Russia's Finance Ministry Claws Back Tech Tax Breaks to Feed the War Budget

A heated domestic brawl erupted between two state departments after the Ministry of Finance drafted a brutal revision to the Tax Code. Under existing rules, any certified software outfit qualifies for generous preferential rates if at least 70% of its revenue comes from core tech activities, including internal billing between parent companies and their specialized software subsidiaries.

The finance bureaucrats decided to strip all inter-company transactions from that magical 70% revenue calculation, effectively gutting the system for corporate giants that isolate developers into dedicated subsidiaries. Maksut Shadaev, chief of the Ministry of Digital Development, immediately rebelled in a blistering formal letter, refusing to sign off unless the amendment gets scrapped entirely.

The blow falls directly on captive development hubs created by telecoms, banks, and major retailers, which generated an estimated 21.2 trillion rubles in gross turnover during 2025. In these captive subsidiaries, internal intra-group service deals account for between 70% and 95% of their total cash flow. Even among standalone software creators, inter-entity structuring commonly makes up 20% to 40% of their accounting paper trail.

Because human talent eats up 65% to 80% of total operational burn across the software sector, losing these benefits quadruples payroll insurance fees from 7.6% straight to 30%. To make the fiscal squeeze even tighter, corporate profit tax rates for these teams would simultaneously jump from a cozy 5% straight to the standard 25% bracket.

Stripping artificial life-support from captive tech subsidiaries reveals how quickly sovereign tech fairy tales crumble the second empty state coffers demand real tribute.