Russian Finance Ministry considering request from IT industry to preserve VAT benefit - minister
MOSCOW. Oct 21 (Interfax) - The Finance Ministry has received a request from IT associations for the preservation of the VAT exemption for the sale of Russian software and it is considering it, Finance Minister Anton Siluanov told journalists on Tuesday.
"We have received such proposals. We are considering them," Siluanov said.
According to amendments to the Tax Code submitted to the State Duma, it is planned that the clause on the zero VAT rate for the commercialization of software included in the register of domestic software will be eliminated. The draft also provides for an increase in the rate of preferential insurance contributions for the IT industry from 7.6% to 15%.
Russia's largest IT associations, Russoft, the Information & Computer Technologies Industry Association (APKIT) and MIT - We Are IT, sent a letter to Russian Prime Minister Mikhail Mishustin and State Duma Chairman Vyacheslav Volodin, in which they requested for the VAT benefit to be preserved.
Industry representatives referred to the cancellation of the benefit as "an extremely painful measure". They estimate that this could cause Russian IT companies to lose out on more than 100 billion rubles of revenue in 2026 and the development rate of the industry to drop from the current 20%-25% to 3%-5%.
The authors of the letters said that corporate IT budgets would also cease to grow due to the reduction in investments by large companies at the current key rate. A significant proportion of demand for Russian software comes from organizations which will not be able to carry forward input VAT - banks, government bodies, budget organizations and small businesses - while companies which will carry forward input VAT will also be unable to spend the same amount of money on Russian software, the associations said.
They also said that canceling the benefit would cause a sharp decline in demand for Russian software, leading to a drop in the number of employees and preventing companies from bringing their products up to the same level as their foreign equivalents.
Representatives of the associations have said previously that eliminating the VAT benefit could force Russian developers to charge 30%-35% more for their products. It could also lead to the closure of several IT companies, meaning that the Russian federal budget will lose out on income tax revenue, they said.
