Tuesday, August 25, 2009

Some things that don't translate over

For me, starting the business in Russia was an education in that many things I have taken from granted from my businesses in the US, are completely non-applicable in Russia.

Take for example expenses.

In the US, the assumption made is that most any reasonably relevant expense can be attributed to your business.

In Russia, the opposite is true. Any given expense has a bureaucratic procedure which must be followed in order for it to qualify.

Even in the case where all the hoops can be jumped through, many of those whom I do business with are unwilling to take on the liability of a legally claimed expense as this then impinges on their own taxes. Many actual expenses directly relevant to my business cannot be expensed as the provider will either charge a lot more for their service or refuse to provide the business receipt altogether.

Thus one huge lesson learned is that the seemingly easy choice of taxation:

1) 6% of revenues
2) 15% of profit

the choice really needs to be the revenue one. Because the inability to actually claim hardly any expenses makes 2) not worthwhile.

Note this applies for small businesses - I cannot comment on the larger/large business systems.

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