The Verkhovna Rada committee on finance, banking, tax and customs policy at a meeting on July 3 decided to recommend that parliament take into consideration all of the proposals of Ukraine President Viktor Yanukovych on the laws introducing a special taxation regime for the IT industry.
The president, in particular, proposed not to impose a 5% tax rate on
individuals’ income for IT firm staff. According to the head of state,
such benefits will lead to the significant losses to the budget and they
contradict the principle of equality of all taxpayers before the law
and prevention of tax discrimination.
In addition, the president opposed changes to the principle of
charging a unified social contribution for IT companies using tax
breaks, which foresees the fixing of charges at the amount of two
minimum wages.
The president considers it necessary to clearly define software and
other products, the supply of which will be exempt from VAT, as well as
the term “software.”
As reported, on May 24, 2012, the Verkhovna Rada, Ukraine’s
parliament, approved reduced tax rates for Ukrainian software developers
for a period of ten years. Draft law No. 9744 on amendments to the Tax
Code of Ukraine concerning a special tax regime for entities working in
the software development industry was passed, as was bill No. 8267 bill
(passed at second reading), which regulates the single duty on
obligatory state social insurance for entities working in the software
development industry.
In particular, the amendments foresee a 5% personal income tax rate, a
5% corporate profit tax, and exemption from value added tax for
software developed by Ukrainian entities only.
The special tax regime will be in effect from January 1, 2013, to January 1, 2023.
The document foresees that the duty will be split in the following
way: 4.1% for unemployment, 3.9% for insurance in connection with a
temporary disability, 0.6% for insurance against an accident, 91.5% for
obligatory state pension insurance.
The social insurance regime will be in effect January 1, 2013, to December 31, 2017.
The president on June 22 vetoed the law and returned it to the parliament with his proposals.
