B E I T E N B U R K H A R D T I n t e r n a t i o n a l L a w F i r m Recent changes to the Federal legislation concerning IT-related businesses September 18, 2007 St. Petersburg, RUSSIA

2 Overview of IT-companies taxation changes General features  Export-oriented regulations in  Special requirements for IT-companies  Lack of government and local regulations

3 Contents of the changes and the tax legislation (2005) Details of legal actContentsComment and implication Federal Law No FZ dd July 22, 2005 “On special economic zones” Established tax preferences for companies registered in technological development zones: Special rates of the Unified Social Tax (maximum rate is 14%); Property tax remission for a 5-year period. The procedure of registration in special technological development zones is complicated. Therefore, tax preferences receiving is hindered. Federal Law No FZ dd July 22, 2005 changed in particular the Article 148 of the Tax Code concerning VAT The Article 148 of the Tax Code of the Russian Federation was revised and enlarged, in particular: - services including software and database modification, adaptation and development are VAT taxable, if a buyer of such services runs business operations in the Russian Federation. The question concerning taxation of software development under the order of foreign customers was partly clarified. The resolution of the Supreme Arbitration Court No 2617/05 dd August 02, 2005 regarding software export Software sales are not recognized as an export operation The question concerning taxation of the software development under the order of foreign customers was partly clarified.

4 Contents of the changes and the tax legislation (2006, 2007) Details of legal actContentsComment and implication Federal Law No FZ dd July 27, 2006 changed in particular the Articles 241 and 259 of the Tax Code of the Russian Federation Established tax preferences for IT-companies, in particular: -special rules to calculate the Unified Social Tax rates (maximum rate is 26%); -permission to depreciate electronics and computer hardware. IT-companies should fulfill conditions to receive the State registration certificate. But the Government has not issued the above-mentioned regulation yet. Therefore, tax preferences application is impossible. Federal Law No FZ dd July 19, 2007 changed the Tax Code The Tax Code of the Russian Federation was revised and enlarged, in particular: -Art. 149: enlarged free of VAT transactions list (R&D, IP-rights transfer, know-how, rights granted under license agreements); -Art. 251: funds received from Science and technology support funds are not recognized as an income for CPT purposes; -Art. 259: A possibility for accelerated depreciation of fixed assets which is applied for R&D; -Art : enlarged the expenses list recognized for the purposes of the Simplified Taxation System (IP-rights, know-how, R&D purchasing costs). The changes in the Tax Code of the Russian Federation stimulates IT-industry development on the internal markets. Above-mentioned changes provide preferences not only for middle-size and large-size companies but also for small entrepots.

5 Contacts Mr. Victor Naumov Partner BEITEN BURKHARDT, St. Petersburg Ms. Anna Afanasyeva Attorney-at-law BEITEN BURKHARDT, St. Petersburg Nevsky prospect 140, St. Petersburg, Russia Phone: , Fax:

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