22.01.08

A VAT exemption for software sales which came into force on January 1, 2008 will not include software retail sales.

According to the amendments for the Tax Code, starting January 1, 2008, the VAT exemption is effective for “transactions with transfer of exclusive rights for computer software and databases,” and “transfers of exclusive rights for use of the results of intellectual activity based on license agreements.” In other words, the implemented amendments made only licensing software sales VAT-exempt.

However, according to the Ministry of Finance the new exemption will have a limited sphere of application. In a letter from the Deputy Head of the Ministry of Finance to the Information & Computer Technologies Industry Association explains that the VAT exemption will not apply to retail sales of so-called “boxed” software. The reason: to make the exemption valid, a license agreement with a customer must exist at the time of sale. Yet, retail buyers enter into end-user agreement later and only during the installation of the software.  

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