Programmers have received 10-year tax breaks

A system of tax incentives for the domestic IT industry has been introduced which will take effect on January 1, 2013. The incentives are provided for in the Law “On Amendments to Chapter 20 (Transitional Provisions) of the Tax Code of Ukraine Regarding Taxation of Software Producers” that has been signed by the head of state Viktor Yanukovych. The relevant bill passed in Verkhovna Rada back in May 2012. However, the president vetoed it, proposing a number of amendments. The parliament passed it again on July 6, 2012, agreeing to all the presidential proposals. Let us recall that the bill was sponsored by the president’s younger son MP Viktor Yanukovych (junior).

The law provides the IT producers with substantial tax breaks. In particular, software products sales will be temporarily (January 1, 2013 through January 1, 2023) exempt from VAT. The products in question include programming results in the form of operating systems, utility, applied, entertainment and/or educational computer programs, as well as Internet sites and/or online services, and cryptographic data protection software. However, the coveted personal income tax reduced rate for programmers is absent from the law as finally passed, because the president believes the 5 percent special tax rate requested by the IT community could lead to a significant budget shortfall and would be contrary to the principle of equality before the law for all taxpayers.

Regulations on unscheduled tax inspections of IT industry enterprises, as well as on the need to obtain opinion of the State Agency for Science, Innovation and Information to qualify for the special tax treatment, have been excluded from the amended law, too.