Russia VAT rate may rise to 22% in 2026

Russia’s Finance Ministry has proposed raising the value‑added tax (VAT) rate to 22% in 2026 to generate additional revenue for defense and social spending. The draft budget, approved by the cabinet, would increase the standard VAT from 20% to 22%, producing roughly 1 trillion rubles ($11.9 billion) in extra funds. These resources are earmarked for equipping the armed forces, paying military salaries, supporting families and modernising defence enterprises. The federal budget plan for 2026‑2028 retains a reduced 10% VAT rate for socially important goods.

Other tax measures in the budget include a 5% levy on bets accepted by bookmakers and the continued taxation of corporate profits. The ministry describes the draft as “balanced and sustainable.” The proposal comes as Russia’s forecast budget deficit has widened; in April the ministry raised its 2025 deficit estimate from 0.5% to 1.7% of GDP. VAT already accounts for about 37% of federal revenues in 2024, underscoring its importance as a funding source.

According to the draft, federal revenues in 2026 are projected at 40.3 trillion rubles ($481 billion), with non‑oil and gas income expected to represent nearly 78% of the total. Spending is forecast at 44.1 trillion rubles ($526 billion). Prime Minister Mikhail Mishustin has called the planned deficit “acceptable.” The government anticipates real wages to rise by around 10% and real incomes by more than 9% over the three‑year period.

Since the escalation of the Ukraine conflict in 2022, Russia has faced sweeping Western sanctions, yet the economy has remained resilient, recording GDP growth of 4.1% in 2023 and 4.3% in 2024. Growth is expected to slow to 2.5% this year, while the central bank projects a more cautious range of 1%‑2%. The VAT increase is part of the government’s effort to ensure a stable budget and support key sectors, including defence and social welfare. As the Russian economy continues to navigate sanctions, the proposed tax hike aims to provide a significant boost to state revenues, and its implementation will be closely watched for its impact on the country’s economic outlook.