- Who can become self-employed and what it takes
- self-employment law
- The self-employed are taxed on professional income. It’s fixed:
- Who benefits from the new regime?
- How tax is collected
- Where does the law work?
- Types of self-employment
- What is more profitable: sole proprietorship or self-employment?
- Let’s compare in numbers, taking the amount of income of 2 million rubles:
- If we do the same calculation for an annual income of 500,000, we get:
- Outcome:
- comparison table
- Pros of self-employment
- Cons of self-employment
- How to apply for self-employment
Who can become self-employed and what it takes
The Self-Employment Act is designed to officially recognize the work of people working without an employer and employees. It establishes the procedure for taxation and simplifies the life of those who issued IP.
self-employment law
Since January 1, 2019, law No. 551845-7 has been in force in several regions of Russia. Its main task is to restore order and facilitate the taxation process for those who work for themselves. Previously, such citizens had two options: to work “in the gray” or to do individual entrepreneurship. When working through an individual entrepreneur, it was required to pay 13% of personal income tax (according to a simplified scheme – 6% of income).
The self-employed are taxed on professional income. It’s fixed:
- 4% – when settling with individuals.
- 6% – when settling with legal entities or individual entrepreneurs.
Who benefits from the new regime?
- Individual entrepreneurs. This allows you to work calmly without the risk of getting a fine for illegal business. Reduces tax burden. Removes paperwork.
- Clients – legal entities. To pay a self-employed person for work, it is not necessary to perform the duties of a tax agent (a person who is responsible for transferring taxes to the budget). The result is less taxes and paperwork.
How tax is collected
For reporting, you must indicate in the application “My tax” the amount received for the product or service. Write out a check. So, you will register income. Then you will receive a notification from the Federal Tax Service with the total amount of tax for the last month. You don’t need to count anything. The IRS will do it for you. Payments must be made by the 25th of the following month. You can pay with a bank card.
Where does the law work?
Officially, there is no full-fledged federal law on self-employment. The government is experimenting to see how such taxation would work and what problems it would create.
Since 2019, only Moscow, the Moscow and Kaluga regions and the Republic of Tatarstan have participated in it. In 2020, the list of regions has expanded. Now 19 more regions have been added to the experiment:
- Saint Petersburg
- Voronezh region
- Volgograd region
- Leningrad region
- Nizhny Novgorod Region
- Novosibirsk region
- Omsk region
- Rostov region
- Samara Region
- Sakhalin region
- Sverdlovsk region
- Tyumen region
- Chelyabinsk region
- Krasnoyarsk region
- Perm region
- Nenets Autonomous Okrug
- Khanty-Mansi Autonomous Okrug – Yugra
- Yamalo-Nenets Autonomous Okrug
- Republic of Bashkortostan
From July 1, 2020, the Ministry of Finance plans to extend such a tax to the entire country. About it said the press center of the department on its website. They promise to sum up the results in 2028 – until that time, tax conditions should not change.
Employment can be issued by any citizen of Russia, regardless of registration. But you can work on these tax conditions only on the territory of 23 subjects of the Russian Federation that participate in the experiment. It is not yet entirely clear how to be Internet freelancers or those who do not have a clear link to the place of activity.
Types of self-employment
There is no exact list of professions. But there are specific activities with which it is forbidden to switch to self-employment:
- Sale of gasoline, alcohol, tobacco, other excisable goods and goods with mandatory labeling.
- Resale of property rights, car and goods.
- Extraction and sale of minerals.
- Entrepreneurship for the benefit of another person on behalf of, as an agent or for a commission.
- Entrepreneurship with hiring other employees.
In all other cases, if you work “for yourself” and receive an income of no more than 2.4 million per year, you can become self-employed. First of all, this is done for popular “independent” specialties:
- Freelancers (designers, copywriters, internet marketers).
- Frequent craftsmen (plumbers, electricians, builders).
- Handymen (loaders, couriers).
- Artisans (manufacturers and sellers of handmade goods).
- Photographers and videographers.
- Landlords (who rent apartments).
Self-employment does not affect employment. You can work in an office and work as a freelancer. It is impossible to combine individual entrepreneurship and self-employment – an entrepreneur must choose one tax regime.
What is more profitable: sole proprietorship or self-employment?
In individual entrepreneurs with a general taxation regime, the personal income tax rate is 13%. Compared to this figure, self-employment is more profitable. But IP can also be opened with a simplified taxation system (STS). Then you have to pay 6% of income. The same rate is set for a self-employed person who receives money from a legal entity.
IP pays contributions to funds. This is 8,426 (for compulsory health insurance) + 32,448 (for compulsory pension insurance) and 1% for income exceeding 300,000. Even without income for the year, an entrepreneur is obliged to transfer a total of 40,874 rubles in contributions.
If the amount of taxes is less than contributions, only contributions must be paid. If more, then contributions + difference. For example, if you owe 22 thousand in taxes, then you pay only 40,874 contributions. If 50 thousand are owed in taxes, then 40,874 will be counted as contributions, and 9,126 will be as a tax.
Let’s compare in numbers, taking the amount of income of 2 million rubles:
- A self-employed person will pay 120,000 rubles (6%) in taxes when working with legal entities.
- An individual entrepreneur with a simplified tax system will pay 120,000 rubles (6%) plus contributions of 8,426 (OMS), 32,448 (OPS) + 17,000 (1% of income above 300,000 thousand). Part of the taxes are covered by the amount of contributions. In fact, it turns out that for the year the IP will pay the state 137,000 rubles.
Individual entrepreneurs win by providing social and medical guarantees and supporting pensions. But not all self-employed earn 2 million a year.
If we do the same calculation for an annual income of 500,000, we get:
- Self-employed: 30,000 rubles.
- IP: 42,874 rubles (6% is 30,000 taxes, which are less than contributions. Therefore, the IP will pay 40,874 contributions + 1% on income above 300,000 thousand).
If part of the payments to the self-employed comes from individuals, his figure will be even less.
Outcome:
- The status of self-employed is more beneficial in both cases.
- IP is good because the contributions provide pension and health insurance.
comparison table
Pros of self-employment
- Simple taxation. Registration and submission of reports – from a smartphone or tablet without collecting documents and standing in lines. If you don’t make money, you don’t pay anything.
- No checking account required. Accept money on a bank card, in cash or through electronic payment systems.
- You can issue checks in the application.
- You can register self-employment separately from the main job.
- The status of self-employed is proof of real income. It makes it easier to get a loan or a mortgage.
- The law guarantees that the conditions for self-employment will not change until 2028.
Cons of self-employment
- Not suitable for high income freelancers. If the annual income exceeds 2.4 million, it is necessary to switch to IP.
- Not available for some activities.
- You have to pay taxes. Yes, this reduces the net profit, but transfers the relationship with the client to the “white” legal zone.
How to apply for self-employment
Remotely through the mobile application “My tax”:
1. Download the app on the website of the Federal Tax Service of Russia.
2. Register. If you have a taxpayer’s personal account, enter the password for it and the TIN. If there is no office, scan your passport from the application – the required fields will be filled in automatically – and take a picture.
3. Wait for verification registration data.
If you need to switch from an individual entrepreneur to self-employment, then after registering in the application, within 30 days, you must send a tax application for the transition to another tax system.
If you are switching from self-employment to an individual entrepreneur with a simplified tax system, then applications must be submitted within 20 days. It is important. Otherwise, you will remain on the general VAT system.
Read: Andrei Trubnikov: “A person who climbs out of line will never become an entrepreneur”
