Comment by hinkley
Let's be honest. At a bunch of shops the engineers hired in year 2 will never be properly recouped because the company will be out of business in less than 7 years.
Let's be honest. At a bunch of shops the engineers hired in year 2 will never be properly recouped because the company will be out of business in less than 7 years.
Seems like the incentive is to make as little profits as possible at the start to avoid being killed by taxes. I would have expected an exclusion for companies that make below X dollars or are less then Y years old.
Any incoming revenue, whether from sales or investment is theoretically taxable as income unless the company can show that it was used for an exemption such as an op-expense. This rule classifies dev salaries as cap-ex which have a different exemption process. “Profits” are just revenue minus expenses, the question is what is an expense. This rule classifies some expenses in a modified way that lowers the annual amount of the company’s expenses raising their tax liability.
Start ups are hard, most fail. But what rational national policy makes is several orders of magnitude harder to succeed during the riskiest period by adding tax provisions on pretend profits?