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On 24 May 2012 the Ukrainian MPs adopted the package of Laws of
Ukraine aiming at encouraging the development and boosting the
global competitiveness of Ukrainian IT industry ("the
Laws"). The Laws have not been signed by the
President of Ukraine, thus not taken effect, yet though the chances
of it being signed in due course are considered quite high.
The Laws provide for a number of tax incentives for IT companies
for ten years from 2013, namely:
Reduction of corporate income tax rate for IT companies from
19% to 5%;
Introduction of VAT exemption for domestic software sales
(currently the domestic software trade is subject to 20% VAT);
IT specialists employed with IT companies are subject to
reduced personal income tax rate of 5% as compared to the current
rates of 15% and 17%;
Reduction of payroll tax burden on IT companies, namely the
standard rate for the industry of 36.76% is now levied on the
amount limited by two minimal statutory salaries as compared to the
current cap of ten minimal statutory salaries. This incentive will
be available for five years since 2013.
These tax benefits will extend only to IT companies which engage
in types of activities listed in the, Laws. Moreover, these
benefits will be awarded subject to (i) compliance with certain tax
authorities' registration criteria and (ii) obtaining an
approval from the State Agency for science, innovation and
informatisation.
There are concerns that the process of getting the required
approval may become quite bureaucratic, thus many IT companies may
face impediments in prompt shifting to beneficial tax regime.
Also, there are fears that the tax authorities may now start
looking more rigorously into hidden employment issue which was not
a hot topic in the previous years, but may become one after the
mentioned benefits are introduced. Such fears, in fact, stem from
the alleged governmental hesitation over the likely state budget
losses that may be caused by the tax incentives, if introduced.
Considering that the two thirds of the Ukrainian IT people are
employed through civil law services contracts rather than through
employment contracts the Government concerns should be taken
seriously.
Laws: Law of Ukraine No. 8267 "On State
Support of the Software Industry" dated May 24, 2012 and Law
of Ukraine No. 9744 "On Introducing Amendments to the Tax Code
of Ukraine Concerning Special Tax Regime for the Companies
Operating in Software Industry" dated May 24, 2012.
For more information, please contact our CMS office in
Ukraine.
This article was written for Law-Now, CMS Cameron
McKenna's free online information service. To register for
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give professional or legal advice. All Law-Now information relates
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and may not have been updated to reflect subsequent
developments.
The original publication date for this article was
08/06/2012.
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