The government began to coordinate the parameters of the so-called third support package for the IT industry. In particular, a number of measures were discussed in early February at a meeting with relevant Deputy Prime Minister Dmitry Chernyshenko, sources familiar with the consultations told Vedomosti. This was confirmed by Deputy Minister of Digital Development, Telecommunications and Mass Media Maxim Parshin and Chernyshenko’s representative.
According to the representative of the Deputy Prime Minister, the positive effects of the first package of state support measures for the industry made it possible, when preparing the third package, to return to those proposals that were not included in the second package. “In particular, the extension of benefits not only to industry companies involved in software development, but also to Internet companies whose business is based on an advertising model or receiving commissions from transactions (aggregators),” the source said. According to Parshin, in the near future, on behalf of Chernyshenko, “a series of strategic sessions will be organized with representatives of specialized associations and companies – both developers and customers of Russian solutions.” The officials did not explain what part of the business of large IT-holdings benefits could be extended to.
The first two benefit packages for the IT industry have come into effect relatively recently. The first package was approved in July 2020 and has been operational since early 2021.
For Russian software developers, the income tax rate was reduced from 20 to 3%, and the insurance premium rate was set at 7.6% instead of 14%. They were also exempt from VAT in terms of granting rights to software included in the Unified Register of Russian Programs. The government approved the second package in September 2021, it included over 60 events and measures to reduce barriers to the use of modern digital solutions, the press service of the government noted then. The measures of the second package are being introduced gradually, some of them already in 2022.
The start of the development of the third package was announced in January 2021 by Parshin, who did not name specific measures. “There are different ideas, we are collecting proposals, of course,” he said (quoted by TASS).
The proposal to expand the package of state support measures for the IT industry was considered at the Chernyshenko site a year ago, at the stage of discussing the second package, said Artem Sokolov, president of the Association of Internet Commerce Companies (AKIT; unites large marketplaces and companies developing the Internet commerce segment). If the proposal to expand the measures from the first package is adopted in the form in which it is being discussed now, then such large platforms as Yandex.Market, Ozon, Wildberries, AliExpress and others will fall under the new rules, he noted.
A representative of Yandex.Market declined to comment. “Ozon has not yet participated in the discussion of support measures, but we support benefits for aggregators,” a company representative told Vedomosti.
“Most of the IT solutions are our teams’ own developments,” emphasizes a Wildberries representative. “State support for Russian IT companies, including aggregators, will make it possible to compete with foreign software and strengthen the positions of domestic players (including entrepreneurs who sell Russian goods through platforms) both on the local and international markets,” he added. .
“Today, almost every such company develops its own IT solutions for its work, in fact, being the same developer, which is already subject to tax benefits,” Sokolov noted. Therefore, tax incentives should be extended not only to marketplaces, but also to any online stores using their own IT developments, the president of AKIT noted.
Today, a significant part of large companies (owners of contextual advertising services, etc.) incur significant costs for software development, but cannot enjoy tax benefits solely because of the ways this software is monetized, says EY partner Ivan Rodionov. “As a result, such companies either pay more taxes than their competitors, or are forced to restructure for a long and difficult time in order to receive such benefits,” he said.
This is not always fair, agrees Maxim Moseikov, director of the tax and legal department at Deloitte in the CIS, since he makes the receipt of benefits dependent on the way the IT company monetizes its product. “In practice, this leads to a lot of questions about which types of monetization of developed software products are allowed for benefits and which are not,” he adds.
If the expansion of benefits is adopted in the form discussed, it will equalize the tax burden of such companies with their competitors, continues Rodionov. “And given the overall positive effect of the introduction of the IT maneuver in 2021, the simplification of the criteria will most likely please the business and attract new participants, including all well-known aggregators,” he noted.
The experts found it difficult to assess the effect of tax savings for IT aggregators from the third package of benefits. But in the case of large companies in the sector, we can obviously talk about billions of rubles a year. For example, according to Yandex’s reporting for 2021, the income tax paid by the company as a whole amounted to 7.43 billion rubles, for 2020 – 13.2 billion rubles. (it is not yet clear whether the entire holding or only its individual parts will be able to apply for new benefits).
Rodionov also noted that the business of aggregators now “is very different from a classic IT company that makes money on the development and implementation of software.” And if the criteria for benefits are too accessible, then, taking into account the general trend towards digitalization of business, it may turn out that in a couple of years the Russian economy will consist exclusively of the IT sector and the stimulating meaning of the IT maneuver will be lost, he concluded.
“An important aspect is how clear and precise the conditions for the application of benefits will be formulated. Using the tax IT maneuver as an example, we see that there are many ambiguities,” says Ekaterina Burlyand, Director of Tax and Legal Advisory at KPMG. Some of the eligibility criteria are very narrow and companies have to redesign their business processes to take advantage of the benefits, she concluded.
Vedomosti sent inquiries to the Ministry of Economic Development, the Ministry of Finance and the Ministry of Industry and Trade.