“Just as we started to lift our heads a little, the ‘special military operation’ began” Entrepreneur Sergey Nesterov from Novosibirsk (name changed) told in September 2025 that he wants to leave business altogether. For the past 15 years, he has been selling electric fireplaces. Every year his income has declined, because people are not willing to buy fireplaces during a crisis. According to him, the downturn began back when sanctions were imposed over Crimea, and during the pandemic the business practically “froze.” “As soon as we started to lift our heads a little, the ‘special military operation’ began. People were in panic mode and had no interest in spending money on fireplaces,” Sergey told journalists. The entrepreneur believes his business is still alive largely thanks to families of military personnel. They receive large payouts for injuries or the deaths of relatives in Ukraine and can afford to buy electric fireplaces. In Nesterov’s view, consumers who are not connected to the war simply have no money. Sergey started thinking about shutting down production immediately after the war began, when he saw the authorities putting increasing pressure on small businesses. He is outraged that “the state comes up with new laws almost every day just to squeeze money out of business.” In the first half of 2025, Sergey received a letter from the tax service. Inspectors asked him to double-check his reported income. For Nesterov’s business, 2024 was financially difficult, and he filed a tax declaration showing no profit. In the letter, the tax authorities reminded him that if he failed to amend the declaration on time, he would face a fine of 5,000 rubles. Sergey considered the demand unreasonable, saying he already receives plenty of fines as it is. In addition to fines, profits are eaten up by taxes. In 2019, he paid 38,000 rubles a year; by 2025, that amount had risen to 54,000 rubles. From every transaction, he must pay 6%. Any income above 25,000 rubles per month and more than 200,000 rubles per year triggers an additional tax. Nesterov believes that because of the tax burden, many entrepreneurs are going underground: closing their sole proprietorships and continuing to work unofficially. The Conditions Under Which Businesses Survived in 2025 In the Novosibirsk region, 3,300 companies liquidated their legal entities in the first half of 2025. For comparison, 1,700 companies closed in the region over the entirety of 2024. At the time, experts and the media called the Novosibirsk region the national leader in business “mortality.” Financial analyst Aleksandr Razuvaev told NGS that in 2025 it was small and medium-sized businesses that suffered the most in the region, as companies were forced to exit the market due to heavy credit burdens. Evelina Gomonko, an associate professor at the Faculty of Economics at RUDN University, told Izvestia that credit pressure increased after the key interest rate was raised to 21 percent. The hike was intended to help the Central Bank curb inflation. As a result of the high key rate, loans became prohibitively expensive for businesses. In 2025, dozens of restaurants in the Novosibirsk region were put up for sale due to unprofitability. Owners set prices below market value. According to financial analyst Razuvaev, rising logistics and equipment costs were among the main reasons for the closure of small and medium-sized businesses. Another factor contributing to the downturn was an increase in the corporate profit tax, which applies to companies using the general taxation system. As of January 1, 2025, the tax rate rose from 20 percent to 25 percent. In addition to higher taxes and interest rates, companies faced falling demand. According to the Russian Union of Industrialists and Entrepreneurs (RSPP), average demand dropped by 40 percent in the first quarter of 2025. The number of legal entities in Russia decreased by 67,300 between January 1 and November 1, 2025, according to calculations by 7x7 based on data from the Unified State Register of Legal Entities (EGRUL). Among all the wartime years, only 2022 was worse, when the number of legal entities fell by 76,700 due to the start of the war in Ukraine and its economic consequences. By contrast, in 2023 and 2024 the number of registered legal entities in the EGRUL grew: by 19,200 in 2023 and by 15,700 in 2024. Rosstat also confirmed the decline in the number of legal entities registered in the EGRUL. In the first half of 2025, organizations were closing one and a half times more often than they were opening. According to the agency, the sectors hit hardest were trade, construction, and manufacturing. Not all financial experts believe that the reduction in the number of registered organizations was driven solely by economic factors. According to Daniil Gonenko, an associate professor at the Department of Economics and Finance of the Public Sector at the Presidential Academy, most companies were forcibly removed from the EGRUL by the Federal Tax Service. This happened because the legal entities had provided inaccurate information to the tax authorities. Another 18 percent of the companies removed from the register were inactive, having failed to submit reports to the tax service or conduct any financial transactions. What Awaits Entrepreneurs in 2026 Elona is a gemologist and entrepreneur from St. Petersburg. She runs her own natural stone shop. One of her videos became among the most popular clips about the 2026 tax reform, gaining 1.4 million views on Instagram*. In the video, Elona is crying as she says she will not be able to pay taxes under the new system: “These tax amounts are just… I don’t know where they come from. I don’t understand why people in the government think this is legitimate. That we can somehow earn this money back. We can’t.” The reform primarily предусматривает cutting benefits for small and medium-sized businesses and raising the value-added tax. Value-added tax (VAT) is an indirect tax that entrepreneurs pay on goods they sell. Increasing VAT from 20 percent to 22 percent will raise the tax burden. The hike will hit companies with lower turnover the hardest. Small and medium-sized businesses usually pay taxes under special regimes: the simplified taxation system (STS) and the patent taxation system (PTS). The STS replaces several taxes for individual entrepreneurs at once: personal income tax, VAT, and property tax. Under this system, entrepreneurs pay the Federal Tax Service either 6 percent of their revenue or 15 percent of the difference between revenue and expenses. Companies could use the STS if their annual revenue did not exceed 450 million rubles, their average staff size was under 130 employees, and the residual value of their fixed assets did not exceed 200 million rubles. The PTS is a special regime under which individual entrepreneurs pay a flat 6 percent tax. It was available to entrepreneurs with annual revenue under 60 million rubles and no more than 15 employees. Starting in 2026, entrepreneurs using the STS and PTS will be required to pay VAT if their annual revenue exceeds 20 million rubles. In 2027, the threshold will drop to 15 million rubles, and in 2028 to 10 million rubles. In the comments under Elona’s post, Nina Kulikova from Krasnoyarsk wrote that she and her husband run a freight transportation business. They have no employees: her husband handles the transport itself, while she deals with paperwork. According to her, fuel, spare parts, and maintenance costs for trucks are constantly rising. At the same time, freight rates are falling due to intense competition in the industry. As a result, they are forced to accept lower prices set by clients for deliveries. Nina said she was outraged by the abolition of the patent taxation system in 2026. “If they cancel the patents, we’ll be left with absolutely nothing. We’re not asking for help. We just want them to stop interfering with our ability to survive,” Nina wrote. According to a survey conducted by Opora Russia among 11,000 entrepreneurs in October 2025, more than 70 percent planned to raise prices for their goods and services. The same study found that over 30 percent of respondents were ready to close their businesses once the tax reform comes into force. Another 24.9 percent were considering layoffs, while 27.1 percent planned to raise prices. According to Andrey Belik, a partner at the legal firm SB Tax Team, price increases will reduce demand. He believes that not all entrepreneurs will be able to balance profitability with consumers’ purchasing power. As a result, many companies will shut down, either because they will be operating at a loss or because they will lose their customers. | 
