FBK Legal at Taxes 2023 Conference
Ekaterina Subbotina has spoken about tax incentives for IT companies, and compared tax regimes applicable to IT activities of Skolkovo residents and other innovative science and technology centres (using the Vorobyevy Gory centre as an example).
Ekaterina underlined the challenges, opportunities and risks that are common for companies applying different regimes. The lawyer also talked about the application of tax concessions with regards to the business purpose test stipulated in article 54.1 of the Russian Tax Code. “There is no clear answer whether under article 54.1 of the Russian Tax Code it is possible to make a new IT company from an IT department of a company operating in another industry if the purpose of such restructuring is to benefit from tax preferences.
Nevertheless, the Judicial Chamber on Economic Disputes of the Supreme Court mentions that any tax incentive should be in the public interest. That is why the main task for a taxpayer that wants to use tax exemptions is to pass the public interest test – whether the taxpayer spends savings for public purposes that the legislator meant when introducing the exemptions (e.g. to develop IT projects, retain qualified personnel and increase their wages) or whether “other economic activities” are disguised as IT activities.”
In addition, Ekaterina Subbotina spoke about challenges of IT companies that sell software intended for services from the list of “excluded” activities. According to the lawyer, “exclusions” are meant to avoid abuse (provision of highly profitable services disguised as IT activities) and should not discriminate against actual IT companies that are specialised in software development for the indicated industries but do not render such services. However, to reduce the risks, it is better to wait for clarifications from the regulator and favourable court judgements.