Tag Archives: tax

“Google tax law” in Russia

IT companies operating on the Russian market have started to pay VAT on the sale of electronic services in the Federation since 1st of January 2017. The rate is 18%. The relevant law, called in Russia “Google tax” was signed by Vladimir Putin at the beginning of July 2016.

The new rules apply to companies offering internet right to use their programs, including computer games and databases, and domains; providing services of advertisements placing; as well as selling electronic versions of books, music, video, etc. This applies, among others, to companies such as: Apple, Google, Microsoft and Uber.

Under the new law, foreign IT companies are becoming VAT payers. For their purpose, the Russian tax authorities will launch this year a special on-line service “Tax office”. It will cover the whole process of taxation from application to the tax office, by making a declaration and control of the settlement by the tax authorities. If any company fails to comply with the new regulations, it will be punished for illegal activity.

Foreign companies had already reacted to the new legislation by increases in prices of their services. The first, at the beginning of December 2016, was the US Google. It informed its Russian clients that file storage service Google Disc would become more expensive due to new tax regulations. Uber moved on its drivers the duty to pay taxes on provided services. The company announced that it does not intend to raise prices because of the new law and its drivers can count on subsequent reimbursement. Nevertheless, some Russian Uber drivers started to give up work. The US startup is trying to catch up the local leader in the market of private transportation, Yandex Taxi. Currently there are in Russia about 3,000 Uber cars, and Yandex Taxi has 15,000 cars. New tax regulations may enlarge this gap.

In the initial version of the Law on VAT for the IT industry, it covered Russian companies too. Yet, it met with great criticism from native industry. The arguments convinced the Kremlin and therefore the law covers only foreign providers of services via Internet. This is to convince Russian IT companies to leave tax havens and register their business in Russia.

Latvia passes new innovation and startup tax law

The tax law has been developed by the Ministry of Economics in collaboration with Latvian startups, represented by Latvian Startup Association. According to the new legislation, a startup is a company with strong growth potential. The government aims to foster development of rapidly growing technological companies or startups and commercialization of research and innovative ideas, products, or processes. That is supposed to stimulate creation of new startups in the country, thereby support research and innovation.

This law refers to new startup employee taxation, relieving the tax cost for qualifying startups. A flat monthly tax of € 252 per employee will enable startup employees drag on a well-qualified workforce recruitment scheme. The government will remunerate all social tax, at the same time abandoning individual income tax for employees and corporate income tax for startups.

Apart from being less than 5 years old, candidate companies should obtain have less than € 200,000 in revenues in their first 2 years of existence, to have already affirmed € 30,000 in venture funding, to have already released an “innovative” product or service, and not be paying dividends.

The new law seems a great step forward and will definitely help startups in Latvia live out in a competitive market. The majority of an IT startup’s costs are salary, therefore this will double the effectiveness of investments, which will further encourage to invest more.

Programmers in Romania released from income tax

Europe lacks programmers, especially IT industry lacks those professionals – the problem face both: highly developed countries and those, that are chasing the forefront. Struggle for professional programmers is a fact, and with time the problem will probably grow. Therefore, companies and countries are developing strategies to give these employees an advantage in this race. An example is Romania, which releases the mentioned professional group from income tax.

The solution may be, of course, to invite programmers from other countries. But after a while, they can leave. A serious increase in the number of students in these field may, in turn, negatively affect the quality of teaching and level of skills of graduates. To give out diplomas will rather not improve the situation. Therefore, companies are increasingly trying to attract their employees to keep them for longer. This direction is followed by countries, just like Romania does it.

Romania wants to exempt from income tax all the programmers. Currently, such a privilege has only a part of them. This way the government wants to keep them in the country. Currently, in Romania, from the income tax there released those programmers, who work for companies whose annual revenue from software sales is at least $ 10 thousand per employee. These rules have been applied since 2004. Recently, the Ministry of Communications of Romania signaled that the state should take further steps to keep the IT experts in the country. The $ 10 thousand limit may be abolished in order to encourage start-ups, especially because IT is the best-paid sector of Romanian economy.

The Hungarians are furious about the new Internet tax

Thousands of people protested in Budapest on Sunday against introduction of a tax on the Internet and data transfer planned by the government.

Last Tuesday the  economy minister Mihály Varga announced that the Internet providers will pay  a tax on the transfer of Internet of their clients in the amount of HUF 150 (EUR 0.5) per each gigabyte. This means that the Hungarians can pay up to twice higher bills for Internet.

In protest, thousands of Hungarians gathered on Sunday evening at the building of the Ministry Of Economy and the building of the ruling party Fidesh. The demonstrators raised up smartphones and launched them at the same time.

The protesters have gathered together on Facebook, where they founded the group “Against internet tax”. Since Tuesday it has been liked by 191 thousand of Internet users. They argue that the planned action will limit the fundamental rights and democratic freedoms. The organizers of the protest gave the government 48 hours to withdraw from these plans. If this does not happen, on Tuesday they will start another protest.

The government wants to tax data transfer on the network next year. The plan assumes that the internet providers will pay EUR 0.49 for each gigabyte of data, which according to estimates by the Ministry of Economy will raise the budget with additional HUF 20 billion per year. Viktor Orbán’s government’s plans are criticized by the internet providers, the opposition, Internet users, trade unions and the European Commission. In their opinion it is a bad idea by which internet rates will rise. It will also impact negatively on the economy, because the Hungarians now use the Internet less than the EU average.