From 1 January 2026 regional authorities in Russia will be able to introduce lower tax rates for companies operating under the simplified tax system (USN), the federal government announced on its website on Wednesday. The decision implements amendments to the Tax Code adopted in November 2025 and is intended to give local governments more flexibility in supporting businesses.
Russia reduced simplified tax rates and regional impact
Under the new rules, regions may establish reduced USN rates for businesses registered and operating on their territory, but only for the categories of activity approved by the federal government. The government statement clarified that the measure covers all activity types listed in the national classifier, apart from those explicitly prohibited by the Tax Code, such as services provided by pawnshops, certain insurance activities and organisers of gambling.
The change is designed to allow regional administrations to tailor tax policy to local economic conditions. By lowering simplified-tax burdens for selected sectors, regions can create incentives for small and medium-sized enterprises, encourage local investment and support job creation. Authorities said the adjustments will apply to firms that meet registration and activity criteria specified in the government list.
Fiscal officials will face trade-offs. Reduced rates will likely lower tax receipts from affected firms in the short term, but policymakers expect that a more favourable tax environment will broaden the tax base over time as businesses expand and formalise their operations. Regional leaders will be able to weigh immediate revenue implications against potential gains in employment and economic activity.
Analysts say the move strengthens fiscal decentralisation by giving local governments practical tools to shape economic policy. Regions with targeted development strategies may adopt more generous rates for priority activities such as manufacturing, information technology services or value-added production, while maintaining standard rates for other sectors.
The government also retained safeguards. The list of eligible activity types will be determined at the federal level, which preserves a degree of uniformity and helps prevent arbitrary or harmful tax competition between regions. Explicit exclusions in the Tax Code ensure that certain activities remain outside the scope of preferential treatment.
Business groups welcomed the extra flexibility. Representatives of small and medium enterprises said regional tax levers could make it easier to start and scale operations outside major urban centres. Local administrations will now be able to design targeted incentives aimed at attracting new firms or supporting nascent clusters.
Implementation details, including the specific reduced rates and administrative procedures, will be set out by regions in the course of 2025 and 2026. Companies and advisers will be watching regional budgets and regulatory updates closely to assess how individual regions choose to deploy the new authority.
Overall, the measure signals a pro-business shift in regional economic policy that could help diversify local economies and promote growth, while keeping a framework of federal oversight to limit excessive tax competition.
Key Takeaways:
- From 1 January 2026 regions may set lower rates under the simplified tax system, with Russia reduced simplified tax rates designed to support local business.
- The change implements amendments to the Tax Code adopted in November 2025 and applies to most activity types listed by the government.
- Certain sectors are excluded, including pawnshops, insurers and organisers of gambling, as specified in the Tax Code.
- Regions can use the measure to boost small firms, attract investment and tailor fiscal policy to local priorities.
