Contributed by Vladislav Donchenko, tax practice partner in Lex Alliance law company (Moscow).

Russian tax system provides wide supporting measures for IT sector of Russian economy. Such measures are implemented in the form of federal and regional tax incentives. From 2021, new package of federal tax incentive for IT sector came into force.

Federal Tax Incentives from 2021

Kind of taxes

Reduced tax rates

General tax rates

Corporate income tax

3%

20%

Social contribution payments

(the amount payable is a percentage share of gross salary income (salary before tax) of an employee)

7,6%

30%

VAT

Full exemption if special conditions are met / 20%

20

Russian IT company may benefit from VAT exemption in respect of the following sales:

  • sales of exclusive rights to software and databases included in the unified register of Russian programs and databases;
  • sales of rights to use such programs and databases (including updates to them and additional functionality).

Please note that companies should not apply tax incentives if the transferred rights consist in obtaining the opportunity to distribute advertising information on the Internet and (or) gain access to such information, post advertising offers on the Internet, search for information about potential buyers (sellers) and (or) conclude transactions.

Russian IT company, which would like to benefit from tax incentives, should meet the following conditions:

  • Receive state accreditation.
  • Perform at least one of the following kinds of business activities:
    • Development and implementation of software and databases (regardless of the type of contract);
    • Adaptation and modification of computer programs, databases;
    • Installation, testing and maintenance of software and databases.
  • The share of income from these types of activities is at least 90% of the total income.
  • Average number of employees is not less than seven people.

Regional tax incentives

Some regions of the Russian Federation provide benefits for IT companies registered on their territory. These benefits are provided only to companies under the simplified taxation system (STS): revenue is not more than 150 million rubles, not more than 100 employees, the share of participation of Russian or foreign companies is not more than 25%).

Note: payers of the simplified tax system are exempt from VAT on all operations (except for imports).

The regional tax rate varies from 1% to 10% percent depending on the region. Income tax at the regional tax rate should be paid instead of federal CIT rate (3%). Examples:

  • Novgorod region: 2% of all income (for residents of business incubators)
  • Tatarstan (Kazan): 1% of all income OR 5% (income - expenses);
  • Tver region: 1.5% of all income OR 5% (income - expenses);
  • Tula region: 3% of all income OR 7% (income - expenses).

 

Where Lex Alliance team can help you:

  • Consulting support related to Russian tax incentive for IT companies;
  • Establishing of a Russian company, receiving state accreditation to receive tax incentives;
  • Registration of software in the Russian in the unified register of Russian programs and databases to receive VAT exemption;
  • Full tax and legal support of your Russian business activity;
Dated: [bxcode.pagedata.date]