RA tax legislation as applied to startups: whether tax benefits granted to IT startups are effective to ensure the sustainable development of IT sector

Abstract

The paper illustrates the RA Law on State Support to the IT sphere and identifies the positive and negative affects it has or may have on the IT sector. In order to provide a comprehensive understanding of the global IT industry and its importance, the commitments of tech lead countries in providing state support to newly organized business entities engaged in IT activities have been studied. The governments tend to create IT friendly business environment, because they are sure that any development in that sector will lead to significant development in the economy. As a fragile business entity, startups need more privileges to succeed, hence, most of the benefits enshrined in the state legislations inferred to them. Regardless of geographical position and development level, countries amend their legislations in favor of startups, among which are Latvia, Singapore, India and Armenia. In addition to tax privileges, Latvia, India and Singapore provide a wide range of other benefits, such as low rate credits, aid programs, simple registration process, links to investors, intellectual property protection, easy exit which, in parallel with tax benefits, create a favorable business environment for SME-s.