MIL OSI Translation. Region: Russian Federation –
The demand for this status is evidenced by the numbers: as of December 1, 361.6 thousand individual entrepreneurs were registered in Moscow.
Individual entrepreneurship in Moscow has long been one of the foundations for the development of the urban economy. Every year the number of Muscovites doing business with this status is growing. This choice is easy to explain: individual entrepreneurs (IE) have access to a number of tax benefits and other support measures. How and who can become an individual entrepreneur, what taxes and fees have to be paid, and what assistance the city provides to small businesses – in continuation of the series of publications “Moscow Economy in Simple Language”.
Who is an individual entrepreneur
Today, in order to do business, it is not necessary to create your own company with an impressive authorized capital. You can open your own business by registering the status of an individual entrepreneur. Any resident of the city, even a foreigner, with the exception of minors and convicts, has such an opportunity.
In Moscow, this form of doing business is popular due to the simplicity of registration and document management. To start your own business, you need to fill out an application, then get a certificate from the tax office. After that, you can start working.
Individual entrepreneurs can engage in almost any activity, with the exception of a number of exceptions. For example, by the production and sale of alcohol, they are prohibited from creating financial organizations, organizing air travel and television broadcasting, as well as conducting some other types of business. All options are spelled out in the all-Russian classifier of types of economic activity.
At the start, entrepreneurs keep minimal reporting. Also, preferential tax regimes are in place for them, which allow them to optimize costs and direct money to develop the business.
The fact that the status of individual entrepreneurs is in demand is evidenced by the facts: the number of new individual entrepreneurs is growing every year, and the necessary infrastructure for such a business is expanding. Despite the restrictions associated with the pandemic, a record was recorded in the capital in October: 7,825 people issued the status of an individual entrepreneur. And as of December 1, 361.6 thousand individual entrepreneurs were registered in Moscow – this is every third individual entrepreneur in the Central Federal District and every 10th individual entrepreneur in Russia.
How to become an individual entrepreneur
The status of an individual entrepreneur is assigned by the Federal Tax Service on the basis of an application. You can submit it remotely or in person. Online submission is more convenient: you can not waste time on the road, queues and transfer of documents. And besides, it exempts from paying the state duty. You can submit documents in person at the six flagship centers “My Documents” or the interdistrict tax inspection number 46… In this case, you must pay a state fee in the amount of 800 rubles.
In addition to the application, you must provide a passport (no other documents are required). After three to five days, depending on the method of filing, the tax office will register as an individual entrepreneur.
By the way, in the USA and France, you can also register an individual entrepreneur online. However, it takes 25 working days to obtain status under the standard procedure in the USA, and 14 days in France. In Italy, you can apply remotely only with an electronic signature and a certified mailbox.
Only one individual entrepreneur is allowed at a time. If necessary, you can close it, and then open another one for a new type of activity. The number of such operations is unlimited. When a business starts to grow, an individual entrepreneur can hire employees: their number is directly related to the tax regime.
A number of tax regimes are provided for individual entrepreneurs. They greatly simplify the work and allow you to save on the services of an accountant.
If none of them is selected at the beginning of work, then a general taxation system is automatically established, in which the businessman pays both value added tax and personal income tax. However, you can hire an unlimited number of people.
The simplified taxation system offers two options. The first is to pay six percent of income, the second is to pay 15 percent of the difference between income and expense. A businessman under such a tax regime can employ up to 100 people and at the same time maintain minimum tax reporting.
Under the patent taxation system, entrepreneurs draw up a permit to conduct business – a patent. The patent regime covers 80 types of work: from grooming dogs to selling cars, from design to working in a taxi. The price of a patent is calculated based on the field of activity and the area of the city where the entrepreneur will work.
You can apply for a patent for a period from one month to one year at the tax office by filling out an application. This is done so that a businessman can evaluate his project and its profitability. If everything goes well, you need to submit an annual tax application for a new period. Under the patent system, an entrepreneur is allowed to employ up to 15 people for one type of activity.
In January – September 2021, entrepreneurs in Moscow issued about 81.5 thousand patents. Most of the patents were in the retail trade – 35 percent. Also popular are the rental of residential and non-residential premises and the transportation of passengers and goods.
An individual entrepreneur is exempt from paying taxes if he does not carry out real activities. But insurance contributions – contributions to the Pension Fund and the compulsory health insurance fund – he is obliged to transfer from the moment of registration as an individual entrepreneur.
How to distinguish an individual entrepreneur from a self-employed
The status of an individual entrepreneur should not be confused with the status of self-employed. Although in both cases people are self-employed, there are two different tax regimes for them.
Self-employed deduct a fixed percentage of their income: four percent if they provide services to individuals, and six percent when interacting with legal entities, and pay insurance and pension contributions at will. For individual entrepreneurs, the amount of tax depends on the tax regime, and additional contributions are required.
Also, self-employed people can work without a cash register and not submit reports, unlike individual entrepreneurs. At the same time, they are allowed to earn up to 2.4 million rubles per year, while the threshold for annual revenue for individual entrepreneurs depends on the chosen taxation system: 60 million for individual entrepreneurs working on the patent tax system, and 200 million rubles for individual entrepreneurs on a simplified tax system. There are no revenue limits for the general taxation system.
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From business service centers to coworking spaces
Despite the fact that the coronavirus pandemic has made its own adjustments to the work of businesses of all sizes and sectors of the economy, new startups, services and services appear in Moscow every day.
Comfortable conditions are created for individual entrepreneurs in the capital. For example, there are business service centers where you can get free advice on running a business, help in preparing documents for registering your business, new knowledge at events, learn about support measures from the city, and much more. If you have any questions about starting and developing your own business, you can contact the consultants of the Small Business of Moscow State Budgetary Institution. Another option for work and exchange of experience is coworking, located in business service centerswhere you can work or get together with like-minded people and discuss projects.
More than 90 online services are available for comfortable doing business in the city: you can obtain permits and licenses, apply for a patent, find a room and do a lot of other necessary things without leaving your home. Subsidies for leasing equipment and utilities are available to entrepreneurs.
Individual entrepreneurs can also rent premises from the city on favorable terms. According to the results of bidding for 11 months of this year, the city concluded more than 1500 non-residential real estate purchase and sale contracts… More than 80 percent of the outlets were rented by representatives of small and medium-sized businesses – these are 614 objects with a total area of 68.5 thousand square meters. Roadshows, seminars and sessions are held for potential tenants.
The city helps aspiring entrepreneurs gain knowledge useful for work. GBU “Small Business of Moscow” regularly conducts educational events for different categories of entrepreneurs in offline and online formats, and you can take part in them completely free of charge. In addition, future businessmen can go through complex training programs “MBM Startup School”, “MBM Online Academy” or “Online Accelerator”.
EDITOR’S NOTE: This article is a translation. Apologies should the grammar and or sentence structure not be perfect.