"Game companies are currently abandoning the Emirates in favor of other destinations," says Irma Novikova from Prospectacy about the outcomes of 2024
We continue to wrap up the year 2024 with teams involved in gaming or the gaming business. Up next is an interview with Irma Novikova, an international law attorney at Prospectacy.
How was this year for the company? What achievements would you like to highlight?
This year has been as busy and productive as always for Prospectacy. We encountered numerous interesting cases requiring unconventional approaches, creative solutions, and ingenuity.
We extensively worked in niches like IT, digital, and game development. We significantly expanded our expertise and geographical reach in company setups and relocations.
This departing year allowed us to focus not only on our ongoing work in jurisdictions such as Cyprus, the USA, and the UAE, but also on the CIS region: we extended our comprehensive services to countries like Armenia and Kazakhstan.
In the near future, we hope to present new solutions that will undoubtedly benefit our clients, especially considering the specifics of the gaming industry.
Additionally, this year we've actively started developing our Telegram channel! It’s a new and very intriguing field for us — we discuss complex topics in simple terms (concerning legislative innovations, taxes, and other business-friendly subjects).
How did the relocation market for gaming companies change in 2024?
In 2024, we observed the second wave of development for IT companies that relocated in the first wave. We see these companies have become more active in the international market. Their projects are now fully international, and their investments are drawn exclusively from foreign sources.
We also noted that some clients’ expectations, who relocated their companies, somewhat diverged from reality, including their initially planned organizational structure. As many employees from such companies chose to relocate to other third countries, moving and distributing across various jurisdictions, this complicated the companies’ operational structure. Furthermore, these companies encountered local business nuances, which became evident over a couple of years.
Compared to last year, we've noticed a shift in client approach – developers are choosing jurisdictions for business setup more thoughtfully and steadily. There's an increasing demand for comprehensive solutions in contract structuring, international taxation, structural arrangements, and risk assessment during relocation.
Based on interactions with clients and gaming conference participants, it became clear that the need for relocation isn't diminishing; rather, it's growing to some extent. There's a rising interest among game developers in relocating to more friendly countries. Based on 2024 requests, we observe the continued trend of interest in Cyprus among clients.
There's been a reassessment of the previously very popular jurisdiction – the UAE. Currently, businesses, including gaming companies, are opting out of the Emirates in favor of other directions. This is largely due to the introduction of income tax on almost all legal entities, complicating and increasing the cost of opening bank accounts, as well as the lack of significant IT benefits and signed tax treaties to avoid double taxation (DTAs) with some countries and the current review of such an agreement with Russia towards higher tax rates.
Regarding the increased interest in CIS countries, throughout the year at conferences, we observed that such interest isn't yet so much in the form of business relocation but rather in the form of opening businesses to establish a communication channel with the international market, including overcoming financial and payment challenges that remain prevalent.
What areas did gaming companies most frequently seek assistance in this year?
It's challenging to identify distinct areas where gaming companies sought assistance. Each case is unique.
This could include extensive tasks for comprehensive business establishment or separate issues: developing optimal taxation and financial flow schemes, obtaining benefits for IT companies in various jurisdictions, supporting international transactions, intellectual property rights regulation and protection, and many others.
Notably, companies that stayed in Russia sought solutions for accessing the international market through the CIS without relocating.
An important focus was working with company founders regarding their residency, lost residency, and the complexity of their income sources.
Additionally, a frequent issue this year was addressing tax matters related to Russia suspending certain DTA provisions, which we frequently encountered in practice this year. Overall, tax issues have come to the forefront due to their complexity and the suspension of DTAs, including examining in which cases and directions the suspended DTA provisions now apply. Moreover, this year, the U.S. mutually suspended its tax agreement with Russia, adversely affecting tax rates and offsets.
