Budget 2026 Takeaways: Government and Business Find Common Ground
Analysis of Budget 2026 amendments: preserving tax breaks for the IT sector, phased reduction of the VAT threshold for small businesses, and striking a balance between the state's fiscal objectives and entrepreneurial interests.
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The Russian government has adjusted the initial draft of the 2026 budget following feedback from business. The zero VAT rate for Russian software has been preserved, and the reduction of the VAT threshold for small businesses has been extended over three years. The reform is aimed at increasing budget revenues while maintaining support for strategically important sectors.
Initial Plans
The original draft budget for 2026, prepared by the government, envisioned a sweeping overhaul of the tax system. In particular, it proposed lowering the VAT payment threshold for the simplified taxation system (UСН) and patent taxation system (ПСН) from the current 60 million rubles in annual turnover to 10 million rubles. It also included the introduction of a new tax regime for the gambling industry: a corporate income tax of 25%, and for bookmakers—5% on accepted bets. The changes were also set to affect the IT sector: the Ministry of Finance proposed eliminating the zero VAT rate benefit for domestic software and raising the preferential insurance contribution rate for IT companies from 7.6% to 15%.
However, the proposed changes sparked a strong reaction from the public and business community, concerned about the potential negative consequences of these initiatives. The government responded to this backlash by listening to the feedback and adjusting the tax amendment package.
Preserving the VAT Benefit for IT: Stability for the Sector
One of the key changes was the decision to preserve the zero VAT rate for Russian software. The initial idea of eliminating it drew widespread response: the largest IT associations sent appeals to the Prime Minister and the Chairman of the State Duma, warning that the changes could result in revenue losses exceeding 100 billion rubles in 2026 and a slowdown in the sector's growth rate from 20-25% to 3-5%. Experts also noted the risk of declining demand for domestic solutions, team reductions, and delays in developing products meant to replace foreign alternatives.
IT is one of the fastest-growing sectors of the economy: in 2024, its contribution to GDP reached 6%, with growth rates significantly outpacing traditional sectors. A major driver of this development has been the zero VAT rate, introduced as part of the "IT maneuver" during the pandemic—it stimulated businesses' transition to domestic solutions and accelerated digitalization.
The economic rationale behind this decision is confirmed by experts as well. Dmitry Ryakhovsky, Doctor of Economics, Professor, Head of the Department of Taxes and Tax Administration at the Financial University under the Government of the Russian Federation, and partner at Legikon Pravo, comments for Argument Media:
"The stronger the sector develops, the greater its tax potential will be. We can see what a boost the tax incentives already provided have given to the sector's development. Most likely, we'll see growth in the number of IT companies, as well as the expansion of existing ones."
In a conversation with Argument Media, State Duma deputy and Deputy Chairman of the Committee on Information Policy, Information Technology and Communications Andrey Svintsov noted that based on numerous roundtables and field discussions, the Duma can see that the IT support measures provided by the government are working effectively. In several areas, import substitution has already reached 60-70%, and in some cases 90%. At the same time, there remain segments where import substitution is close to zero, and it is precisely the next 3-5 years, in his assessment, that are critical for completing work on the most complex and resource-intensive solutions that require large teams and serious computing infrastructure.
According to him, maintaining the zero VAT rate will accelerate import substitution across a wide range of IT products, providing small and medium-sized businesses with a stable preferential regime and the ability to compete with foreign developers. Introducing a 22% VAT, Svintsov believes, would effectively push a significant portion of Russian companies out of the market and once again open up space for Western competitors.
Responding to questions from Argument Media, he also noted that instead of raising VAT, the decision was made to increase the profit tax for the most successful companies. Such a mechanism, according to the deputy, will support businesses operating on the edge of profitability and create a fairer model where those earning significant profits help sustain those who are just developing their solutions. This logic, Svintsov believes, could be applied in other industries as well, if businesses provide specific calculations and arguments.
Thus, the government has demonstrated its willingness to listen to the arguments of a strategically important sector that, among other things, also ensures the digital transformation of other economic sectors, without abandoning the overall objectives of modernizing the tax system.
VAT transition period for small business: not a shock, but a gradual change
Following public discussions on tax reform, authorities have significantly adjusted one of the most sensitive points for small business – lowering the threshold for mandatory VAT payment under the simplified and patent tax systems. The initial version proposed that the limit would immediately drop to 10 million rubles, which could have immediately moved thousands of small enterprises to the general system, threatening a sharp increase in both financial and administrative burden.
Now entrepreneurs have a transition period. The new three-tier scale looks much softer: 20 million in 2026, 15 million in 2027, and only in 2028 the final 10 million. In other words, instead of a sharp "collapse" of the limit, there's a gradual reduction. This approach doesn't cancel the reform, but makes it more manageable and understandable.
For companies, this pause is an opportunity to calmly restructure their operations: recalculate financial models, rebuild supply chains, implement the necessary VAT accounting, and explain in advance to partners how the work process will change.
Experts highly value this approach. Dmitry Ryakhovsky emphasizes that the phased reduction of the VAT threshold will allow small businesses to prepare as comfortably as possible and transition to VAT calculation and payment with minimal errors.
"We do not expect a decline in the number of small enterprises in connection with the lowering of the VAT threshold. Some businesspeople will naturally try to go underground, but today's tax administration tools will quickly identify and penalize such businesspeople," he concludes.
Additionally, authorities have softened several other provisions: a moratorium on fines for new VAT payers, preservation of the patent taxation system for specific sectors (freight transport, rural retail), and expansion of expenses recognized under the "income minus expenses" regime. Adjustments also affected the gambling business: the tax rate remains at 25%, while the tax on bookmaking operations has been revised to 7% of the difference between accepted bets and winnings.
Providing a transition period is an example of a balanced government approach. It demonstrates that the reform's goal is not to maximize collections at any cost, but to integrate small businesses into the general tax system as painlessly as possible, without undermining their viability.
The reform's balance: softer for industries, but without abandoning objectives
According to government estimates, the VAT increase alone will bring the federal budget 4.423 trillion rubles in 2026–2028: 1.2 trillion in 2026, 1.6 trillion in 2027, and 1.7 trillion rubles in 2028. Tightening rules for the gambling business will also make a substantial contribution: revenues will grow from 1 billion rubles in 2024 to 60 billion rubles.
Beyond covering defense and security expenditures, these funds, together with revenues from other tax innovations, form the fiscal foundation for fulfilling social obligations: pension indexation, support for families with children, raising the subsistence minimum, as well as financing major infrastructure projects.
The need to seek additional revenues also has macroeconomic justification. As the author of the Telegram channel angry bondsDmitry Adamidov notes in conversation with Argument Media, tax policy is largely developing in line with monetary policy: since the Central Bank maintains a high key rate, and existing stimulus programs create significant pressure on the budget, these expenditures must be compensated through various sources, including tax adjustments. This points to the broader macroeconomic context in which tax decisions were made.
The adjustments reveal the chosen reform model: strengthening the revenue base combined with targeted protection for sectors critical to technological sovereignty and maintaining entrepreneurial activity. Preserving tax breaks for domestic software and introducing a gradual VAT transition scale for small businesses demonstrate a rejection of abrupt measures in favor of managed system restructuring.
Through dialogue with society and business, the government has managed to make the tax reform more balanced: the state secures the necessary resources to meet its social and infrastructure obligations amid budget pressures, while business gets predictable conditions and time to adapt.
