Ukraine Grants 10-Year VAT Relief for IT Sector

News provided by

Worldwide News Ukraine

31 Jul, 2012, 13:57 GMT

KYIV, Ukraine, July 31, 2012 /PRNewswire/ --

Starting January 1, 2013, and up until January 1, 2023, enterprises producing software are exempt from paying value added tax on software supply operations. VAT relief will apply to the supply of operating systems, regular computer programs, system administration, encryption software, websites, online services, testing and consulting in the area of IT, etc. The President of Ukraine Viktor Yanukovych signed the respective law on Monday, July 30th.

In order to obtain tax relief, IT companies are expected to submit the respective form to the tax authorities. Currently, Ukrainian IT industry remains the subject to 20 percent VAT. Importantly, starting January 2013, the corporate tax for IT companies will be reduced from 21 percent to five percent, according to the new law. Comparably, corporate tax in the U.S. is variable and may go up to 35%.

Originally, the Ukrainian parliament adopted the law in May of 2012. Since then it has been vetoed by the President and, consequently experienced some improvements. One of the changes was the exclusion of the regulation regarding the right of tax authorities to hold unscheduled audits of the IT companies. Another change was elimination of the norm where the State Agency for Science, Innovation and Information had to evaluate a company for it to receive the tax relief.

The annual value of services provided by Ukrainian IT industry equals USD 1.5 billion, informed the Prime Minister of Ukraine Mykola Azarov in February 2012. According to the official, 80 percent of the services were exported abroad. He estimated annual growth of Ukrainian IT industry at 30-40 percent.

In 2016, Ukrainian software export income will become comparable with metallurgy exports, stated the head of The State Agency for Science, Innovation and Information Volodymyr Semynozhenko in December 2011. Previously, when in the first six months of 2011 Ukraine temporarily introduced 0 percent VAT, the industry experienced the 40 percent growth, noted the official.

Currently, Ukraine is world's fifth largest software exporter, according to the Vice Prime Minister Serhiy Tihipko. In 2011, software exports from Ukraine approached USD 1 billion. The official lamented high taxes IT companies paid in Ukraine.