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Gastronomic sum: the Russian Federation discusses raising the zero VAT threshold for public catering

Why the authorities are ready to make concessions and whether this will help to slow down the growth of prices in restaurants and cafes
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Photo: Izvestia/Kristina Kormilitsyna
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The authorities are planning to make life easier for restaurateurs - they are discussing raising the zero VAT threshold for catering. Since 2022, cafes and restaurants with revenues below 2 billion rubles do not pay tax - now they want to raise the threshold to 3 billion, sources in business circles told Izvestia. The Ministry of Finance has confirmed the elaboration of the issue. At the beginning of the week, the Ministry discussed the measure and conceptually supported it. Prices in this sphere grow faster than the average inflation in the country, up to 20-30% per year, and many companies have already gone beyond the benefits. Now it is unprofitable for them to grow and develop. Who will be affected by the change and whether it will help to slow down the growth of prices in cafes - in the material "Izvestia".

What establishments do not pay VAT

The authorities are discussing an increase in the income limit for catering companies, allowing them not to pay value added tax (VAT) - from 2 to 3 billion rubles a year. Three sources in business circles told Izvestia about it. The press service of the Ministry of Finance confirmed that the issue of raising the zero VAT threshold for public catering is being worked out together with the Federal Tax Service. The editorial board requested the tax service.

A meeting on this topic was held in the Ministry of Finance with the participation of representatives of the agency and the business community on January 27. The Ministry of Finance conceptually supported the initiative, said interlocutors familiar with the discussion.

As a general rule, the VAT rate in Russia is 20%. Now the restaurant business (including cafes, canteens, bars) is exempt from its payment, if its total income per year does not exceed 2 billion and catering services account for at least 70% of all earnings. The exemption was introduced in 2022 as a post-pandemic support measure for the sector. Since last year, another condition has been added for its application - the organization must provide its employees with a salary not lower than the average monthly salary in the region or subject.

The zero VAT does not apply to companies that prepare products for sale to retailers or restaurants, sell goods through vending machines, or sell finished products in a store.

The initiative to raise the threshold was promoted by Opora Rossii together with the Federation of Restaurateurs and Hoteliers of Russia (FRIO). In December 2024, the business association sent a letter to Prime Minister Mikhail Mishustin with a request to raise the zero VAT limit to 3 billion (Izvestia has the document). It says that the measure will stimulate further development of the industry and provide additional revenues to the budget by "whitewashing" the catering market.

The letter also states that, according to the Ministry of Finance, the volume of revenue of participants of the experiment on zero VAT from 2022 to 2023 increased by 1.4 times. Also, the number of their employees increased by 22%. Taking into account the accumulated inflation, as well as in connection with additional revenues from personal income tax and insurance contributions from the catering industry should raise the threshold.

As noted in the document, the current limit of 2 billion leads to the fact that restaurateurs when approaching the limit are forced to abandon development, sell the business or hide income.

Business Russia also said that in December they sent a letter to the government with a request to raise the threshold to 3 billion. In addition, the appeal was a proposal to introduce a special VAT regime for catering companies whose revenues exceed 3 billion a year, said "Izvestia" chairman of the business association committee on the restaurant business, founder and manager of the restaurant chain "Teremok" Mikhail Goncharov.

Possible solutions to the latter issue are still being worked out, he said. According to the expert, companies whose income exceeds the limit, immediately find themselves in a real "operational" disadvantage because of the need to pay VAT and double taxes on salaries.

How the increase in the threshold will affect the restaurant business

Raising the threshold for zero VAT is important for the restaurant business, as investment in the industry is now minimal, said the executive director of "Opora Russia" Andrei Shubin. According to him, the increase in the limit will allow to attract more funds and maintain the quality of service and products. The measure will give businesses incentives to expand, create jobs and enter new markets, he added.

The VAT exemption benefit introduced in 2022 has already helped whitewash the market and support companies, assessed Mikhail Goncharov of Delovaya Rossiya. However, he said, inflation has reduced its effectiveness, and many companies have crossed the 2 billion threshold not so much because of their growth, but because of the rising cost of goods.

- The experiment with zero VAT has shown a positive effect: tax deductions and wages have increased. It is important not to lose these results, because when companies move to the category of big business, their profitability decreases sharply," added Mikhail Goncharov.

The SME Corporation also supported the initiative. The general director of the organization, Alexander Isaevich, is sure that the funds freed up by VAT exemption can be used by business to open new outlets.

The initiative can also be considered in conjunction with the ongoing campaign of the Federal Tax Service to combat the shadow sector, which is particularly characteristic of the catering industry, said an expert of the Council for Financial, Industrial and Investment Policy of the Chamber of Commerce and Industry, tax consultant Alexei Krylov. He reminded: one of the criteria for VAT exemption is the compliance of salaries at the enterprise with the average for the industry in the region. Thus, the authorities encourage the employer to comply with social guarantees by transferring insurance premiums and ensure the collection of personal income tax, the expert explained.

What restaurants will be affected by the measure to increase the threshold of zero VAT

According to Mikhail Goncharov from "Business Russia", now only a few dozen medium and large enterprises are approaching the limit of 3 billion.

In total, there are more than 180 thousand public catering enterprises in Russia, but only a small part of them has a turnover of more than 2 billion rubles, said Yaroslav Dubenkov, an expert of the Faculty of Economics of PFUR.

According to Rosstat on October 1, 2024, in Russia there were 37 thousand canteens and snack bars, 98 thousand restaurants, cafes and bars, as well as 61 thousand canteens on the balance sheet of educational institutions, organizations, industrial enterprises, that is a total of about 200 thousand points.

- According to rough calculations, about 80% of catering companies earn less than 2 billion rubles a year. And in the case of increasing the threshold, the number of those who will fall under zero VAT, may increase to 90-95%, - predicts analyst Freedom Finance Global Vladimir Chernov.

The measure will affect premium-class and middle-segment enterprises, networkers and successful regional franchises, the expert believes. To such, for example, can include "DoDo Pizza", Rostic's, as well as restaurants that are part of Novikov Group, listed Vladimir Chernov. "Izvestia" sent them requests.

According to the Chairman of the Board of Directors of Dodo Brands Andrei Petelin, the company operates on the franchise model, and the network has about 10 major partners are close to the limit of 2 billion. For them, the decision to raise the threshold will be extremely favorable.

Raising the limit to 3 billion rubles gives partners additional time for growth, he said. However, in the future the same problem will arise when reaching 3 billion, but now it is a significant help to avoid a sharp slowdown in development and maintain the profitability of the business, summarized Petelin.

How the increase in the threshold for zero VAT will affect inflation and the budget

Inflation in the catering sector is traditionally higher than in other areas due to the growth of prices for food, logistics and rent, said Yaroslav Dubenkov from the Russian University of Management Sciences. The figure in this segment may be higher than the official Rosstat data by two to three times, i.e. about 20-30%, estimated Vladimir Chernov from Freedom Finance Global.

- VAT exemption can reduce the burden on business and slow down price growth. However, the effect will depend on how companies will use the freed funds: if they are used to cover expenses, prices may slow down, but if the business decides to increase the margin, the cost of meals will also grow rapidly," says Yaroslav Dubenkov.

The impact on inflation from raising the threshold is ambiguous, because prices in restaurants depend on many factors, including the cost of products and the macroeconomic situation, said Andrei Shubin from "Support of Russia".

At the same time, if the initiative is adopted, the budget may lose part of the VAT revenues, believes Vladimir Chernov. He estimated: with the average margin of the restaurant business at 15-20% for revenue of 3 billion rubles VAT is about 360 million rubles per year per enterprise. Accordingly, the treasury may lose several tens of billions.

However, the shortfall in budget revenues will be compensated by an increase in tax revenues collected on the income of large restaurants, says Ekaterina Golubtsova, Associate Professor of the Department of State and Municipal Finance at the Plekhanov Russian Economic University. And also - thanks to the increase in profit tax from 20 to 25% from 2025.

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