In a significant administrative reform aimed at reducing regulatory burdens on businesses, Russia’s State Duma has approved a law eliminating the annual confirmation requirement for OKVED codes (All-Russian Classifier of Types of Economic Activities). The bill, adopted in its second reading on January 23, 2024, introduces amendments to several federal laws and is expected to take effect on September 1, 2024.
This update promises time and cost savings for entrepreneurs and legal entities across the country, while still ensuring transparency and accountability in reporting major changes in business activity.
What Are OKVED Codes?
OKVED (Общероссийский классификатор видов экономической деятельности) codes are standardized classifications of business activity in Russia. Every registered legal entity and individual entrepreneur is required to select and report OKVED codes upon company formation or registration.
These codes are crucial because they:
- Define the nature of business operations for statistical and regulatory purposes
- Determine eligibility for tax rates, benefits, and social contributions
- Influence a company’s reporting requirements to government authorities
The Current System: Annual OKVED Confirmation
Under the existing system, businesses must annually confirm their registered OKVED codes with the Pension and Social Insurance Fund. This requirement exists to ensure the accuracy of data used to calculate insurance premiums and categorize businesses correctly.
However, this process has been criticized for:
- Being administratively burdensome, especially for SMEs
- Resulting in unnecessary paperwork with minimal updates year to year
- Creating compliance risks for those unaware of minor procedural violations
Key Changes in the New Law
The new legislation introduces several simplifications:
- The annual OKVED confirmation obligation will be officially cancelled starting September 1, 2024.
- Businesses will no longer need to submit annual confirmation reports to the Social Fund.
However, the law includes two key conditions requiring notification to the Federal Tax Service (FTS):
- If there is a change in the primary economic activity (main OKVED code)
- If the share of a secondary OKVED code increases or decreases by more than 20%
These conditions ensure that the tax authorities are informed of significant shifts in business operations, without forcing businesses to report unchanged data annually.
Benefits of the New Rules
This simplification offers a number of clear advantages for entrepreneurs:
- Reduces bureaucracy, especially for companies whose activities remain stable year over year
- Saves time and operational resources on administrative tasks
- Minimizes compliance risks related to missed deadlines or incorrect filings
- Allows businesses to focus more on growth and innovation rather than reporting procedures
Exceptions and Obligations Under the New Law
Although the annual confirmation is no longer required, businesses must remain vigilant in these cases:
- When the main business activity (primary OKVED) changes
- When substantial changes (more than 20%) occur in the volume or share of one of the secondary OKVED codes
Failure to notify the FTS in these cases may result in penalties or administrative consequences, so it’s essential to monitor business activities and maintain accurate records.
Who Is Affected by the Changes?
This reform applies to:
- All legal entities (LLCs, JSCs, etc.) registered in Russia
- Individual entrepreneurs (IEs) operating under simplified or general tax regimes
- Startups, SMEs, and established businesses across every industry
It is especially beneficial for small and medium-sized businesses, which often lack the administrative staff to handle frequent compliance filings.
Timeline and Implementation
DateMilestone
January 23, 2024
Bill passed in the second reading by the State Duma
September 1, 2024
Law officially takes effect
Businesses are encouraged to prepare during the interim period to ensure a seamless transition to the new system.
Frequently Asked Questions (FAQs)
What are OKVED codes, and why are they important?
They classify the economic activities of businesses and are used for taxation, insurance, and legal categorization.
Do businesses need to confirm OKVED codes in 2024?
No, as of September 1, 2024, annual confirmation will no longer be required.
What happens if a business fails to notify FTS about a main activity change?
They may face fines or complications in insurance and tax filings.
How can businesses update their OKVED codes?
Through official portals of the Federal Tax Service or by submitting a formal amendment to their company charter.
Are there penalties for outdated OKVED codes?
Yes. Misreporting or failure to update codes may lead to incorrect taxation or disqualification from certain benefits.
Will this affect how taxes are calculated?
Not directly, but incorrect OKVED data can impact tax rates and social contribution calculations.
How Businesses Should Prepare
To ensure compliance and benefit from the simplification:
- Review all registered OKVED codes to confirm their accuracy
- Establish an internal review system for monitoring any shifts in business activity
- Train your staff or accounting team on the new reporting rules
- Consult with a tax or legal advisor if you anticipate changing your main activity or expanding into new business areas
Taking these steps now will help businesses adapt smoothly to the new regulation.
Conclusion
By eliminating the requirement to confirm OKVED codes annually, the Russian government is streamlining its regulatory environment and making life easier for businesses of all sizes. This policy reflects a broader commitment to cutting red tape, enhancing transparency, and fostering a more efficient business climate.
With simple notification rules replacing annual filings, entrepreneurs can now spend less time on compliance and more time on growth.
Have questions about your OKVED codes or how this change impacts your business?
👉 CContact our compliance expertstoday for personalized advice on updating your codes, ensuring proper reporting, and maximizing your benefits.
