They want to increase the amount of social tax deductions from the costs of education and treatment from January 1, 2024. The relevant bill has recently been submitted to the State Duma. How relevant are the proposed changes, understood the “Profile”.
Uplift and Simplify
Amendments to Article 219 of the Tax Code of the Russian Federation have been prepared in the context of President Vladimir Putin’s instructions set out in his annual address to the Federal Assembly. The head of state proposed to increase the amount of social tax deductions for the cost of educating children from 50,000 to 110,000 rubles, for expenses for their own education, treatment and medicines – from 120,000 to 150,000 rubles. Under certain conditions, 13% of these amounts can be returned. The refund will be charged from personal income tax (PIT) withheld at this rate from salaries and other income.
Thus, if now the deduction for the education of one child is limited to 6.5 thousand rubles, then after the adoption of the amendments, the amount will increase to 14.3 thousand. 15.6 thousand to 19.5 thousand rubles.
Putin also set another task – to increase the demand for social tax deductions. In fact, this tool is one of the measures of state support for Russians. According to the President, the Federal Tax Service should provide the service “in a proactive mode, quickly and remotely, not burdensome for citizens.”
Received for consideration by the deputies of the State Duma bill, as mentioned above, will affect the amount of the return of the personal income tax. At the same time, you can also receive fiscal cashback for education, paid medical services and medicines from other officially declared incomes, including the tax on large deposits, which will have to be paid for the first time in 2023. But with the personal income tax of the self-employed (the rate on it is 5%), it will not be possible to issue a deduction. This tax belongs to the special tax regime.
Design difficulties
Currently, there are five types of tax deductions in our country: standard, social, property, professional and investment. They are described in detail in Chapter 23 “Tax on personal income” of the Tax Code of the Russian Federation.
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However, in reality, not all taxpayers use this opportunity. As it turns out, many people are simply not informed about the existing benefits, which is clearly shown by sociological studies.
So, in August 2021, the SuperJob service published survey data on the topic of tax deductions. The results were discouraging: almost a quarter of the respondents admitted that they did not know anything about it, a third – they heard, but do not use deductions. And only 43% of Russians were aware of what a 3NDFL declaration is, how to fill it out correctly, and what documents and checks to attach in order to return part of the money spent.
Citizens aged 35 to 44 showed themselves to be the most “advanced”: 50% of them confirmed that they receive tax deductions. Young people are the least aware of their rights: 44% of respondents who are under 24 years old admitted that they had heard about such an opportunity for the first time.
Another noteworthy detail is that the fiscal cashback from the state is mostly issued by people with high legal incomes (salary of 80 thousand rubles and more). Such counted 48% among the survey participants. At the same time, two-thirds of low-paid workers (salary less than 30,000 rubles) admitted that they had never used the benefit.
The main reason for the low popularity of social and property tax deductions was the complexity of registration. Apparently, not the last role is played by the symbolic amounts of the return of personal income tax from the expenses for the education of children. From the point of view of many Russians, the game (labor costs) is not worth the candle.
Documents and deadlines
In recent years, the Federal Tax Service (FTS) has done a lot to improve the procedure. The application can now be submitted remotely by filling out the taxpayer’s personal account. After the employer’s accounting department provides the tax authorities with data on income for the previous year (usually this happens in the second half of February or by the beginning of March), the 3NDFL declaration is generated automatically. It remains to enter the amount of funds spent and attach scans or photographs of supporting documents – the organization’s license, service agreement, certificates, cash receipts for payment.
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And yet, certain inconveniences, as they were, and remain. For example, supporting documents must be ordered in advance, while not all organizations provide them on demand. Another headache is to collect checks and receipts for payment. It’s good if there are two or three of them, but when there are 8–10, then it’s easy to get confused or simply lose a part.
In principle, it is not clear why copies of a license and a contract for the provision of educational or medical services are needed. The cash receipt itself is a contract between the client and the organization. Nothing prevents assigning a special code to the payment card, confirming both the legal address of the company’s registration, and whether it has a license, and the type of activity.
Waiting for the deduction is also a lengthy process, which demotivates many recipients of social deductions. The standard term for a desk audit at the regional inspectorate of the Federal Tax Service is three months, another month is allotted for the transfer of funds to the bank account specified in the taxpayer’s application.
By the way, it is not a fact that money can be received at all. Now the tax authorities have introduced offsetting into practice: a social or property deduction can only be disposed of after paying the accrued taxes (for an apartment, car, land, etc.). So sometimes the entire amount to be returned is used to pay off the current debt.
In addition, the fiscal authorities are objectively not interested in speeding up the process, since the state budget is deprived of part of the tax revenues. On average, the “losses” of the treasury on deductions amount to about 1.5 trillion rubles. in year. Of this amount, almost 1.4 trillion is accounted for by property deductions made by mortgage borrowers. It is clear why: here the cashback is not at all symbolic. You can return up to 260 thousand rubles spent on the purchase of an apartment, and up to 390 thousand rubles. – from the interest paid under the loan agreement.
Hopes for proactive mode
The transition to a proactive mode of providing social tax deductions, which the president demanded, implies a change in the principles of the work of the Federal Tax Service. The department prepared the ground for this: back in the fall of 2021, proposed draft amendments to the current legislation aimed at simplifying the registration of social deductions. It was decided to do this by analogy with property and investment deductions.
The bill proposes to introduce a unified electronic document confirming the taxpayer’s right to a deduction. Thus, organizations and individual entrepreneurs providing relevant services will be able to submit applications on behalf of clients directly to the tax authorities. Actually, this is what “proactive mode” means. The effect is obvious, according to the Federal Tax Service: due to the introduction of a simplified scheme for granting property and investment tax deductions, the terms of desk audits were reduced by more than two times.
Initially, it was planned to introduce a proactive regime for social deductions from January 1, 2023. However, for almost a year and a half, the deputies of the State Duma did not promote the bill. Now, taking into account the President’s message, the document will be put into motion. Profil’s source in the Federal Tax Service stressed that the department has high hopes for this law.
It can be assumed that a proactive regime for the provision of social tax deductions will be introduced next year. It is logical to do this at the same time as increasing the amount of payments for tuition and medical services. But in any case, Russians will be able to receive the first increased fiscal cashback – in proactive or regular mode – no earlier than 2025.
