Bankruptcies of sole proprietors are becoming more common in Russia – Putin's taxes are to blame

Explosion of business bankruptcies in Russia / Collage by Channel 24, photo by Getty Images

Russia has seen a significant increase in the number of bankruptcies of individual entrepreneurs (IPs) or sole proprietors. The figures have risen sharply against the backdrop of changes in the tax burden and the general deterioration of the economic situation.

Why is business in Russia going bankrupt?

In the first quarter of 2026, 8,146 cases of bankruptcy of individual entrepreneurs (as sole proprietors in Ukraine) were recorded. This is 29% more than in the same period last year, writes The Moscow Times.

These are entrepreneurs with debts of over 1 million rubles who initiate the procedure for recognizing financial insolvency through the court. This was the dynamics in previous years:

• Individual entrepreneur bankruptcies in the first quarter of 2026: 8,146
• Q1 2025: 3134
• Q1 2024: the figure is several times lower
• Q1 2023: 2492

Thus, compared to 2024, the number of cases increased by 2.6 times, and compared to 2023, by 3.3 times.

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In total, in the first three months of 2026, 137,466 Russians received bankruptcy status through the court , which means an increase of 13.7% year-on-year.

What reasons do experts give?

The increase in bankruptcies is attributed to several factors.

The increase in the number of bankruptcies of individual entrepreneurs is a natural result of the increase in the tax burden, the fall in consumer demand and the high key rate,
– says Maksym Kachnov, head of the bankruptcy practice of the Grishin, Pavlova and Partners legal group.

Managing partner of Pugacheva & Partners, Tetyana Pugacheva, notes that entrepreneurs often initiate the procedure themselves. She adds that restructuring is rarely used, and courts usually proceed to sell the property.

In Russia, in principle, the bankruptcy procedure has always had a pronounced “funeral” character. Therefore, cases of successful restructuring are extremely rare, because this requires an economically sound and feasible plan for overcoming the crisis, which, given the current economic realities, is practically unrealizable,
– said Serhiy Uchitel, partner of the Pen & Paper bar association.

Thus, the Russian small business market is demonstrating growing financial pressure: bankruptcies of individual entrepreneurs and citizens are accelerating, and tools for business recovery remain limited.

What other problems does Russian business have?

• The financial performance of Russian companies deteriorated sharply at the beginning of this year, with a combined net profit of 3.4 trillion rubles, down 33.1% from the previous year. Income from small businesses and the self-employed fell to about $7.5 billion in the first quarter of this year.

• Russia's Federal Tax Service has begun freezing intangible business assets, such as patents and trademarks, to secure debt collection. The tax service's new measures particularly affect IT companies and businesses that own significant intellectual assets.

• The Russian authorities have stepped up the fight against shadow employment and “envelope” salaries, with 219,000 workers receiving official status. Companies can be subject to inspections if they have salaries below the minimum level, many self-employed people, or an average salary below the average level in the region.