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Software Won't Be VAT Exempt
The exemption of software from the value-added tax instituted on January 1 will not extend to retail sales, according to a letter written by Deputy Finance Minister Sergey Shatalov to the Information and Computer Technologies Industry Association. The Finance Ministry has been able to counteract that tax break because no written licensing agreement is made with the purchasers. The law “On Introducing Amendments to Individual Legislative Acts of the Russian Federation as Part of the Formation of Beneficial Taxation Conditions for the Financing of Innovative Activities” was passed by the State Duma in the summer of 2007 and came into force at the beginning of the year.
Under the law, passed on the instruction of Russian President Vladimir Putin, amendments were made to the Tax Code concerning the profits tax and the VAT procedure was simplified. The Finance Ministry reacted coolly to the changes. A total of 3-4 billion rubles in tax savings is foreseen due to the amendments.
The amendments freed “operations to transfer exclusive rights to computer and database programs” and “the transfer of rights to the use of the results of intellectual activity based on licensed agreements,” that is, software sales, from VAT. The Shatalov letter specifies, however, that “box” sales of programs will not be subject to the exemption. Retail buyers make a licensing agreement when the software in installed in the computer.
Vadim Tereshchenko, financial director of the ABBYY company told Kommersant that he sees no benefits yet from the new benefits. “It is hard to evaluate their value so far,” he commented. He predicted that, even though the sale of software to legal entities will be exempt from VAT, the final sale price will remain the same. The 1C company, another large software developer, has divided its products into two categories. One category consists of business software, where licensing agreements are signed by everyone in the sales chain down to the final purchaser (that is mainly bookkeeping programs and Microsoft licenses) and the other is retail programs (games, audio books and boxed Microsoft programs).
www.kommersant.com
All the Article in Russian as of Jan. 16, 2008
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