City government

Economy and entrepreneurship

14.08.2015, 15:48

Maxim Reshetnikov: Patent-based taxation system boosts the number of entrepreneurs in Moscow

Maxim Reshetnikov: Patent-based taxation system boosts the number of entrepreneurs in Moscow

The number of sole proprietors in Moscow is up nearly 12,000 over the first six months of 2015, Maxim Reshetnikov, Head of the Department for Economic Policy and Development, told journalists. According to him, this is more than in all of 2014.

He went on to emphasise that such a sizable increase in the number of sole proprietors is largely due to the introduction of a patent-based taxation system, which is user-friendly, straightforward and cost-effective.

“As soon as an entrepreneur buys a patent, he or she no longer has to file tax returns or do any accounting,” Mr Reshetnikov said. “As a matter of fact, they no longer need an accountant or even a cash register for that matter. They won’t have to pay VAT, personal income tax and some other taxes, including sales tax, which was introduced in Moscow on 1 July.”

Following the introduction of the patent-based taxation system, the number of patents issued in the first half of 2015 amounted to over 22,000, which is 20 percent more than in all of 2014.

According to Mr Reshetnikov, city budget revenue is up accordingly. The total value of acquired patents amounted to 1.8 billion roubles, which is 16 times greater than in 2012 and almost five times more than in 2013.

According to him, the retail sector remains the undisputed leader in terms of the number of the newly issued patents. “A lot of entrepreneurs followed the law by buying a patent, because they see it as the most convenient and straightforward taxation system,” he said. “The number of retail patents is up 50 percent.” This is the most quickly growing sector, with the total value of patents issued to stationary and nonstationary retail outlets over the first six months of 2015 being almost 50 percent more than the value of patents issued over the whole of last year.

An increasing number of patents is being acquired by entrepreneurs operating in such areas as public catering, consumer services, residential and commercial leasing, as well as by self-employed individuals. “We see a significant growth in the number of patents acquired by tutors, fitness instructors, as well as interior designers and renovators,” Mr Reshetnikov said.

Tutors have been issued more than 630 patents (up 30 percent), and fitness instructors 450 (up 50 percent). Approximately 300 interior design and renovation patents were issued during the first half of 2015, which is almost twice that of 2015.

Mr Reshetnikov pointed out that the patents are very reasonably priced. “We ran the numbers and customised pricing based on a particular administrative area,” he said. “Patents issued in the Central Administrative Area are a little more expensive. The fee decreases as we start moving away from the city centre. Outside Moscow, we apply a decreasing ratio, selling patents at a 30 percent discount. Fees are also differentiated depending on the specifics of a particular site. The price of a patent for a flat varies depending on its area and other features.”

As a result, the patent cost remained the same or even decreased for nine out of 10 retail outlets. The increase in the number of newly issued patents is largely due to the new territories outside the Moscow Ring Road, such as the Troitsky and Novomoskovsky administrative areas and Zelenograd. They boast the highest per capita numbers of newly issued patents.

Mr Reshetnikov said that the patent system is one of the main drivers behind the improved business climate in Moscow. “We are pleased to see entrepreneurs responding to it,” he said. “They opt for this system, get right with the law, and the number of patents is growing as a result. Most importantly, there are more entrepreneurs in Moscow now.”