Recognition of income by IT companies to reduce insurance contributions
Legal Digest \ 16.04.2019
The Russian Federal Tax Service has explained which income IT companies can recognize to apply reduced rates of insurance contributions in 2017-2023.
Under article 427 of the Russian Tax Code, IT companies are entitled to apply reduced rates of insurance contributions provided that the following conditions are met simultaneously:

  • The IT company has obtained a document certifying state accreditation as a company engaged in the field of information technology;
  • The proportion of revenues from IT business accounts for at least 90% of the total income based on 9 months of the year preceding the year when the company started to pay insurance contributions at reduced rates;
  • The average headcount is at least seven employees based on 9 months of the year preceding the year when the company started to pay insurance contributions at reduced rates.
In its clarifications the Federal Tax Service stated that when it assesses revenues for the purpose of the incentive an IT company may book the following:

  • income from the sale of its own produced software;
  • income from the supply of services (performance of work) involving the development, adjustment and modification of software, including software of partner organizations;
  • income from the supply of services (performance of work) involving the installation, testing and support of software which the company has developed, adjusted or modified.
Consequently, if the company receives revenues from the sale of software it did not develop, it cannot book such revenues when it assesses the share of income for the purpose of applying reduced rates of insurance contributions. If all the above conditions are met, the company may apply the following insurance contributions during 2019:


Contributions

Rate

 

Tax base: salary from the beginning of the year

For mandatory pension insurance

8%

≤ RUB 1,150,000

0%

> RUB 1,150,000

For mandatory medical insurance

4.0%

no limit

For mandatory social insurance

2.0%

≤ RUB 865,000

0%

> RUB 865,000

Total maximum insurance contributions

14%

Total minimum insurance contributions

4%



Please contact Acsour’s specialists with questions about how tax legislation should be applied.