Outsourcing: countries with the most attractive tax regimes for software development

Apr 04, 2017
Blog

Beyond a skilled workforce and lower wages, companies looking to outsource also look for stable governance and tax incentives when researching locations around the world. Here, we examine the tax attractiveness of some of the best outsourcing options for IT businesses.

Belarus

Belarus offers software and tech-focused businesses a variety of benefits through its Hi-Tech Park (HTP) scheme. The scheme was opened up to businesses with offices across the country in 2006, and now 164 companies with 27,000 software engineers benefit from its corporation tax exemptions and lower income tax rates for employees.

Russia

In Russia, accredited IT and software development firms across the country are able to reduce their social contribution rates by up to 14% and various geographic “special economic zones” also offer reductions in corporation tax and import duties. Of particular interest to tech and IT firms is the Skolkovo Innovation Center near Moscow, dubbed the “Russian Silicon Valley”, where companies benefit from exemptions from corporation tax, property taxes, and VAT, alongside access to grants of up to $5.2m. Skolkovo benefits, however, are available only for product companies.

Ukraine

Software development firms in Ukraine are exempted from VAT and pay lower rates of corporation tax. Businesses based in the country also benefit from the government’s innovative system of digital governance, where contracts and invoices are efficiently delivered and signed over the Internet.

Lithuania

Lithuania offers few tax incentives to IT firms, but boasts an advanced digital infrastructure and a highly skilled workforce. Tech and business parks across the country offer firms easy access to the tools and labour needed to grow their business in the European market.

Estonia

Estonia offers a unique e-residency scheme for businesses to virtually relocate to the country and benefit from its stable government and access to the EU market for a minimal annual fee. The tax regime also incentivises companies to reinvest their profits and international transactions are exempted from VAT.

Other Eastern European options

The skilled workforces and well-developed infrastructure in countries like Poland, the Czech Republic, and Hungary can make them attractive locations for IT firms, but the relatively high rates of corporation and income tax reduce their appeal.

Elsewhere

Countries like Belize and the British Virgin Islands are popular locations for certain types of companies as they offer various offshore business secrecy protections and charge no corporation tax at all. However, they also tend to lack the highly skilled workforce needed to build an IT business, and the locations are treated with suspicion by governments and larger corporations around the world for their lack of transparency.
Other countries, such as the United Arab Emirates (UAE), also charge no corporation tax and have invested heavily in their infrastructure in recent years. But regulations that require all businesses registered in the country to be 51%-owned by a citizen are a major cause for concern to global companies looking to outsource.

Why we chose Eastern Europe

We chose Minsk, the capital of Belarus, for our headquarters because we felt that it offers the best combination of access to a highly talented workforce, strong infrastructure, stable governance and attractive tax incentives for IT businesses. As Andersen has expanded we have looked to find those same benefits elsewhere and have since opened offices in Lithuania, Ukraine, and Russia.
If you want to learn more about our business and how we can help you, please contact us and one of our experts will get back to you as soon as possible.
+375 44 772 45 28
Skype: nichyparovich
E-mail: vn@andersenlab.com
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