A business on the simplified tax system that becomes a VAT payer can choose
- standard rates — 20, 10 and 0% — with the ability to deduct the tax presented by suppliers of goods, works or services for the company or individual entrepreneur;
- preferential rates — 5 and 7%, but without the right to deduct input VAT.
A business on the simplified tax system with income over 60 to 250 million rubles inclusive can apply a rate of 5%. And with earnings over 250 to 450 million rubles inclusive — 7%.
After switching to a reduced VAT rate, a business will not be able to refuse it for 12 quarters in a row — that is, three years.
The Tax Service explained in which cases the period of application of special tax rates — 12 quarters — is interrupted, and in which cases it is not.
The transition from a VAT rate of 5% to a rate of 7% and back does not interrupt the flow of 12 quarters.
A taxpayer on the simplified tax system applied a rate of 5% from the beginning of 2025, and 7% from December, since the business’s income exceeded 250 million rubles. In 2026, the business also applied a VAT rate of 7%, but due to a decrease in income in 2027, it returned to a rate of 5%. Then it is considered that the period of application of special tax rates — 12 quarters — was not interrupted. Accordingly, it is not yet possible to refuse the reduced rate in favor of the standard one.
Exemption from VAT interrupts the period of application of special tax rates. The countdown starts again when the grounds for exemption are lost.