Date added: : 07.07.2014

Every citizen of the Russian Federation, who is also the owner of a software development company, sooner or later has the idea of registering an offshore company. This is a great opportunity to receive stable income and gain confidence in the future. That is why this issue should be given sufficient professional attention.

The main provisions that must be taken into account are the following:

  • registration of an offshore / foreign company and determination of its jurisdiction;
  • selecting and opening an account with an international bank, the work with which will be mutually beneficial and convenient for the client and the software developer;
  • optimization of taxation principles. In the Russian Federation, for example, the company, which main activity is software development, pays income tax, since there are no actual expenses related to this sphere.

The following issues arise from the above:

  • establishment of an offshore company for contributing the main assets to it, as well as ensuring the activities of a legal entity that will act as a distributor of the company in the Russian Federation;
  • competent and professional assistance with which registration of the right to software becomes possible and convenient. As a result, the company will be issued a registration certificate for the software, and it will be recognized by the author of this product.

It seems that everything is extremely clear. The company is engaged in the development and sale of software rights. It receives income from royalties. The developer, who is a resident of Russia, pays the income tax under the law of the Russian Federation. If the foreign person is the rightholder, he can pay royalties outside the Russian Federation, paying tax in own country.

Transfer of income from the Russian Federation to an account of the foreign person provides for charging the withholding tax with a base rate of 20%.

How to reduce income retention?

As an option to reduce tax payments, availability of the double taxation agreement between Russia and the country where the right holder is registered is considered. So withholding tax is not levied on royalties coming from Russia to countries such as:

It is necessary to note that, of course, it is unlikely that somebody wants to register an offshore company in North Korea. It is also not necessary to take into account those countries where taxation is considered as high. But there are also states in the list, the rates of income tax in which attracts by their low level. These are Cyprus (10%), Hungary (10%), Ireland (12.5%). In addition, Cyprus, the Netherlands, Hungary and Luxembourg do not charge withholding tax on payments made to third countries.

As an independent rightholder, countries with a low level of income tax rates can be considered.

As an intermediate recipient, a country can be used where no withholding tax is levied for granting royalties abroad. Any tax-free offshore company can become the final recipient. Given that there are two companies in this structure, it may be possible to achieve a fairly low tax burden.

What determines the choice of the format of activity?

First of all, you need to understand the features of each particular project. For example, in the case when an application is being sold via the AppStore in Russian, royalties are paid by an American company. Hence, withholding tax will be paid according to the rates of the USA. A list of countries considered as possible recipients of royalties, as well as a list of registration places or locations, will be different.

Pay attention to the fact that a foreign company can immediately register the rights to the software, later expanding the patent to other countries. And registration of the right to computer programs is not provided at all in some countries . Then indirect methods should be used to confirm ownership.