The Tax Compliance team is launching a series of materials in which it will talk about the application of increasing coefficients to certain types of expenses. The first such type is expenditure on the acquisition of Russian software and databases included in the unified register of Russian computer programmes and databases. 

Against the background of a general increase in the tax burden of business, primarily due to the increase in the basic rate of profit tax, mechanisms of legal tax optimisation are becoming particularly relevant. The use of increasing coefficients when recognising expenses is one of such mechanisms. 

The essence of the benefit

When applying an increasing coefficient, the taxpayer is entitled to include the amount of actually incurred expenses multiplied by the value of the coefficient in the calculation of the corporate income tax base. As a result, the company artificially, but quite legally, increases its expenses for taxation purposes. 

This preference for software and database costs has existed since 2022, but during the summer tax reform the legislator significantly modified it. 

Benefit before the tax reform

Until recently, the value of the increasing coefficient was 1. 5 and it applied to expenses for the acquisition of exclusive and non-exclusive rights to software that met the following criteria: 

• The programme is included in the Unified Register of Russian Computer Programmes and Databases (Unified Register);
• The programme relates to the sphere of artificial intelligence (AI). 

The proof of attributing the Software to the sphere of AI is a corresponding mark in the Unified Register. The decision on making the mark is made by the Ministry of Digital Rights and Freedoms of the Russian Federation on the basis of verification of the information submitted by the right holder. It is noteworthy that the legislation does not stipulate specific attributes of programmes containing AI components. 

In practice, the increasing coefficient of 1, 5 is not widely spread among taxpayers. The main reason is that at the moment most companies do not need software with AI components to carry out their business activities. 

Benefit after tax reform

In the summer of 2024, two important amendments were made to the Tax Code with respect to the application of the increasing coefficient: 

• The value of the coefficient was increased to 2;
• The requirement for mandatory attribution of software to the sphere of AI was cancelled. 

Thus, the only condition for the application of the multiplying coefficient to the expenses for the acquisition of software rights became the presence of information about it in the Unified Register. The introduced changes will come into force from 2025. 

It can be expected that the new parameters of the increasing coefficient will make it available to a wide range of taxpayers, since both large, medium and small IT companies regularly register their products in the Unified Register.