Tax Benefits for IT Start-ups

According to tax legislation, for taxpayers certified and operating under the law on State Support of IT Sphere, the income obtained from the realization of the IT products is considered deductible income (law on Income tax), and, at the same time, from the standpoint of the law on Profit tax, it is not a part of the taxpayer’s gross income. Tax agents, certified and operating under the law on State Support of IT Sphere, calculate the income tax from the salaries of their employees and equaled to it other income at the rate of 10%.

Businesses applying for certification must meet a list of requirements, some of which are the following:

  • they have to be established and operating under the law on State Support of IT Sphere, and their activities are limited in the 3rd article of the same law. The allowed and supported activities are
    • Software Development (development, alteration, testing, support; application creation; development and/or creation of tools for development system software, applications, DBs, website structure and content; alteration and adaptation of ready applications to fit the customer’s environment)
    • Consulting (including design and development of hardware, software, integrated communication technologies; user training related activities)
    • Systems Management (network building, management; technical support for data processing services)
    • Data processing (network data distribution; web hosting and related activities)
    • Web related activities (development and maintenance of search systems, DBs; actions related to websites operating as Internet portals, such as regularly updated news websites)
    • IT education and research programs
  • the number of employees is not over 30 at the moment of registration and can’t be over 30 for the duration of its operation under the certificate
  • can’t sell or otherwise transfer the results of its operation under the certificate to other RA resident business entities that work in the IT sphere, except for educational purposes
  • if the business entity decides to perform activities provided by the law but not included in its original application form, it has to apply for changes in the certificate

The certificate is terminated if:

  • the validity period of certificate is over
  • the business entity has applied for its termination
  • the business entity violated the law
  • the business entity presented false information during the certification process.

If the cause of termination is the violation of the law, the business entity shall pay to the State budget the unpaid tax benefits it had under the certificate, as well as tax penalties and fines defined by the tax legislation.

2017-01-30T13:26:28+04:00 May 12th, 2015|