Russia Introduces Tax Support Regulations For Domestic IT Development

Russia’s State Duma has adopted laws on tax support for the Russian IT industry. This will help increase the use of Russian software in domestic companies, provide jobs for Russian IT specialists, reduce the departure of Russian specialists abroad, and accelerate the technological development of the Russian economy. Cooperation with China rather than the United States will be practical step taken.

The law was adopted in accordance with the action plan to ensure the development of the economy in the face of sanctions pressure and a roadmap to create additional conditions for the development of the IT industry, said Antonina Levashenko, head of the Russian Center for Competence and Analysis of OECD Standards, RANEPA.

Investment Tax Deductions

For the IT sector, an increased coefficient (1.5) is provided for the cost of purchasing Russian equipment and programs, if they relate to the field of artificial intelligence. When purchasing such programs and equipment, an investment tax deduction is provided – the amount of such expenses can be taken into account when determining the amount of income tax due. At the same time, the document contains tax support measures not only for the IT sector, but also for the oil industry, investment activities and other areas.

From the legal perspective, there are still areas in which businesses can work out qualification as IT in terms of the development of the IT sector. Measures to be included include minimum wages in the IT industry, as well as on compensation for the cost of renting housing.

Russian equipment and programs must be entered into special registers of Russian radio-electronic products and Russian computer programs and databases, and have an appropriate “special feature” that will confirm their belonging to artificial intelligence.

In order to apply an increased coefficient when taking into account depreciation costs for such equipment, it has to classified precisely as artificial intelligence equipment. The measure itself is positive for those companies that already use or acquire Russian equipment and software, but the problem of the lack of specific Russian programs and equipment in the IT industry remains, the development and invention of which such measures do not stimulate and will need to be addressed.

For the development of developments in the field of artificial intelligence (AI), support for Russian development companies can be expanded, for example, by establishing targeted grants for the development of AI systems that perform certain tasks and the commercialization of such developments. Grant support for this is already being implemented as part of the Commercialization-AI program and can be expanded by resuming the acceptance of applications and introducing new areas – now projects in the areas of computer vision, natural language processing, speech recognition and synthesis, intellectual decision support systems and advanced methods of artificial intelligence.

US Technology Politically Unreliable

The Russian government is trying to regulate the development of AI with the help of its traditional tool – tax legislation. China’s AI policy seems to have a strong influence, not to mention that of the United States. U.S. Senator Tom Cotton spoke two years ago, suggesting that it is fine to allow Chinese students study languages and federal texts in the United States, but it is undesirable to teach them quantum computers and AI. In other words, politicians understand the importance of AI, the importance of developing this area within their own country and the undesirability of sharing achievements with strangers.

Russia therefore intends to take measures to promote the implementation of its own developments in the field of AI at enterprises, and not ready-made, American solutions that can be turned off at any time – an issue that may suppress other countries attractiveness to adopting US made systems.

The tax changes look right and should lead in the right direction, but only practice can show whether they are sufficient to achieve an acceleration in the development of the industry, however to accelerate the development of IT, stronger measures are needed and, most importantly, adequate ways to measure the result. First of all, this will affect the decisions of enterprises to implement domestic developments in the field of AI and domestic DBMS (database management systems). In addition, it will encourage investors to invest in these areas. The demand for specialists will grow significantly, especially since there are few specialists specifically in Russian developments.

There is a strong trend towards supporting the IT industry in Russia, being so obvious that many companies register as IT businesses in order to receive tax benefits or benefits for employees. That loophole may soon be closed however, as companies will soon need to provide suitable OKVED, but also really engage in this activity, and sometimes also be included in certain lists of companies.

It remains to be seen whether the government will introduce similar benefits for other industries such as machine tool building, machine building and aircraft building.

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