THE SOFTWARE SALE FOREIGN CURRENCY EARNINGS Since most of the software development market is export-oriented, the export regulation is important for the market. We would like to note that in Ukraine, business entities may be restricted in their rights to manage currency earnings from foreign economic activity. This restriction is provided for by the following provisions:
Art.387 of the Commercial Code “After payment of taxes and charges (mandatory payments) envisaged by the law, entities carrying out foreign economic activity shall dispose of foreign currency earnings from performed transactions independently, save for the cases of introducing the requirement on the National Bank of Ukraine regarding the mandatory sale of a portion of foreign currency proceeds.
Art. 25 of the Law “On the National Bank of Ukraine” stipulates that the introduction of the requirement regarding the mandatory sale of a portion of foreign currency proceeds for a term of up to six months is one of the main economic instruments and methods of monetary policy. According to Art. 44 of this Law, the NBU’s responsibilities include establishing the procedure for mandatory sale and the amount of foreign currency proceeds.
At present, the NBU has exercised its authority and restricted the rights of business entities to dispose foreign currency earnings. The Resolution of the NBU Board No.45 of May 30, 2017 established the requirement for legal entities and IEs to sell 50% of foreign currency proceeds. This mandatory sale of foreign currency proceeds is carried out without the client’s order the next working day after crediting such earnings to a clearing account (para.5 of the NBU’s Resolution No.45). We would like to note that in spite of the fact that Art.25 of the Law on the National Bank of Ukraine provides for this restriction on a temporary basis and the NBU’s Resolution No.45 remains in force until December 13, 2017, we can’t say that this obligation is temporary. This is due to the fact that, in practice, the requirement for mandatory sale of foreign currency proceeds have been valid in Ukraine for many years, as the NBU adopts a new resolution immediately after the expiration of the previous one. At the same time, the NBU de jure complies with the requirement for a six-month period of the restriction, but this restriction is de facto in effect for more than six months. As noted above, software development companies spend 60-80% of their income to pay to developers. Since these payments are made within Ukraine, they should be made in hryvnas. Therefore, we believe that this regulatory tool does not restrain the development of service companies in the market and has no negative impact on them. At the same time, we think that product companies selling their products/services in the global market are very sensitive to such regulatory instruments. In our opinion, this requirement has a negative impact on the development of product-oriented companies.
TAXATION OF VAT TAX INCENTIVES FOR SUPPLY OF SOFTWARE PRODUCTS There is a special tax incentive, which stimulates the supply of finished software products, for companies in the market: operations on the supply of software products shall be exempt of paying the value added tax from January 1, 2013 to January 1, 2023. The relevant rule is provided for in the para.26 of subsection 2 of section ХХ of the TCU.