The new tax advice for the IT sector from the Ministry of Finance

The new tax advice for the IT sector from the Ministry of Finance

On April 27, the Ministry of Finance approved a consultation on certain issues of VAT taxation. The executive body gave explanations on a certain point. It indicates a time exemption from VAT for the supply of various software products. The rule is valid from the beginning of 2013 to the end of 2023. However, it does not say which software products are covered by the consulting and in what cases.

Does the VAT exemption apply to transactions for the sale and supply of software products, which includes technical support services?

It is necessary to determine which goods are exempt from value added tax. These are various applications, design, expansion of software functionality.
What is the technical support?

✅ Software testing.
✅ Identification of software flaws.
✅ Customization of the product for the needs of the user.
✅ Installing the product to update it.

If they are an integral part of software products, and their cost is included in the price of this product, then such operations are exempt from VAT. It applies to technical support services, which are an integral part of updating and changing software functionality. It applies not only to computers, but also to phones.

If supplies, updates and technical support for a product are not included in the price, is it eligible for VAT exemption?

If a company sells certain software, and the price includes settings, support, updates, then it is exempt from VAT. The different situation is when the company does not sell software, but only provides support services, updates, settings. Such services should be subject to VAT.

It is the fundamental difference: making and selling products is one thing, customizing is another. The Ministry of Finance gives an explanation through certain manipulations with the VAT evasion. It is thanks to these features of tax legislation IT companies most often offer their software in combination with support, settings, etc. Everything is included for the client. It allows not to pay VAT to the seller.