Russia Drops Corporate Income Tax Rate For Software Developers To 3%

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Russian IT companies, and especially software developers can now enjoy tax relief measure which came into force on Friday, January 1. These lower both the corporate income tax rates for such companies and insurance premiums for the industry.

Income tax drops to 3% from 20% while IT industry insurance premiums drop from 14% to 7.6%. The reduced rates are only applicable to software developers and does not apply in respect of distributors and companies, whose revenue from production of respective products will be less than 90% in the total revenue structure. IT companies have to obtain state accreditation from the Russian Ministry of Digital Development, Communications and Mass Media to apply for the tax relief.

Since plans to introduce the tax relief for Russia’s IT sector were announced the demand of such companies for accreditation by the Ministry of Digital Development, Communications and Mass Media has soared. For example, the number of state accreditation applications climbed by a multiple of seven as 646 applications were received by the ministry from June 24 to August 10, while 94 applications had been received in the same period before June 23.

Overall, the policies are fine for developers, however, the IT industry does not consist solely of developers, with distributors, system integrators, internet companies and many others all wanting similar support policies.

Russian Deputy Prime Minister Dmitry Chernyshenko has also said that a second package of measures to support the IT industry is under consideration by the government. It may particularly include policies to support large internet companies, developers of games, social media and streaming service providers.

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Russia Briefing is written by Dezan Shira & Associates. The firm has 28 offices throughout Eurasia, including China, Russia, India, and the ASEAN nations, assisting foreign investors into the Eurasian region. Please contact Maria Kotova at russia@dezshira.com for Russian investment advisory or assistance with market intelligence, legal, tax and compliance issues throughout Asia.

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