How will VAT on software distribution change?
Since the new year, amendments come into force that actually cancel the VAT exemption for the implementation of software licenses for most software titles. First of all, this will affect foreign software, followed by computer programs and databases of Russian origin, which are not included in the Register of domestic software.
Regardless of entering the Register, VAT benefits on software will be lost to advertising services and applications, aggregators (marketplaces) and search programs. It is believed that the changes will affect any programs that advertise even their own products or services. An offer to buy a license for paid access to a service or an extended version of a shareware program can also be considered an advertisement.
How it happened and what to do read under the cut
What is the reason for the cancellation of VAT exemption on software
Amendments to the Tax Code (Tax Code of the Russian Federation) were introduced by the Federal Law of July 31, 2020 N 265-FZ. The changes introduce additional requirements for exemption from VAT for the exercise of rights to computer programs and databases. Amendments to the Tax Code of the Russian Federation on "tax maneuver in the IT industry" come into force on January 01, 2021.
What is the essence of the new requirement? In the new version of subparagraph 26 of paragraph 2 of article 149 of the Tax Code of the Russian Federation, the right to a VAT "exemption" is retained exclusively in relation to the exercise of rights to software included in the register of Russian programs for electronic computers and databases (Register of domestic software), which maintains Ministry of Telecom and Mass Communications.
As a result of the tax maneuver in the IT industry, the alienation and granting of rights to foreign software, regardless of the type of contract, will be subject to VAT. By definition, such software cannot be included in the Register of Domestic Software.
Likewise, the software of the majority of Russian copyright holders will remain without benefits, since it is not so easy to get into the Register.
As an economic reason for the actual cancellation of VAT benefits on software, the need to compensate for the loss of budget revenues as a result of a simultaneous reduction in income tax and insurance premium rates for IT companies is called. For more details, see the information on our website.
How to register an application in the Register of Russian software
This is a separate topic for conversation. In short, the following minimum requirements
must be met: 1) The rightholder of the Russian software must be a citizen of Russia or a commercial organization. At the same time, the share of participation of Russian citizens, organizations, the Russian Federation, subjects of the Russian Federation, in a commercial organization should be more than 50%.
2) Information about a software product cannot constitute a state secret.
3) The total amount of payments for a calendar year under license agreements in relation to foreign legal entities and individuals is less than 30 percent of the proceeds of the software rightholder from its sale, including the provision of rights to use.
4) The software is not forced to update and control from abroad
5) Warranty service, technical support and software upgrades are carried out by a Russian commercial or non-commercial organization without predominantly foreign participation, or by a citizen of the Russian Federation.
6) The application and the documents and materials attached to it are submitted through the website of the Ministry of Telecom and Mass Communications using the electronic signature of the applicant.
7) The application must contain hyperlinks to the site of the copyright holder with technical documents:
- with a description of the functional characteristics of the software and information required for the installation and operation of the software;
- containing a description of the processes that ensure the maintenance of the software life cycle, including the elimination of malfunctions identified during the operation of the software, improvement of the software, as well as information about the personnel required to provide such support.
Your technical writer should take the trouble to draft documents in accordance with GOST.
8) The application shall be accompanied by documents confirming the exclusive rights of the applicant to the registered software.
What confirms the exclusive rights to the software
The software is protected by copyright as literary works. Therefore, exclusive rights to it arise from the moment of creation and do not require formal confirmation from the state. Nevertheless, the Civil Code provides for the possibility of state registration of computer programs and databases. Based on the results of registration, the applicant is issued a Certificate, which indicates the copyright holder.
However, the Certificate of State Registration of Software is not a 100% guarantee that the applicant has an exclusive right. It is implied until proven otherwise. Since the rights to the software arise by virtue of its creation initially by the author, it is necessary to confirm the transfer of rights to the applicant by agreement or by force of law.
In practice, at least 3 options for confirming exclusive rights to software are possible:
a) In the case of creating software by order of the copyright holder, the transfer of the exclusive right is confirmed by a Custom Development Agreement with an organization - a contractor or a Copyright Order Agreement with an individual developer (including in the status of an individual entrepreneur).
b) When purchasing exclusive rights, you must have a contract for the alienation of exclusive rights to software.
c) In the case of software development by full-time employees, the employer's rights to such software are confirmed by the documents necessary for the emergence of rights to a work work. Here you will need to issue a whole package of documentation.
Thus, the optimization of VAT through the transition to licensing agreements is a thing of the past. We are preparing for a new reality and trying to get into the Register of domestic software.