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IT companies could benefit from new St Petersburg tax breaks

0 8 May 2014

Industrial parks, IT companies and hotels have been included in a range of tax breaks proposed by St Petersburg's municipal investment committee. The proposals include a reduction in the tax rate on profits to 13.5% and the removal of property taxes for five years. 

Saint Petersburg governor Georgiy Poltavchenko has already assigned a commission to calculate the possible impact of the tax breaks. The head of the investment committee Irina Babyuk stated that the amendment to current legislation could come into force towards the end of 2014 if the proposals are approved. 

As a result of the proposals, companies running industrial parks and resident businesses would no longer be obliged to pay certain taxes. Furthermore, according to Babyuk, resident businesses would receive tax breaks on earnings. This reduction in the tax burden is not being offered to all companies, but rather to those who satisfy certain investment requirements. 

The Managing Director of “VTB Capital Asset Management” Vladimir Vishnevski proposes that companies that manage industrial parks should have a minimum of $60 million worth of investment in order to qualify, while park-residents should have invested at least $30 million. 

Furthermore, IT companies will be able to count on a reduction in tax on earnings, and property developers who rent them premises will benefit from not having to pay any tax whatsoever. 

The proposals are designed to boost the respective industries, but some observers believe that the reduction in tax on earnings for IT companies will not necessarily have the desired effect, since their primary expenditure is actually on staff. Furthermore since IT companies are mobile, and can easily move to any city or country where tax conditions are most favourable, alternative methods must be found to try to attract businesses. 

In Saint Petersburg there are already a number of tax breaks in place (15.5% for 5 years) for developers of security software, as well as for the transport and manufacturing sectors.

Source: SiliconRus

Top image via Shutterstock

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