Parliament plans tax stimulus for IT industry - International Law Office

Parliament has adopted new legislation that amendments the Tax Code, as well as other laws and regulations, in order to support Ukraine's IT industry. If the legislative package is signed into law, as seems likely, the tax benefits for IT companies will come in effect on January 1 2013 and remain valid for 10 years.

The changes propose a preferential tax regime for companies involved in software development, database and software design, data centre services, the management and administration of computer systems and IT consultancy.

The key aspects of the proposed changes are as follows:

• The general corporate profit tax rate is reduced from 21% to 5%. In order to enjoy this benefit, the company must, among other things, obtain confirmation from the State Agency for Science, Innovation and Information Technology that the company's business meets the statutory criteria (eg, proof of the company's good fiscal standing and confirmation of the accurate valuation of its assets).
• A 10-year value added tax exemption applies to the sale (to Ukrainian customers) of software developed by eligible IT companies. At present, such domestic supply of software is taxable at a rate of 20%.
• Employees of eligible IT companies are entitled to a 5% personal income tax rate (as opposed to either 15% or 17%). The reduced tax rate applies to salary and similar payments received from the employer. However, the list of job positions that are eligible for the reduced rate of income tax must be further developed and approved by the Ukrainian government. Social security contributions will also change.

For further information on this topic please contact Alexey Khomyakov or Kostya Solyar at Asters by telephone (+380 44 230 6000), fax (+380 44 230 6001) email (alexey.khomyakov@asterslaw.com or kostya.solyar@asterslaw.com).