Taxes, IT

05/ 06/ 2012

Herewith we would like to inform you that on 24 May 2012 the Verkhovna Rada of Ukraine adopted the laws on special taxation regime for IT sector (the Draft Law No. 9744 and the Draft Law No. 8267). The idea of tax incentives was initiated by the EBA and developed further within EBA IT Committee with subsequent support of the Vice Prime Minister – Minister of Social Policy of Ukraine Sergiy Tigipko by means of the  focus Working Group he initiated. Both laws are to be signed by the President and will become effective the day after their official publication except for tax related provisions postponed for January 2013.

According to these laws the special tax regime for IT companies will last for 10 years in terms of corporate profit tax, individual income tax and VAT, and 5 years in terms of single social contribution. According to the Draft Law No 9744, the personal income tax for IT companies is set at 5%, however not exceeding 2 minimal salaries multiplied by standard rate set by the Tax Code of Ukraine (15%).

In addition, starting from January 2013 the rate of corporate profit tax for the companies operating under the special regime is 5%. The Draft law also foresees VAT exemption for IT-companies participating in a special tax regime.

The rate of a single social contribution will mount up to the standard rate on two minimum wages, both for the employer and the employee.

To be eligible for tax benefits, IT company is to apply to the State Tax Service of Ukraine with the application and conclusion. Prior to the application to the Tax Service IT companies have to get an expert conclusion from the State Agency for Science, Innovations and Informatisation proving that the companies receive their income on the basis of activities stated in the Draft Law No 9744.

According to the report published on the Verkhovna Rada web site, subject to the Draft Law No 9744 are the companies dealing with the publication and sale of software, programming, testing, IT-consulting, management of computer systems, data processing, posting information on web sites and so on. Web hosting was excluded from the list of such activities. Also, the companies with less than 10 employees are eligible for applying for tax benefits.

We are happy to share this progress with you and would like to thank all EBA members actively involved in process of developing the mentioned legislative initiatives!

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