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Business heard the Government’s overall plans for IT development in Ukraine

04/ 09/ 2019
    Changes in IT taxation, creating a Human Capital Fund, general plans regarding industry’s and startup’s development – all of these were presented within the meeting of IT business with Prime Minister Oleksiy Honcharuk, Head of State Tax Service Serhiy Verlanov and Vice Prime Minister – Minister of digital transformation Mykhailo Fedorov on September, 4. The representatives of European Business Association IT Committee attended the meeting as well. Volodymyr Beck. the Chair of the European Business Associations IT Committee. It seems, that within my recollection, it is the first time the government initiated a suggestion of stimulating export-oriented IT-industry. Among main incentives there are competitive tax burden for private entities, contractual tenet of interaction between specialists and companies, implementation of human capital development mechanisms in Ukraine as well. So the dialogue that is being created currently is very important and high-priced by business. Oleksiy Honcharuk, the Prime Minister of Ukraine, highlighted the deficit of personnel and out-of-date education system to be the sharpest problems of IT. In order to solve these issues, the Government suggests creating of Human Capital Fund that will be enriched by the extra tax for IT and donations of international partners. At the same time, it was offered to create a new Fifth Group for private entities that includes classifiers of economic activities of IT. Herewith, switching to the new model will be unconstrained. The Third group isn’t going to be dismissed or changed and IT classifiers of economic activities won’t be withdrawn. The new taxation group is expected to be available on 2020 January, 1. Serhiy Verlanov told about a new option of private entities taxation in IT-industry. The single tax remains the same – 5%, but military tax in amount of 1,5% and deductibles to Human Capital development Fund are added. Payments rates to the Fund are following: 2020 year – 1%, 2021 – 2%, 2022 – 3%, 2023 – 4%, 2024-2029 – 5%. Such option is planned to be fixed for the next 10 years. Apart of that, single social contributions will be doubled: The Fifth group will pay 22% of two minimal salary but not one, as before. It is expected that creation of the Human Capital development Fund will overcome the predictable lack of IT professional in the future because the money will be spent on education development: scholarships for students, grants for scientists, investments in mutual projects with Higher Educational Institutions (campuses, laboratories). Mykhailo Fedorov, from his side, highlighted the priorities for the industry: development of internet infrastructure, digital-skills education, transformation IT from outsourcing to product industry etc. According to analysis, the government expects IT export to reach $13 billion while the number of people employed in the industry to exceed 650 thousand in 10 years because of the new rules. In general, presented conception can create a stable foundation for human resource capital development, meanwhile competitive tax rates will help our IT to make a lodgment on an international market. However, there are a lot of details being not highlighted within the presentation: a mechanism and a structure of human capital development Fund, for instance. That is why we are expecting for core team activation in order to make things clear. IT community of the European Business Association is thankful to the Government for understanding IT peculiarities and the importance of contractual relations for the industry. In the same time, stable and predictable game rules are highly important for business. So, we hope announced suggestions will be thoroughly discussed with business within a core teams in order to provide completely transparent, fair and predictable rules with a strategy for the next 10-20 years.
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Changes in IT taxation, creating a Human Capital Fund, general plans regarding industry’s and startup’s development – all of these were presented within the meeting of IT business with Prime Minister Oleksiy Honcharuk, Head of State Tax Service Serhiy Verlanov and Vice Prime Minister – Minister of digital transformation Mykhailo Fedorov on September, 4. The representatives of European Business Association IT Committee attended the meeting as well.

Volodymyr Beck the Chair of the European Business Association's IT Committee
It seems, that within my recollection, it is the first time the government initiated a suggestion of stimulating export-oriented IT-industry. Among main incentives there are competitive tax burden for private entities, contractual tenet of interaction between specialists and companies, implementation of human capital development mechanisms in Ukraine as well. So the dialogue that is being created currently is very important and high-priced by business.

Oleksiy Honcharuk, the Prime Minister of Ukraine, highlighted the deficit of personnel and out-of-date education system to be the sharpest problems of IT. In order to solve these issues, the Government suggests creating of Human Capital Fund that will be enriched by the extra tax for IT and donations of international partners.

At the same time, it was offered to create a new Fifth Group for private entities that includes classifiers of economic activities of IT. Herewith, switching to the new model will be unconstrained. The Third group isn’t going to be dismissed or changed and IT classifiers of economic activities won’t be withdrawn. The new taxation group is expected to be available on 2020 January, 1.

Serhiy Verlanov told about a new option of private entities taxation in IT-industry. The single tax remains the same – 5%, but military tax in amount of 1,5% and deductibles to Human Capital development Fund are added. Payments rates to the Fund are following: 2020 year – 1%, 2021 – 2%, 2022 – 3%, 2023 – 4%, 2024-2029 – 5%. Such option is planned to be fixed for the next 10 years. Apart of that, single social contributions will be doubled: The Fifth group will pay 22% of two minimal salary but not one, as before.

It is expected that creation of the Human Capital development Fund will overcome the predictable lack of IT professional in the future because the money will be spent on education development: scholarships for students, grants for scientists, investments in mutual projects with Higher Educational Institutions (campuses, laboratories).

Mykhailo Fedorov, from his side, highlighted the priorities for the industry: development of internet infrastructure, digital-skills education, transformation IT from outsourcing to product industry etc.

According to analysis, the government expects IT export to reach $13 billion while the number of people employed in the industry to exceed 650 thousand in 10 years because of the new rules.

In general, presented conception can create a stable foundation for human resource capital development, meanwhile competitive tax rates will help our IT to make a lodgment on an international market. However, there are a lot of details being not highlighted within the presentation: a mechanism and a structure of human capital development Fund, for instance. That is why we are expecting for core team activation in order to make things clear.

IT community of the European Business Association is thankful to the Government for understanding IT peculiarities and the importance of contractual relations for the industry. In the same time, stable and predictable game rules are highly important for business.

So, we hope announced suggestions will be thoroughly discussed with business within a core teams in order to provide completely transparent, fair and predictable rules with a strategy for the next 10-20 years.

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