Russia’s Simple Small Business Tax System

Russia’s Simple Small Business Tax System

I remember a few years back, an American businessman by the name of Herman Cain ran for president on the platform of introducing a flat tax.

To most Republicans the idea of a flat tax is a pretty progressive idea.  To most Democrats it’s very backwards.  So, if you are a Republican, you might find Russia’s tax law to be an object of envy.  If you are a Democrat, I would remind you that socialized health care has been here since sometime around Woodrow Wilson’s term in the Oval Office.

So, here it goes:  If you open a small business in Russia (sole proprietorship or LLC), you can apply for the simplified tax rate.  I have never heard of anyone being denied such application.  And here are the numbers:  6%.  That’s the flat rate you pay on any income.  The only other “hidden cost” is a payment to the pension fund, which for simplicity’s sake, we will say is about 1% of total income.

If you are a sole proprietorship, the rest of the money (roughly 93%) is then just yours.  You can do whatever you want with it.  I believe this is a fantastic set up, particularly for solopreneurs who are offering a simple service and have few expenses.

However, if your business has expenses, you can apply for a tax rate of 15% of total profit.  This is a situation where you would then go the American route of hiring a good accountant to help you find expenses in order to avoid taxes.

And if you are not interested in registering a business, your personal income is taxed at a flat rate of 13%.

Now to be fair, things change drastically if you take on a payroll or your business grows beyond 60 million rubles per year (slightly north of $1 million).  But my view is that you can cross that bridge when you come to it.

This blog post is not to provide any tax advice.  I’m simply arguing that the Russian government has made it easy to open a small business, and I would like to give them credit for that.  Whenever I need real advice for my business, I go to the Business Development Agency (BDA).  They charge very reasonable rates and are always happy to answer my questions and offer options of real solutions.  This is not a paid advertisement!  I am just letting you know who I trust, in the event that Russia’s siren song of simplified tax rates would encourage you to start your own business here.  Because you would probably then want professional assistance and not just a blog post.

It’s a little humorous how, as an American, I spend time trying to convince my Russian friends how fantastic their tax system is.  And it’s a little baffling to me how unimpressed they are.

Well, I guess I should say I love the simplified tax system for small business.  But particularly as I work in the area of real estate, I would submit that the tax on sales of real estate could use some improvement.  If you are a non-resident, it is a flat rate of 30% of the total sale, regardless of whether the property increased or decreased in value.  Let that sink in for a moment.

Because I really want folks to be encouraged to buy real estate in Russia.

So, start a business in Russia.  And before you buy any property, read the small print.

Because perhaps in comparison to other countries around the world, Russia should not have the reputation as being the bureaucratic one.  It’s quite simple, really.

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How To Sell Real Estate In Russia

How To Sell Real Estate In Russia

Ok, I’m learning.  But it looks like I’m on to something.

The RBC web-site states that more than 4,000 real estate agencies were closed in Russia over the past year.

There are good reasons for that.  Many parts of real estate service are becoming more automated, making some realtors go the way of the farmer during the Industrial Revolution.  And construction seems to be continuing at a fervent pace, even as average income seems to be holding steady at best.

I somehow became excited about the idea of so many agencies closing.  Not that I wish my competition any ill will (really!), but the idea of a real challenge somehow energizes me more than any low-hanging fruit that just anyone could pick.

This humble blogger’s real estate agency, Expat Flat, has focused mainly on providing rental options for those foreigners who are moving to Moscow for work for a couple of years.  And as we continue this service, we have also begun to think about sales.

You see, my prediction is that as real estate prices fall, property investment will become more attractive to international investors.

But how to attract international investors?  Well, we decided to do what no one else is doing, and start a Russian real estate video blog, in English, entitled “How Much Does It Cost?”

There are quite a few really good Russian real estate video blogs… in Russian.  But as far as I know, this is the first Russian real estate video blog in English.  We aim to make Russian real estate available to the world.

Here is the first episode, highlighting some offices right across the street from the Kremlin:

After putting the video out on YouTube and also the Facebook page, it was cool to get strong positive feedback both from Russia and a few places around the world.

We already have a few more spots lined up for future episodes that we are beyond excited about, but for those of you back home, I have a question.  What kinds of places would you be interested in having highlighted in such a video in the future?  Please comment and let me know.

We would love to show you around Russia, and maybe you will begin to not just enjoy the entertainment value of such a video, but also begin to see the opportunity for investment.

How To Sing Happy Birthday In Russian

How To Sing Happy Birthday In Russian

Ok, there are actually two ways to sing Happy Birthday in Russian.

The first is something close to what you would expect:

“С днём рождения тебя” (S dnyom rozhdeniya tebya)

Literally translated, this means “With the birthday, to you” and it is to be sung to the tune of the English hit “Happy Birthday”.  Here’s how it goes:

S dnyom rozhdeniya tebya! (With the birthday to you!)

S dnyom rozhdeniya tebya! (With the birthday to you!)

S dnyom rozhdeniya! S dnyom rozhdeniya! (no need to insert the name you Western self-centered indvidualist!)

S dnyom rozhdeniya tebya! (With the birthday to you!)

I honestly have no idea why they say “With the Birthday” or “With The New Year”.  I am no etymologist, to be sure.

The SECOND way to sing Happy Birthday is much more Russian.  Also, the name of the song is something like “I Play on the Accordion“.  Here are the words:

May people run clumsily through puddles
May the water flow like a river down the street,
And may people passing by not understand why
I am so happy on this sad day.
 
And I play the accordion for all to see
It’s a pity that (my) birthday
Is only once a year
 
Suddenly a magician arrives in a blue helicopter
A shows (us) movies for free.
He wishes a happy birthday
And he’s likely to give me 500 ice-creams (as a present)
 
And I play the accordion for all to see
It’s a pity that (my) birthday
Is only once a year
It’s a pity that (my) birthday
Is only once a year

Fortunately, the Happy Birthday song that includes the word “pity” is sung to an upbeat melody:

To add further confusion to a situation in which a nation refers to this as a “sad day” and mentions that we should be mournful since we can not celebrate more than once annually, my understanding is that this song was originally performed by the critically acclaimed Crocodile Gyena.  Here you go:

I sort of feel this explains why Russians don’t smile.

Of course I’m joking.  Russians sometimes do smile. 

And lest I leave you worrying about a magician arriving in a blue helicopter, I can say that there is a third more modern and happily upbeat option.  Here it goes, together with random Russian cartoon footage.  You are welcome.  Now choose which one to sing, the next time you are invited to a Russian birthday party.

American Cafeteria Closed For Lunch

American Cafeteria Closed For Lunch

I walked up to the cafeteria in Perm, Russia.  It was the mid-nineties and Russia was bursting with optimism for the future.  I was bursting with desire for lunch.  Unfortunately, the cafeteria in Perm was closed… for lunch.

That’s when I learned some important words of wisdom: “You can not understand Russia with your mind…”  There are different endings to that proverb, such as “you just need to love her” or “you just need to observe”.  Both of those endings are pretty good, I think.

And so, now after more than 18 years of living in Russia, there are many things I don’t understand, but I still love and observe.

For example, it’s still difficult for me to understand how the short version of the name “Aleksandr” in Russian can be “Shurik”.  Also, the short name for Evdokiya can be “Dusya”, but I digress.  Because in English, we can call Margaret “Peggy”.  So, get over it.

Also, I don’t always understand my wife, but that doesn’t mean I can’t love, observe, and still build relationship with her.  But that’s a different story… right?

I was asked to go on a political talk show on Russia’s NTV channel.  I had received some invitations before and never thought I would go on a political talk show.  Some people think that NTV is a government controlled propaganda channel.  Some people frown upon those people who go on political talk shows in Russia.  Other folks have their views of Fox or CNN.  But I went anyway.

We should look for any opportunity for dialog, even if it doesn’t fit our personal concept of an ideal conversational format.

The political talk show seemed surprised when I shared my view that America has made many mistakes in foreign affairs.  The audience also seemed to like my point that sanctions are pointless and will not change Russia’s politics.

I then explained that Russia is speaking in a language that the American people don’t understand.

A security guard in Russia asked for my paperwork so that he could fill out the forms for my car to be parked in his jurisdiction.  At the time, I didn’t have my Russian license, so I offered to help him fill out his papers.  He said that this would not be necessary since he was studying English to which I could only reply, “Great!”  There was then a long pause, and he asked, so your name is “Driver’s License”?

It’s hard to understand each other when we don’t speak the same language.  Although perhaps the misunderstanding is on a level deeper than Russian or English.

This is what a Russian political talk show looks like:

By the way, America, you also are not speaking to Russia in a language that it understands.  But I haven’t been invited to any American talk shows to explain that important point.  In this instance, my task was to explain how the Russian people could speak to the American people in a way that would be understood.

“Why not form a group of volunteers and show the goodness and might of Russia by sending them to Houston to assist with hurricane relief?”

That’s what I suggested on the Russian political talk show.  I must have explained myself poorly because I think I was completely misunderstood.  They thought I was talking about a government relief program.  I was thinking of Russian businessmen supporting a project, because I think Russian businessmen are interested in improved relations with America.  I was picturing personal initiative not a government committee.

But the fact that I was misunderstood shows that we don’t understand each other.  Will we ever understand each other?  I honestly don’t know.  I was raised, for example, to never expect money from the government, so it didn’t cross my mind to explain that my idea was not a government project.

 

My dear Russian friends, you live in a great country.  Your cultural history and education are beyond anything that I have seen or experienced in America.  You don’t need to have a complex about your nation.

And I have seen many examples of the might of Russia over the past 18 years.  I remember in 1999, I was in a remote village in the Urals and hungry.  There was no store in the small village.  A local village woman pulled a large sack of potatoes out of her underground winter storage.  These weren’t potatoes that she had bought, of course.  These were potatoes that she had grown for her family during the short summer months.  She handed me the sack.  When I started to hand her some rubles she shook her head and said, “Have you lost your mind?”  That’s power, and that’s Russia.

It seems I’m asked almost every day why I chose to live in Russia.  Usually, I just say, “America has smooth roads and everybody is always smiling.  Totally boring”.

Dear Russian Patriots, I would remind you that you live in Russia because you were born here.  I live here because I love it here.

If I had a dollar for every time I was asked if my wife is Russian I could move from Mytischi to Rublevka (if you know what I mean).  No she is not.  The next question (or comment) is always, “Well then, you must be a spy?”

I then say, “Is Russia a great nation?” The answer is always, “Yes.”  To which I reply, “…well if you believe Russia is a great nation, why don’t you believe that someone would want to come and live here?”

Speaking of drivers’ licenses, I have no idea why the American driving test is so easy and the Russian test is so difficult.  For example, in Russia, you need to know what is the correct color of a rear anti-fog light in a motorcycle (and in what conditions you may turn it on).  And then you get a driver’s license that gives you the right to drive a car but not a motorcycle.  These are some of the things that I do not understand.

The sanctions aren’t working, but the USA seems to be following the principle “of doing the same thing and expecting a different result”.

To which I can only suggest that my Russian friends remember that “You can’t understand America with your mind… just love and observe”.  Maybe the American cafeteria is closed for lunch.  Just shrug your shoulders, smile, and don’t take it personally.  And who knows, maybe you will get a new idea, like sending a group of volunteers to America.

Because like with my wife, you don’t have to always understand in order to find new ways to build relations.

Did Russia Meddle With US Elections?

Did Russia Meddle With US Elections?

Probably I shouldn’t blog about politics ever.  And usually I can hold my peace.  Because I believe 99% of it is hype to fill up the time between commercials on the 24/7 news channels.

But I have been thinking about this blog post for a few months now, so here goes.

Did Russia meddle with the US elections?  Here is my answer: I have no idea.  And neither do you.

But perhaps a better question would be “Would Russia meddle with the US elections if it had the chance?”.  Um, well, if given the chance, I wouldn’t put it past them.

And I am quick to add, I wouldn’t put it past the United States of America to meddle with nearly every significant foreign election in recent memory.

The second question would be “what is Russia trying to communicate to America?”.  I will take a stab at that in a moment.

I was convinced Hillary would win.  I didn’t think for a second that Mr. Trump had a chance.  Shows how well I understand politics.  Even with my misguided views, I was invited to do an interview on the eve of the election with Russia’s Rossiya-24 channel.

After the interview, I was heading home on the commuter train when I received a mysterious invitation to “An event at an undisclosed location.  The location would be announced only immediately before the event was to begin.”  I sort of thought that the “event” might include me digging a shallow hole in the woods.  But my wife said, “That’s cool.  You should totally go”.  So, I did.

It’s sort of difficult to describe what the event was.  I guess it was like a pro-Trump/pro-Kremlin election watch party.  The speeches seemed to be very pro-Trump and anti-American government.  But the main idea was a simple belief that Trump was the one who could improve Russia-US relations.  I was asked if I would like to give a speech.  I explained that, uh, I felt that probably nobody there wanted to hear my opinion on Trump. Although I was no supporter of Hillary either.

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This painting was one of the main features of the Trump watch party

It was an interesting couple of weeks around the elections.  It seemed the Russian people were euphoric about Obama’s exit and were convinced that Trump would improve the relations between our nations.

During that time, I talked to a lot of folks.  And I guess I could say this is a list of things, in no particular order, the Russian people would want America to know (now that we have your attention).

Not saying that I agree with all of this, but I think it is helpful for Americans to understand.  Because I have heard many of these points not just from Russians, but from folks I’ve met from many nations around the world.:

  1. Russians want better relations with the United States.  It also seems they want it on their terms, just as America (1st) wants these improved relations on its terms.  Not sure how that is supposed to work, but I believe there is a real desire for improvement of relations.  Even at the awkward pro-Kremlin watch party, I sensed a sincere desire for improved relations, and a real concern for America.
  2. It’s strange for you to be indignant about any meddling in your elections.  No one outside of the United States believes that the US isn’t getting their fingers in all of the pies.
  3. 800 Foreign Military Bases is a slight overdo.  Maybe we could tone it down just a bit… and save some cash!
  4. The price of oil being attached to the dollar is unfair.  That’s a really long conversation.  Google it, if you’re interested to learn more.
  5. America’s democracy isn’t really a democracy.  Elections are controlled by corporations, etc.

And maybe this is the moment when I can mention perhaps the one thing I don’t love about Russia.  That is, I don’t love it when Russia blames America for things.  I don’t love it, because I believe that Russia is a powerful nation, so the actions of other nations shouldn’t affect it.  And in years past when my Russian friends would ask me “what Americans think about Russia”, I would shrug my shoulders and say something like “usually they don’t”.

But now, America, a superpower, and maybe we could say the superpower, is doing the same thing- blaming Russia for its own problems.  Maybe we could pause for a moment and look at ourselves, instead of Russia.  And maybe, just maybe, we can stop pointing fingers at Russians, Republicans, and Democrats.

Because although we are all sinners, if we make a little effort, we might just be able to begin working together again.

The One Word You Must Know To Achieve Productivity In Russia

Who knew that achieving productivity in Russia could be as simple as a one word vocabulary?

I’ve noticed from time to time that America and Russia have different understandings of time and planning.  This actually does not mean that the people of one nation are more productive than the other.  Rather, the triggers for productivity are different.

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If you don’t know the triggers, you might find yourself becoming slightly frustrated from time to time.  For example, if you are a foreigner in Russia and have met with your Russian co-workers in a planning meeting, you might be surprised that the result of the planning meeting is everyone urgently drinking tea, leaving the office to get some kind of urgent spravka of a personal nature, and in general, urgently engaging in every activity under the sun, except applying the action points that were just discussed in the meeting.

At this moment, you might feel lost and sad, and wonder at which point in your life journey, you took the misstep that left you destined for a meaningless existence in The Motherland.

You might then bitterly gaze out your office window at the overcast skies and watch the sleet pouring down on the slushy streets… and then you notice that Russians are working.  And if you watch American news, you already know that Russians are a tireless bunch, manufacturing weapons, hacking foreign political parties, pumping oil out of the ground, trolling heads of state, and all of this in spite of the weather.

And back in your native Idaho or Iowa, you know that people are productive too.  And they are productive after careful planning sessions.  But here you are, all alone, in the middle of Russia, feeling like you must now personally fulfill all of the activities described in said meeting.  Why aren’t your meetings in Russia translating into practical results?

It is questionable whether any meeting is necessary anywhere in the world.  However, long planning meetings in Russia are probably less useful than their American counterparts, and are a complete waste of time if you don’t know the one word you must know in order to achieve productivity in Russia.

Here is a list of the One Word You Must Know In Order To Achieve Productivity In Russia:

  1. Срочно.  Since this is a hastily written blog post on a Saturday morning, I don’t have time to translate this word into English for you.  But urgently learn the trigger of bustling activity and manufacturing in Russia. That trigger word is срочно. Because unless you urgently learn the word срочно and it’s meaning in English, you will be left perpetually and gloomily staring out your office window.  All alone and feeling a sense of urgency.

There is an old Chinese saying that goes something like this:  “Nothing is done in the Soviet Union without the word срочно”.

But here is the rookie mistake that most Foreign People In Russia make when employing the word срочно.  These silly Russian expats think that you should have a meeting, make a plan, and then wait for everything to become hopelessly urgent before waving this magical wand of Russian manufacturing.  Nay, I say!

Instead, you must begin the whole affair by explaining in the most gravest of terms that this work is срочно.  Become emotional about the deadline.  Then watch in amazement as a vigorous flurry of labor commences, unlike anything ever witnessed in the Western world. I’m not kidding when I say that you might even notice that your co-workers will begin to get their friends to help in the task at hand, often absolutely free of charge.

Because Russians work hard, they just generally see that they should apply themselves to what is urgent and brings results… not to what is endlessly discussed.

Front Street in Cuyahoga Falls

Ok, folks.  This blog post has nothing to do with Russia.  It has to do with America.  More specifically, it is related to my hometown of Cuyahoga Falls, Ohio.  I’ve been able to visit Cuyahoga Falls a few times over the past year, and the city has a plan that is blowing my mind.  [Beginnning rant now]

This is a picture of my dad, taking a stroll on Front Street, circa 1943:

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You see, that’s what people did in the 1940’s on this pedestrian street, they employed the decidedly unique human trait of bipedalism and went outside houses without cars.

Fast-forward to 2017:  The city of Cuyahoga Falls is planning to spend $10 million to transform Front Street from a pedestrian walkway into a two lane road.  This is in an effort to boost local business due to the decline of foot traffic, and also, presumably, because Cuyahoga Falls doesn’t have enough two lane roads.

Probably, I should just go to bed now instead of writing this, but I really have to get this off my chest.

A few weeks ago while in Ohio, I decided to go down to Front Street myself to do some in-depth investigation.  I immediately discovered the problem.  There aren’t enough parking spaces on the parking deck:

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The next issue that can only be overcome by tearing out the pedestrian walkway, is the distance from the parking deck to the nearby shops as is illustrated in this snapshot taken from the parking deck overlooking the bustling market district:

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I feel like I’m revealing an issue of national security when I write on the internet that the distance in the above picture is too far for the average American to walk.

Joking aside, the distance from the parking deck to that store (used to be a uniform supply, I think) is LESS than the distance from the average parking space at Wal-Mart to the entry  greeter.

But you know, sometimes on a windy winter day, I think to myself, “I might just drive down to Front Street and fill my work uniform order right now.  That would sure just hit the spot.”

I mean, call me crazy, but perhaps the issue isn’t the road. It’s people who think 30 yards is too far to walk AND the fact that there are pants that don’t fit right instead of fancy over-priced cupcakes and hot chocolate at the end of this story?

Fortunately, there is a theater on Front Street in Cuyahoga Falls:

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Unfortunately, it didn’t seem there would be anything showing.  Hello, Cuyahoga Falls!  I mean, I understand many of us Fallsites would prefer not to spend our Saturday evening watching a chamber orchestra, or even listening to one.  But don’t we at least have a comedian or two who could put on a show and save the walkway from the mayor’s jackhammers?

Now, I know what those of you who are not from Cuyahoga Falls are thinking.  You’re thinking I’m not telling you the whole story.  You would be right.  I forgot to mention there is a beautiful river next to the street with a boardwalk (for crying out loud, overlooking a series of waterfalls).  I also failed to mention that the parking deck is absolutely free of charge.  Oh yes, there is also a nice fountain.  And there is Metropolis Popcorn and the Whistle Stop.  I mean, I love the Whistle Stop.  I went there like five times when I was a kid and bought some model rockets.  I think it’s super cool that the Whistle Stop is still there.  But it’s not every Saturday afternoon that I need a model rocket, so the Whistle Stop isn’t going to draw my business on most weekends.

As for Metropolis Popcorn, I was too depressed to walk inside.  Probably nice folks.  But I’ve never been sitting around at the house and then thought to myself, “I’m going to go for a drive downtown to eat some popcorn”.  Usually, I’m thinking the opposite: “I’m going to eat some popcorn so that I don’t have to go outside”.  Also, I saw the sign, but couldn’t see the Metropolis.

I think the buildings down on Front Street are pretty cool looking:IMG_0769.JPG

But more importantly, in almost everywhere in the world, cities are tearing out their roads and putting in pedestrian streets.  It’s more fun, it’s healthier.

Yes, Front Street has its issues, but it’s not because of a 50 yard walk from a parking spot.  And these are issues that won’t be remedied by a two-lane road.

I live in Moscow which has a lively city center full of walking streets.  I enjoy the sounds and the people on those walking streets, even in the winter.  It’s a part of the culture both here and in much of the world, and it is a culture that many cities are working to attain.

So, Mayor Walters, I hear you’ve been paying some shiny consultants good money to tell you the difference between a pedestrian walkway and a two lane road.  But I invite you to come on over to Moscow, and I will be happy to give my advice, free of charge.  Please don’t turn Front Street into a motorway.  You can save a lot of money for the city and boost business.  You just need to make bipedalism great again.