The Ukrainian authorities have decided to legalize the tax deductions for IT sector

31.05.2012 The Parliament of Ukraine adopted a series of legislative amendments in favor of an economic experiment to create favorable conditions for development the IT industry in Ukraine.

If these amendments will be signed by the President of Ukraine, the IT companies, that meet the qualification requirements, will be able to:

• to obtain exemption from VAT on the period since January 1, 2013 to January 1, 2023;

• during the same period to pay corporation tax at a rate of 5%;

• over four years to deduct payments to social funds to two minimum wages (as well as for non-residents).

To obtain these benefits, companies must meet the qualified requirements and undergo special registration.

According to the Prime Minister Nikolai Azarov promoting IT-industry will increase revenue to the state budget, which will ensure the realization of social obligations of the state.

Expert’s opinion

Until recently, the offshore development center was in India. Bombay programmers wrote software for the entire world, for some funny money.

At some point, intelligent Ukrainian guys realized that they can write programs for the same funny money and began to draw the blanket over themself. Many of the games that rocked in the "tyrnet", written by Ukrainian programmers or by the "Ukrainian Negroes" for U.S. and European customers.

Business has grown so much that ordinary people began to think about the legalization  of earned money in the Internet, in Ukraine. After all, simple obtainment of money to an account in Ukrainian bank from abroad is fraught for ordinary Ukrainians serious trouble, such as payment of taxes and wild discussions with tax authorities on the subject of " to share unfair money."

People began to register as a private entrepreneurs with simplified accounting, reporting and fixed payments to the budget. The situation came within the scope of the legal field. Everyone was happy. Until they started to deal with offshore companies.

For taxpayers of unified tax system were created conditions to make registration procedure easier  and to operate a simple offshore company. But for what alone programmer has problems with the registration of companies, record keeping, payment of a heap of taxes and fees? For this it needs to hire an accountant and pay him a salary. Naturally, they quickly turned the legitimate activities. And instead of the expected high hopes on the slender ranks of the wealthiest taxpayers, who should precipitate the banks to pay the taxes and fees, the government got a scorched desert. Where nobody works, and to collect taxes from anyone.

And that is typical - go, to the Ukrainian resident, lying around on the Latvian server software for Spanish customer, and working through a network of Chinese proxy servers!

There was no retreat, that’s why the authorities decided to offer conditions for the programmers to come back home and pay taxes there.

But again! Benefits provided to IT-companies that meet the requirements. And you have correctly guessed that the requirements are over excessive!

That's just one of the gems of the law, “to verify compliance of the economic activity of the subject program production industry by economic activity, as defined in paragraph 1.5 of this clause, the subject of industry software products together with the registration statement gives the conclusion of the central executive body for science, innovation and information Ukraine on the conformity of the actual economic activities to the subject program production industry by economic activity, as defined in paragraph 1.5 of this paragraph.”

And so on, in the same spirit. It is pleasant to observe the reduction of the tax burden.

But such difficulties of doing business! Who would be so patient and meticulous, so step by step to fulfill all the conditions (and not all amendments has adopted, for example, it is not resolved the issue with the pension fund on the payment of fees to two minimum wages).

And where corruption is too much - there is no business.

On the basis: http://www.kmu.gov.ua/control/

Yaroslav Lomakin ( Managing Partner of Honest & Bright Company Ltd )