The general rate of profit tax was permanently reduced from 20%
Posted: Mon Jan 20, 2025 10:18 am
How it all began
In 2020, domestic IT companies received additional tax breaks. Then, in the midst of the pandemic, the president instructed the government to amend the Tax Code to set the profit tax rate for IT businesses at 3%. As a result, the government developed a bill known in the industry as the "IT tax maneuver" - the law came into force on January 1, 2021.
to 3% for IT companies accredited uk whatsapp resource by the Ministry of Digital Development and Communications and meeting certain conditions - the share of revenue from IT activities is at least 90% of total income and the number of employees is at least seven people. The reduction in the tax rate was due to a reduction in the share of tax received by regional budgets from 17% to 0%. As part of the tax maneuver for the IT industry, insurance premium rates were also reduced from 14% to 7.6%. At the same time, as a result of the maneuver, transactions for the transfer of rights to software and databases not included in the register of Russian software became subject to VAT.
The Ministry of Digital Development noted the positive impact of the tax maneuver for the IT industry. Thus, at the end of 2021, it allowed additional deductions from specialized companies to be attracted to the treasury in the amount of 48 billion rubles.
Then in 2022, after Western countries imposed sanctions on Russia, Vladimir Putin instructed the government to set the profit tax for IT companies at 0% until the end of 2024 to help the development of information technology. These changes were made to the Tax Code.
The wording of the adopted norm stated that a 3% profit tax rate was set for IT companies, but 0% for the period 2022-2024. However, changes were then made: the phrase about the 3% rate was excluded and only the condition about the zero rate until the end of 2024 remained. Therefore, in the absence of additional adjustments to the Tax Code, the rate for IT companies from 2025 would be general, i.e. 20%.
Thus, the current proposals of the Ministry of Finance on the 5% rate from January 1, 2025 are legally a reduction of the general rate. In my opinion, this is a positive signal, which indicates that the state continues to support Russian developers, including with tax incentives. However, for businesses, the proposals of the Ministry of Finance are an increase in the tax burden.
What else is proposed to change?
Among other changes that may affect the IT business is an increase in personal income tax rates for employees. It is proposed to introduce increased tax rates (from 15% to 22%) on incomes over 200,000 rubles per month. Representatives of Russian authorities, and the business itself, have repeatedly stated that, thanks to the tax maneuver, companies are directing additional income to increasing salaries for their developers, which is necessary under the current conditions on the labor market. This, in turn, allows maintaining a high pace and quality of import substitution of software. However, an increase in the amount of personal income tax withheld from employee income, combined with an additional tax burden on profit tax, is unlikely to have a positive effect on the development of the industry.
In 2020, domestic IT companies received additional tax breaks. Then, in the midst of the pandemic, the president instructed the government to amend the Tax Code to set the profit tax rate for IT businesses at 3%. As a result, the government developed a bill known in the industry as the "IT tax maneuver" - the law came into force on January 1, 2021.
to 3% for IT companies accredited uk whatsapp resource by the Ministry of Digital Development and Communications and meeting certain conditions - the share of revenue from IT activities is at least 90% of total income and the number of employees is at least seven people. The reduction in the tax rate was due to a reduction in the share of tax received by regional budgets from 17% to 0%. As part of the tax maneuver for the IT industry, insurance premium rates were also reduced from 14% to 7.6%. At the same time, as a result of the maneuver, transactions for the transfer of rights to software and databases not included in the register of Russian software became subject to VAT.
The Ministry of Digital Development noted the positive impact of the tax maneuver for the IT industry. Thus, at the end of 2021, it allowed additional deductions from specialized companies to be attracted to the treasury in the amount of 48 billion rubles.
Then in 2022, after Western countries imposed sanctions on Russia, Vladimir Putin instructed the government to set the profit tax for IT companies at 0% until the end of 2024 to help the development of information technology. These changes were made to the Tax Code.
The wording of the adopted norm stated that a 3% profit tax rate was set for IT companies, but 0% for the period 2022-2024. However, changes were then made: the phrase about the 3% rate was excluded and only the condition about the zero rate until the end of 2024 remained. Therefore, in the absence of additional adjustments to the Tax Code, the rate for IT companies from 2025 would be general, i.e. 20%.
Thus, the current proposals of the Ministry of Finance on the 5% rate from January 1, 2025 are legally a reduction of the general rate. In my opinion, this is a positive signal, which indicates that the state continues to support Russian developers, including with tax incentives. However, for businesses, the proposals of the Ministry of Finance are an increase in the tax burden.
What else is proposed to change?
Among other changes that may affect the IT business is an increase in personal income tax rates for employees. It is proposed to introduce increased tax rates (from 15% to 22%) on incomes over 200,000 rubles per month. Representatives of Russian authorities, and the business itself, have repeatedly stated that, thanks to the tax maneuver, companies are directing additional income to increasing salaries for their developers, which is necessary under the current conditions on the labor market. This, in turn, allows maintaining a high pace and quality of import substitution of software. However, an increase in the amount of personal income tax withheld from employee income, combined with an additional tax burden on profit tax, is unlikely to have a positive effect on the development of the industry.