Tax Incentives for IT and Game Development Businesses

Governments worldwide employ tax incentives to attract innovative industries, including IT and game development. Among the various kinds of taxes, corporate income tax (CIT) often poses a significant financial burden. That is why many incentives are designed to reduce CIT, making certain jurisdictions more attractive to businesses.

One rule now sits above all the others, and it took shape between 2024 and 2026. Under the OECD's Pillar Two framework, multinational groups with consolidated revenue of at least EUR 750 million in two of the last four years face a 15% global minimum effective tax rate. Wherever a local regime pushes the effective rate below that level — a free-zone 0%, an IP-box, a deferral — a top-up tax closes the gap back to 15%. For companies under that threshold, the incentives covered below apply in full. For large groups, the reduced rates now act as a floor of 15%.

Listed below are the most common CIT-related incentives suited to IT and game development companies.

Tax Relief Through IP-Box Regimes

Why Is This Advantageous?

Businesses benefit from a reduced CIT rate or a lower taxable base on profits derived from intellectual property (IP).

Countries Offering This Regime

• Cyprus
• UAE
• Kazakhstan

Best For

Companies that develop, license, or publish software and games.

How It Works

IP-box regimes reduce the tax on profits generated from intellectual property.

• In Kazakhstan, Astana Hub residents pay 0% CIT and 0% VAT; the core exemptions for IT and gamedev run to January 1, 2029.
• Cyprus allows an 80% reduction on the taxable amount. From January 1, 2026, the corporate rate rose from 12.5% to 15%, so the effective rate on IP income is now about 3% (15% on the remaining 20% after the deduction).
• The UAE offers a 0% CIT rate under certain conditions. That still holds for smaller businesses; large multinational groups are topped up to 15% via the Domestic Minimum Top-up Tax.

Example

A UAE-based company with an 80% nexus ratio and $1,000,000 in IP-derived profits pays 0% tax on $800,000. The remaining $200,000 is taxed at the regular 9% rate.

Important Considerations

IP-box systems are useful, but they require accurate record-keeping and apply only to royalty and licensing income. Development services do not qualify.

The right incentive depends on your company's structure, activities, and goals. To use these opportunities fully, it is worth consulting a professional tax advisor. That way the tax strategy can be tailored to the specific needs and future plans of the business.

Increased Deductions for R&D Costs

Why Is This Advantageous?

A company can deduct software development costs at rates above 100%, delivering immediate financial relief instead of treating these costs as capital investments.

Countries Offering This Incentive

• Czech Republic
• Denmark
• UAE

Who Benefits Most

Firms with significant R&D expenditure — for example, startups with high cash-burn rates.

How It Works

A company incurring R&D costs generally has two accounting options:

• Deduct the expenses immediately.
• Capitalize the costs as intangible assets.

Several countries allow deductions at enhanced rates, effectively amplifying the deductible amount for tax purposes. For example, a company with $1,000,000 in revenue and $300,000 in development costs normally deducts the full $300,000, leaving $700,000 subject to CIT. In the Czech Republic, from January 1, 2026, the additional allowance was raised from 100% to 150% of costs (up to CZK 50M), so up to 250% can be claimed, and in this example the taxable base falls to $250,000; the window to claim was extended to five years.

Denmark follows a similar path: its enhanced deduction is rising on a schedule toward 120% by 2028 (up to a DKK 1bn cap), and loss-making companies can take a 22% payout on their development costs. From January 1, 2026, the UAE joined this list, introducing an R&D tax credit on a 15–50% sliding scale of qualifying spend; in its first phase it is non-refundable, with the credit itself capped at around AED 2 million.

When Is This Beneficial?

This incentive is most useful for companies with substantial R&D expenses — large teams or complex projects, for instance. Companies that expect considerable development costs should look closely at these jurisdictions.

Deferred Corporate Income Tax

Why Is This Advantageous?

CIT is deferred until profits are distributed as dividends, which makes cash-flow management noticeably easier.

Countries Offering This Incentive

• Estonia
• Georgia

Ideal For

• Holding companies
• Venture capital funds investing in IT or gamedev
• Departments with operational costs outside R&D

How It Works

In a conventional tax system, CIT is paid annually on profits. In countries like Estonia and Georgia, a company pays CIT only when earnings go to shareholders. The rate in Estonia itself has risen to 22%: distributed profit is taxed at 22% (22/78) in both 2025 and 2026. A previously planned increase to 24% and a 2% defence tax were cancelled by the Riigikogu in December 2025. The reduced 14/86 rate on regularly distributed dividends was abolished.

Example

If a company earns $500,000, it can reinvest the entire amount with no immediate tax liability. Tax is paid only when dividends are distributed — at 22% (in both 2025 and 2026).

Key Benefits

This model rewards reinvestment: the payment is postponed, so the business can fund growth, acquire assets, or build a portfolio without tax constraints.

Choosing a Jurisdiction in 2026

The headline incentives survived, but the gap between "0%" jurisdictions and mid-tax ones has narrowed for anyone in Pillar Two scope. Two of the R&D regimes, the Czech and the UAE one, became more generous. So the right structure now depends less on chasing the lowest headline rate and more on group size, where the IP genuinely sits, and the type of income. Licensing and royalties are what the IP-box rewards; development-service revenue does not qualify.

Futura helps IT and game development companies build a tax and corporate structure around a specific business model: where to place the IP, how to account for Pillar Two, and which incentives actually apply. If you are planning a launch or a restructuring, we will review your situation and propose a workable option.

This material was updated in July 2026 by the Futura team.