Restaurants in Russia will be exempt from VAT

The State Duma adopted amendments to the tax code that will exempt "public catering enterprises" from VAT. The changes will enter into force on January 1, 2022.

VAT exemption applies if an organization meets the following conditions:

- Income < 2 billion rubles for the previous calendar year
- At least 70% of revenue comes from catering services and delivery of meals
- The monthly average amount of payments to employees is not below the same indicator for the industry last year

The limit on the number of employees for applying the reduced rate of social contributions (15% instead of 30%) is increased - from 250 to 1500 people.

We see this long-term regulatory change as an effort by the Federal Tax Service (FNS) to reduce the administrative burden on restaurants and to incite them to become fully tax compliant in exchange. We expect that FNS will increase pressure and controls on this industry sector from 2022 onwards.