The simplified tax system, or, as it is often called, “simplified”, is the most popular tax regime for small businesses. Most entrepreneurs use this particular regime.
The simplified tax system was specially developed for small businesses. The widespread use of simplification among entrepreneurs is due to the lower tax burden, as well as extremely simple accounting and tax accounting. The simplified tax system for individual entrepreneurs is no different for the same regime for companies (LLC, CJSC), only entrepreneurs do not have the obligation to keep accounting records. It is only necessary to fill in the KUDIR and the cash book.
How to switch to simplified
In order to start applying the simplified tax system, an entrepreneur upon registration must submit a notification to the registering authority. Otherwise, by default, all IPs are required to apply OSNO. The last tax regime is extremely burdensome for individual entrepreneurs. Its use is justified only if the majority of IP clients are representatives of large businesses who need invoices with allocated VAT. In other cases, especially for a new business, the use of the simplified tax system seems to be the most optimal.
For an already operating business to switch to the simplified tax system from next year, you must submit an application before the end of the current one.
Types of simplified tax system for individual entrepreneurs
Before switching to the use of the simplified tax system, the individual entrepreneur must determine the object of taxation (this is the basis on which the tax will be calculated). An entrepreneur has two options - to pay 6% on income (revenue) or 15% on the difference between income and expenses. If the rate of 6% is the same for the entire territory of the country, then for the STS “income-expenses” many regions set a reduced rate for certain categories of simplified persons. For example, for those working in the field of construction or the provision of public services.
How to make a choice? It is worth trying to predict the revenue structure. If the expenditure part in it is more than 70%, then the use of the simplified tax system "income-expenses" is considered more profitable. It should be borne in mind that the list of expenses is strictly limited in the Tax Code, i.e. far from all the entrepreneur's expenses can be deducted from the proceeds. Moreover, all expenses must be not only economically justified, but also documented.
If an individual entrepreneur does not have hired workers, and the costs are insignificant (this is especially true for individual entrepreneurs working in the service sector), then the use of the STS "income" is definitely more profitable. In some cases, the entrepreneur will have the option of not paying the flat tax at all. After all, the tax amount for individual entrepreneurs without employees can be reduced by 100% by the fixed contributions paid to the PFR. And their payment is required regardless of the financial result.
