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Russia expands tax support measures in the IT sector

15 August 2022

15 August 2022

Yet another package of measures aimed at expanding and clarifying the criteria for tax incentives for IT companies was introduced mid-July under Federal Law No. 321-FZ (the “Law”).

Overview of changes

The Law lowered the threshold for the share of income from core IT activities in a company’s revenue from 90% to 70% and removed the criterion for the average number of employees (previously, the qualifying company had to have at least seven employees).

The Law also significantly expanded the types of core IT activities that can be taken into account when determining eligibility for tax incentives.

Thus, firstly, the Law introduced the terms “proprietary” (developed, adapted and/or modified by the taxpayer itself or by an organisation belonging to the same group) and “custom-made” software and databases. With this in mind, the ability to treat income from one activity or another as core will be different.

For example, revenues from the sale of copies, the transfer of exclusive rights and the granting of usage rights to proprietary software and databases are included in revenue from core activities. And installation, testing and maintenance services are now classified as core activities if they relate to both proprietary and custom-made software and databases.

The special criteria set out in the Law, rather than the general rules of transfer pricing law, apply when determining affiliation: for the purposes of the Law, a “relatedness” of more than 50% is required.

Secondly, the Law establishes an extended list of core activities (including online advertising and educational activities) related to software and databases included in the Unified Register of Russian Software and Databases (the “Register”). Previously the inclusion of software and databases in the Register was only relevant for determining eligibility for VAT exemption and not for corporate profits tax or social contributions incentives.

At the same time, the Law provides that incentives are not available for companies established as a result of reorganisation (other than transformation) after 1 July 2022 and organisations in which the state participation of the Russian Federation is 50% or more.

Similar criteria are also established for the implementation of a reduced cumulative social contribution rate of 7.6%. The new procedure for administering these benefits is retroactive to 1 January 2022.

As per the Law, eligibility for tax incentives still requires IT company accreditation. However, the Law states that the existing procedure for accreditation of IT companies ceased to be valid as of 1 August.

The Law also includes transitional provisions clarifying the issuance of benefits in 2022 and delimiting the conditions for receiving benefits for companies accredited before and after 1 July 2022 (in the former case, benefits may partly be administered under the old rules).

In addition, the Law clarifies the conditions for receiving VAT exemption for software and databases included in the Register, and made it possible to apply a higher depreciation rate (not exceeding three) to such software and databases.


Tax incentives for corporate profits tax and insurance contributions for IT companies were introduced as part of the “tax manoeuvre” and started to apply from 1 January 2021. At that time, a corporate profits tax rate of 3% and reduced insurance contribution rates with a combined rate of 7.6% were set for accredited IT companies that met the conditions for receiving benefits.

In the spring of 2022, a presidential decree announced the expansion of tax measures to support the IT industry. Thus, some of the announced measures have already been included in the “anti-crisis” tax package introduced by Federal Law No. 67-FZ dated 26 March 2022, which established a reduced corporate profits tax rate of 0% for IT companies instead of 3% for the period 2022-2024.

Exemption of IT companies from tax control for a period of three years, which was also announced in the March Presidential Decree, has not yet been established by law, but it is reflected in Letter No. SD-4-2/3586 of the Russian Federal Tax Service dated 24 March 2022, on which we reported earlier. The remaining announced support measures, including the expansion of the types of core activities, have just been enshrined in the Law in an expanded form.


Although the main package of measures introduced by the Law aims to relax the criteria for applying tax incentives to IT companies, in practice it has also introduced some ambiguity.

For example, it was previously established that after 31 December 2024 the reduced profits tax rate of 3%, which was in force before the 0% rate was provisionally established, would apply. There is now no such provision in the Law, so the reduced rate may be extended in the future, or the applicable rate may be set at a higher figure.

The Law also changed the previously announced approach to the application of incentives when reorganising IT companies. As we reported earlier, on 17 March 2022, the Federal Tax Service issued Letter No. SD-4-2/3289, which effectively acknowledged it was possible to reorganise businesses with the main purpose of applying incentives in the IT sector. However, the Law excluded the possibility of making benefits available to organisations carrying out reorganisation (other than transformation) after 1 July 2022, which may limit the possibility of obtaining benefits for taxpayers who had planned to reorganise in the second half of the year, guided by the March letter.

In doing so, the Ministry of Digital Economy has already clarified* certain issues regarding interpretation of the Law, including the application of the provisions during the transition period and the determination of the share of income from core activities.

Also, as stated above, the Law stipulates that the existing accreditation procedure for IT companies was in force until 1 August. As of writing, the new accreditation procedure has not yet been developed and the accreditation of new IT companies has been suspended.

On 2 August 2022, the Ministry of Digital Economy published* the proposed changes to the accreditation procedure on its website. The presented procedure is rather informative and prepares representatives of the IT sector for the upcoming changes. The conditions for accreditation of IT companies mentioned by the ministry include:

  • at least 30% of revenues from core IT activities (this will require separate accounting of revenues);
  • the core “OKVED” code as the main one; and
  • compliance with specific wage levels.

Separate conditions may be set for start-ups, while companies with significant state participation, financial institutions, telecom companies and companies undergoing reorganisation will not be able to undergo accreditation. Please note that this draft regulation partially duplicates the provisions of the Law.

The ministry draws attention to the fact that accredited IT companies will be regularly checked for compliance with the necessary requirements and, in case of non-compliance, will be removed from the Register. The ministry has previously updated* the register of accredited IT companies in September 2021 and August 2022. At that time, 1,600 and 400 companies were removed from the Register, respectively.

Conclusions and recommendations

On the whole, one can say that the changes introduced by the Law are good news for the sector. At the same time, existing and new IT companies should take into account the limitations and clarifications reflected in the Law in order to assess whether they can benefit from the tax incentives and what their long-term impact is.

Particular caution should be exercised by groups planning a future reorganisation aimed at spinning off the IT function into a separate entity applying the incentives.

Given the trend towards extending incentives primarily to local software included in the Register, we also recommend that further possible changes in the accreditation criteria and availability of incentives for companies servicing foreign software (including those held by a group to which the Russian taxpayer belongs) be closely monitored.

Our tax and intellectual property experts will continue to monitor the situation closely and keep you informed of developments.

In Russian


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