The Federation Council supported the law on the VAT increase

© RIA Novosti / Maxim to Aminopherase in photobacteria of the Federation Council of the Russian Federation. Archival photoThe Federation Council supported the law on the VAT increase© RIA Novosti / Maxim to Aminopherase the image Bank

The Federation Council approved a law raising the rate of value added tax (VAT) from 1 January 2019 to 20% from current 18% and at the same time retaining on a permanent basis, the rate of insurance contributions to the social extra-budgetary state Fund at 30%.

However, the law requires the preservation of all existing preferential rates of tax, rights of automobile manufacturers to obtain deductions for VAT amounts paid in the acquisition of goods, works and services.

At the same time by 2025 to extend the validity of the zero rate for air transportation of passengers and cargo in the Crimea and Sevastopol, and also sets the same rate for air travel in the regions of the Far East. The validity of the zero rate VAT on air travel in the Kaliningrad region is also set to 2025.

The act retains on a permanent basis the current rate of contributions for mandatory pension insurance is 22%. Simultaneously, the remains of the so-called «tail» contribution rate of 10% on wages in excess of the specified threshold. In addition, for non-profit and charity organizations through 2025 to extend the validity of the lowered tariffs of insurance contributions for compulsory pension insurance (20%), medical insurance and insurance against temporary disability and maternity (0%).

Now the total rate of insurance contributions is 30% of the wage Fund: 22% contribution to the Pension Fund (PFR), 5,1% — to the compulsory medical insurance Fund and 2.9% to the social insurance Fund. Starting from 2021 the overall rate would increase to 34% — due to increase to 26% contribution to the pension Fund. According to the law, it will remain at 30%.