We would like to remind you that IT companies that wish to enjoy tax benefits need to confirm their state accreditation every year. Companies can confirm state accreditation on the Gosuslugi web site from May 8 to June 1 inclusive.

At the same time, experience shows that if the accreditation is not confirmed in due time or if certain criteria are not met as of the time of a compliance assessment, the accreditation can be revoked very swiftly. Last year, as a result of scheduled compliance assessments of accreditation confirmation, about 2,000 companies lost their cherished status, and before that, at the end of 2022, about 7,000 to 10,000 companies lost their accreditation due to improper consent to disclosure of tax secrets.

Although our team has a successful track record of challenging unlawful revocation of accreditation, companies have a better chance of retaining their status if their confirmation is properly submitted with all the necessary details. We suggest reviewing what is needed for confirmation, as well as potential changes to keep in mind.

Procedure for confirming accreditation of an IT company

1. To confirm accreditation, a form must be completed that reflects the following aspects:[1]

• Information on the share of revenues from IT activities.

The company must submit an income statement showing the total amount of income and the percentage of income derived from specific IT activities. Income from all types of IT activities must account for at least 30% of the total income.

• Link to the official web site of the organization, which needs to contain up-to-date information in Russian about the company's IT activities.

The obligation to complete the form for confirming accreditation is waived for:

• IT companies established in 2024 (they need to file an application with a breakdown of the current year’s revenues),[2]

• IT companies applying reduced tariffs for insurance contributions in the first quarter of 2024.

2. Companies need to independently verify whether other criteria are met:

• Relevance of the consent to disclosure of tax secrets (it can be submitted according to the instructions[3]) – all companies should check compliance with this criterion, even if they are not required to complete the accreditation confirmation form.

• The company's average salary level is no lower than the national or regional average.[4]

Rightholders of products included in the register of Russian software do not need to confirm compliance with the salary level criterion, but they do need to specify the name and number of the product in the register of Russian software and the income from its sale in their application for confirmation of accreditation.

When conducting a routine compliance assessment of IT accreditation up to July 1, the Ministry of Digital Development may request any documents or information confirming compliance with the accreditation requirements.

Potential changes to the accreditation criteria

We should note that the Russian Ministry of Digital Development and the Government are still preparing amendments to Clause 1.15 Article 284 of the Russian Tax Code,[5] as well as to the procedure for accreditation of IT companies.[6]

The planned changes imply a tougher regime for IT companies “with a foreign element,” which could lead to them losing their status as an accredited IT company.

i.The proposal is to introduce a criterion for checking whether there is foreign interest in and foreign control over an IT company. According to the new criterion, the share of foreign interest cannot exceed 50%.

ii. The category of "own software" will not include software developed by foreign companies of the group to which the taxpayer belongs. Accordingly, income from the sale of rights to such software, income from its modification, adaptation and provision of services using it will not be recognized as part of a company's IT income.

In addition, it is assumed that IT companies will need to confirm not only the fact of 30% of the company's income being derived from IT activities, but also that 30% of expenses are related to IT.

Some criteria are to be eased:

i. The Ministry of Digital Development proposes to abolish the criterion for verifying the share of income from IT activities for small tech companies established less than three years ago.

ii. The intention is that the regular procedure of confirming accreditation will not be conducted in respect to an organization accredited the same year it is incorporated or in respect to an organization that submitted an application for accreditation after April 25 of the year of the regular confirmation procedure.

The proposed changes are currently under review and our team is monitoring drafts of the proposed changes on an ongoing basis. We will keep you updated on current news related to accreditation of IT companies for tax benefit purposes.

We would also be happy to assist your company if you are still considering obtaining IT accreditation or have already experienced a revocation of such accreditation.