Russia mulls tax cuts for domestic IT companies to accelerate expansion of tech industry – report

Russian IT firms may enjoy significantly lower income tax and insurance payments, according to a plan laid out by Prime Minister Mikhail Mishustin.

The tax break envisages a nearly twofold reduction of insurance payments – from 14 percent to 7.6 percent – while income tax could be cut to three percent from the current level of 20 percent, Russian business daily Vedomosti said, citing two government officials. Additionally, the prime minister reportedly offered to cancel value-added tax (VAT) on software and IT development ads on foreign digital platforms and provide special subsidies for developers.

The proposed measures, which are believed will be permanent, will likely be announced in the near future, the government sources said. The benefits will be applicable only for businesses which make at least 90 percent of their revenue from software sales and services for its development, implementation, and support.

It is unclear so far how much the incentives will cost the federal budget, but officials reportedly believe that the government has all the means to compensate for it.

If approved, the changes in tax law may boost exports of Russian software, strengthen domestic IT firms’ competitiveness, and support local developers. At the same time, the measures may encourage more Russian companies currently registered abroad to come back home.

Earlier this month, Russian President Vladimir Putin held a videoconference with government officials to discuss the development of the IT industry, which has proven its key role in the national economy amid coronavirus-related restrictions. Putin ordered a plan be prepared to stimulate the development of the sector, including solutions for a comprehensive tax overhaul.

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