Reiman: Taxes for IT-Exporters to Drop Several Times
Leonid Reiman, the Minister of Communications, informs the State Duma is working out a draft law together with the Ministry to introduce special tax regulations for IT-companies engaged in export.
Oct 31, 2007
Such firms will be able to pay out only 6% of the single turnover tax instead of the existing tax load which is several times higher. A corresponding law might be adopted within the coming months.
A draft law regarding special tax regulations for the Russian IT-companies engaged in export has been submitted to the State Duma for the second reading, Leonid Reiman, the RF Minister of Communications, reports during the exhibition 'Infocom-2007'. He also says he has discussed the given issue with Boris Gryzlov, the State Duma Speaker, and the deputies representing the United Russia. All of them approve of the Ministry of Communications intention to establish the tools to support the companies engaged in Software production for export. A corresponding law might be adopted by the Lower Chamber of the Russian Parliament up to the end of the Autumn session, the last plenary session planned for November 17th 2007.
If the law is adopted then the IT-companies engaged in export might cancel the tax on income and property, as well as VAT and the Uniformed Social Tax (UST). Finally the companies will have to pay only 6% of the turnover tax and contributions to the pension fund. According to Leonid Reiman, modern tax load significantly reduces the domestic IT-companies compatibility. In most of them the labor remuneration ratio amounts to 70-80%. Those firms will be able to make use of the simplified tax system where the revenue received in the last 9 months is made up of payments for IT-developments by no less than 70%, the payments of the foreign partners amounting to no less than 55%. An IT-company wishing to receive the tax benefit should employ no fewer than 20 people, besides it should be accredited by the state.
Leonid Remain reminds some benefits for IT-exporters were introduced into the Tax Code last autumn. 'However, we believe the issue has not been resolved yet, - Mr. Reiman states. – We would like to introduce special tax regulations for the given companies. So at present we are working with our counterparts from the Ministry of Finance and deputies of the State Duma to resolve the given issues'.
Market participants say the benefits prescribed in the RF Legislation last autumn are not working yet: having reduced UST, the developers forgot to think about the distribution of the obligatory and funded pension parts, the accreditation mechanism has not also been worked out yet. Besides, according to the IT-companies employees, Alexey Kudrin, the Minister of Finance, is sure the existing benefits regarding US T and VAT are sufficient.
Representatives of the Russian IT-sector are sure if the tax burden is reduced, then the Russian companies will be able to occupy a more solid stake in the foreign markets. 'The world IT-market might be divided into three components: IT-services, software development, IT-equipment production, - Alexey Kuzovkin, Armada Director General, says. – The most highly marginal lines, i.e. requiring the highest intellectual contribution, are the first two. Unfortunately, to compete successfully in the foreign market we have to work using illegal schemes. That happens because the tax burden in Russia regarding the IT-business can not be compared to the situation in China, and even India'. Armada is willing to enter the given market with its unique developments and talented programmers. 'We are sure to be able to win a significant contract share out of our Asian colleagues, but we are impeded by high taxes, - Alexey Kuzovkin highlights. – That is why I would like those responsible for the tax policy to adopt the law related to concessionary tax rate for the domestic IT-companies engaged in ICT development as soon as possible. That might enable Russia and us to occupy an adequate place among the leading IT-companies and worldwide'.
'Special conditions to develop the priority economic sectors are established everywhere. The world software development market is growing so Russia might occupy an appropriate place due to high qualification of its developers, - Sergey Shalmanov, CNews Analytics Analyst, says. – However, the financial and economic departments continue impeding with the tax benefits provision saying dishonest taxpayers might make use of the given benefits. When HT economy is planned to be developed enormous finance should be invested into the infrastructure and tax incentive mechanism development. That is not an issue to be thought over within two years, but an essential component of state support, which is to be offered to domestic companies at a level corresponding to the one used in other countries developing the given sector'.
Leonid Reiman said before the Russian IT-export volume came to 47.7 bln. rubles ($ 1.93 bln.) in 2006 having grown by nearly 80% as compared to 2005. In 2010 the given market volume is supposed to come to 318 bln. rubles ($ 12.873 bln.).
A draft law regarding special tax regulations for the Russian IT-companies engaged in export has been submitted to the State Duma for the second reading, Leonid Reiman, the RF Minister of Communications, reports during the exhibition 'Infocom-2007'. He also says he has discussed the given issue with Boris Gryzlov, the State Duma Speaker, and the deputies representing the United Russia. All of them approve of the Ministry of Communications intention to establish the tools to support the companies engaged in Software production for export. A corresponding law might be adopted by the Lower Chamber of the Russian Parliament up to the end of the Autumn session, the last plenary session planned for November 17th 2007.
If the law is adopted then the IT-companies engaged in export might cancel the tax on income and property, as well as VAT and the Uniformed Social Tax (UST). Finally the companies will have to pay only 6% of the turnover tax and contributions to the pension fund. According to Leonid Reiman, modern tax load significantly reduces the domestic IT-companies compatibility. In most of them the labor remuneration ratio amounts to 70-80%. Those firms will be able to make use of the simplified tax system where the revenue received in the last 9 months is made up of payments for IT-developments by no less than 70%, the payments of the foreign partners amounting to no less than 55%. An IT-company wishing to receive the tax benefit should employ no fewer than 20 people, besides it should be accredited by the state.
Leonid Remain reminds some benefits for IT-exporters were introduced into the Tax Code last autumn. 'However, we believe the issue has not been resolved yet, - Mr. Reiman states. – We would like to introduce special tax regulations for the given companies. So at present we are working with our counterparts from the Ministry of Finance and deputies of the State Duma to resolve the given issues'.
Market participants say the benefits prescribed in the RF Legislation last autumn are not working yet: having reduced UST, the developers forgot to think about the distribution of the obligatory and funded pension parts, the accreditation mechanism has not also been worked out yet. Besides, according to the IT-companies employees, Alexey Kudrin, the Minister of Finance, is sure the existing benefits regarding US T and VAT are sufficient.
Representatives of the Russian IT-sector are sure if the tax burden is reduced, then the Russian companies will be able to occupy a more solid stake in the foreign markets. 'The world IT-market might be divided into three components: IT-services, software development, IT-equipment production, - Alexey Kuzovkin, Armada Director General, says. – The most highly marginal lines, i.e. requiring the highest intellectual contribution, are the first two. Unfortunately, to compete successfully in the foreign market we have to work using illegal schemes. That happens because the tax burden in Russia regarding the IT-business can not be compared to the situation in China, and even India'. Armada is willing to enter the given market with its unique developments and talented programmers. 'We are sure to be able to win a significant contract share out of our Asian colleagues, but we are impeded by high taxes, - Alexey Kuzovkin highlights. – That is why I would like those responsible for the tax policy to adopt the law related to concessionary tax rate for the domestic IT-companies engaged in ICT development as soon as possible. That might enable Russia and us to occupy an adequate place among the leading IT-companies and worldwide'.
'Special conditions to develop the priority economic sectors are established everywhere. The world software development market is growing so Russia might occupy an appropriate place due to high qualification of its developers, - Sergey Shalmanov, CNews Analytics Analyst, says. – However, the financial and economic departments continue impeding with the tax benefits provision saying dishonest taxpayers might make use of the given benefits. When HT economy is planned to be developed enormous finance should be invested into the infrastructure and tax incentive mechanism development. That is not an issue to be thought over within two years, but an essential component of state support, which is to be offered to domestic companies at a level corresponding to the one used in other countries developing the given sector'.
Leonid Reiman said before the Russian IT-export volume came to 47.7 bln. rubles ($ 1.93 bln.) in 2006 having grown by nearly 80% as compared to 2005. In 2010 the given market volume is supposed to come to 318 bln. rubles ($ 12.873 bln.).