The Transfer of Rights to Know-How Under a Commercial Concession Agreement is to be Exempted From VAT

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On February 21, the government of the Russian Federation introduced to the State Duma a draft law on the exemption from value added tax (VAT) on operations of transfer of exclusive rights to objects of patent law, topology of integrated circuits, production secrets (know-how), as well as rights to use these results of intellectual activity under a commercial concession agreement, "Parlamentskaya Gazeta" (Parliament News) said.

The bill has already passed its first reading in the State Duma Committee on Budget and Taxes. The Government proposes to release tax agents from their obligations, which should reduce the tax burden for Russian taxpayers who acquire exclusive rights under commercial concession agreements from foreign persons. In addition, the adoption of the draft will ensure the unification of tax conditions in the turnover of intellectual property with regard to VAT taxation.

Today transactions involving the transfer of exclusive rights on the basis of a license agreement are not subject to VAT. Adoption of the draft will encourage business and other economic entities to conclude commercial concession agreements, which, in turn, will contribute to economic growth and increase tax deductions.





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