income and virtual absence of activity. An exception is made if the entrepreneur does not work because:
- undergoes military service upon conscription;
- cares for a child under 1.5 years old, or for a person with a disability of the first group, or for a child with a disability, or for a person over 80 years old;
- moved after his military spouse to an area where there was no opportunity to work;
- is abroad due to the spouse’s work at a diplomatic mission, consular office of the Russian Federation or an international organization (scroll the latter is established by the government).
In order to legally avoid paying contributions, you need to submit a corresponding application and documents confirming that you have such a right to the tax authority at the place of registration.
If the individual entrepreneur did not work for a full year, the amount of insurance premiums is calculated based on the number of months actually worked and days in the months not fully worked. Upon termination of activities as an entrepreneur, contributions must be paid within 15 days from the date of deregistration with the tax authorities.
You will not have to report to the Federal Tax Service on making insurance contributions.
What taxes and insurance premiums does an individual entrepreneur have to pay for employees?
Here’s what you need to know.
Personal income tax
Personal income tax is 13%. It is calculated on the employee’s income and deducted from the amount that he should receive.
For example, according to an employment contract, the salary is 30,000 rubles per month. Consequently, the employee will receive 30,000 – 13% = 26,100. And 3,900 rubles will go towards personal income tax.
It is worth considering that for some types of personal income tax not credited. We are talking primarily about compensation, financial assistance and preferential payments.
Insurance premiums
Contributions are also calculated on all employee income, but are no longer deducted from them. The employer must pay these amounts himself. From 2023, contributions will also be taken in one payment, size which depends on the employee’s earnings:
- 30%, as long as his salary during the year does not exceed a total of 1,917,000 rubles before taxes;
- 15.1% when exceeded.
For some categories of payers provided reduced rates.
Contributions for accident insurance are considered separately. They are sent to the social fund and range from 0.2 to 8.5%. Individual entrepreneurs on AUSN pay only this, but in a fixed amount – 2,434 rubles per year.
What other taxes does an entrepreneur pay?
The individual entrepreneur remains an individual and pays all relevant taxes, namely:
- Property tax, if any, is no more than 2.2%, the rate depends on the region. Payment must be made by December 1 upon notification from the tax office.
- Transport and land taxes – rates are set by local authorities. You also need to deposit money before December 1st.
Where to transfer taxes and insurance premiums
Since 2023, a single tax payment has become mandatory in Russia. That is, the business must transfer all the money to one account, and then the tax office itself distributes everything. Lifehacker has detailed material about this, where you can find out all the nuances.
What to remember
- An entrepreneur pays taxes in accordance with his chosen taxation system.
- He is also obliged to pay insurance premiums for himself. An exception is if a person has suspended activities for a valid reason. The list of such reasons is defined in the law.
- If an individual entrepreneur has employees, he must pay personal income tax and insurance premiums for them.
- There are many details to consider when paying taxes and insurance premiums. Too much to act without studying the laws or the help of a knowledgeable person.
This article was first published on October 21, 2019. In March 2024, we updated the text.
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