Belarus is the best place for your investment
- Strategically advantageous location
- Direct access to the markets of 5 member states of the Eurasian Economic Union (Russia, Belarus, Armenia, Kazakhstan, Kyrgyzstan)
- Highly qualified workforce
- Competitive investment climate
- Developed logistics infrastructure
- Favourable tax regime
It is definite that benefits from reducing tax burden by using preferential tax regimes create a competitive advantage for businesses. Depending on the sphere and range of activity companies can choose the following regimes:
- High-Tech Park (HTP);
- Free Trade Zones (FTZ);
- The China–Belarus Great Stone Industrial Park;
- The territory of medium-sized and small towns, rural areas;
- Orsha Region of Vitebsk Oblast.
While tax planning and business structuring through preferential tax regimes, consideration must be given to:
– a lot of factors and conditions that influence the right to apply tax preferences;
– risk inherent in participation of such companies in intragroup transactions;
– complex methodology for calculation of the tax base subject to relief;
– greater attention from the regulatory authority, etc.
Saving taxes in a not prohibited manner does not constitute a violation of applicable legislation. However, while planning transactions, as well as business organization, it has to be considered that if the main purpose of conducting business transactions is to underpay taxes, a company will have to adjust its taxable base. Therefore, when taking a decision on applying tax privileges it is necessary to analyze a lot of factors that can influence a company’s success and future.
High-Tech Park (hereinafter — the HTP) is a unique preferential regime provided by the Republic of Belarus for carrying out activities in the IT sphere.
The HTP regime established by the Decree of the President of the Republic of Belarus as of 22.09.2005 No12 “On the High Technologies Park” is valid till January 1, 2049 and operates on the principle of extraterritoriality.
How to become a resident of the HTP?
For becoming a resident it is necessary to provide the Hi-Tech Park Administration with the certain package of documents, the most important of which is a business project planned to be implemented as the HTP resident. The HTP Administration reviews the submitted documents and takes a decision on admission to the HTP, taking into consideration that the business plan meets the goals and objectives of the Park, and namely: development of new and high technologies. If necessary, scientific and technical expertise of documents can be conducted. The documents are reviewed within one month from the date of filing.
Procedure for carrying out foreign trade transactions has been significantly simplified for the HTP residents. Residents have a right to conduct operations with electronic money without a range of limitations, to open accounts in banks and non-banking credit and financial institutions in Belarus and abroad and make settlements through such accounts; procedures for employment of foreigners, their entry to the country and obtaining by foreign employees a temporary residence permit have been also considerably simplified.
The HTP residents are entitled to perform cryptocurrency mining, activity of the cryptocurrency exchange operator, activity of the ICO organizer and other activities. Until January 1, 2023 activities related to mining, creation, purchase and sale of tokens are exempt from taxation.
Within the HTP regime, some norms of the international law have been introduced to the Belarusian legislation, which were not available or difficult to implement for the HTP non-resident companies within the limits of the Belarusian legislation.
Such norms include inter alia the right of the HTP residents:
- to conclude between themselves and/or with third parties convertible loan agreements;
- to conclude between themselves and/or with third parties agreements on granting an option for conclusion of a contract and option agreements;
- to complete and/or execute transactions using smart contracts;
- to conclude between themselves and/or with third parties property loss indemnity agreements;
- to conclude non-compete agreements with their employees;
- to be founders (members, shareholders) of companies being created (created) abroad, to participate in management of such companies, also from the territory of the Republic of Belarus, as prescribed by laws of the respective foreign states;
- to issue irrevocable powers of attorney for a period of more than three years.
There is a range of tax benefits applicable within the preferential regime. At that, the legislation doesn’t provide for the intended use of tax amounts not paid to the budget due to tax privileges.
Contributions to the Social Security Fund and personal income tax
— insurance premium for the HTP residents’ employees is calculated on the basis of the average monthly salary in Belarus. As of August 2018 the average salary amounted to 550 USD;
— income tax for the HTP residents’ employees is 9 %.
Corporate profit tax
The HTP residents are exempt from the corporate profit tax. The privilege applies to all gross profit received in general from the activity the HTP residents are entitled to perform under the HTP regime.
However, some activities are subject to a reduced tax rate of 9%::
– profit from a member’s alienation of its share (part of it) in the authorized capital;
– profit from selling an enterprise as an asset complex;
– profit from selling (redemption) of securities;
– profit as interest on money loans, dividends from sources outside Belarus, as well as a number of other profits provided for by the Tax Code of Belarus.
Corporate profit tax benefits cannot be applied by the HTP residents to profits from their disposal of used property (including real estate) upon expiration of not less than 12 months from the date of its purchase. In this case the usual tax rate of 18% applies.
The HTP residents are exempt from VAT on turnover from sales of goods (works, services) and property rights in the territory of the Republic of Belarus.
In some cases the HTP residents shall assess and pay VAT at the rates prescribed by the legislation:
when exporting goods the HTP residents have a right to apply the tax rate of 0%, provided there are supporting documents;
when renting out property VAT rate of 20% applies;
when disposing of property upon expiration of 12 months from its purchase the tax rate of 20% applies.
The HTP residents are not exempt from VAT charged by customs authorities.
Generally, when purchasing services from foreign companies and Belarus is recognized as the place of supply of such services, the HTP residents shall pay VAT to the budget at the rate of 20%.
At the same time there are certain cases when the HTP residents are exempt from VAT when purchasing some objects from foreign entities. Such cases include purchase of:
1) property rights to items of intellectual property.
2) advertising, marketing, consulting services;
3) services for data processing;
4) works (services) on development of computer programs and databases (software and data products), adaptation, modification and maintenance of such programs and databases;
5) services for provision of disk space for placing information on the server and/or services for its maintenance, works (services) involving designing, development, figuration and modification of web-pages, creation of databases and provision of access to such databases;
6) services involving data search and/or provision of data on prospective customers to clients).
The HTP residents are exempt from offshore duty when paying for advertising, marketing and intermediary services, as well as when paying dividends to their founders.
The HTP special regime provides for 0% withholding tax on profits from:
– alienation of shares (equity interests, stocks) or pats thereof in the authorized capital of an HTP resident company;
– activities involving processing of data and placement of information, web-hosting (including all-inclusive services for web-sites management);
– services for processing of data provided by a client and preparation of special-purpose reports based on such data;
– services for input and processing of data (including services involving database management, data storage, providing access to databases);
– providing place and time for advertising in the Internet;
– web-portals using search engines for the purposes of creation and maintenance of large databases of internet addresses and content in the format ensuring easy data search;
– provision of disk space and/or communication channel for placing information on the server and provision of services for its maintenance;
– debt obligations of any kind whatsoever, royalty;
– intermediary services, advertising services.
Dividends paid by the HTP residents to foreign companies are subject to tax at the rate of 5%, unless a more preferential regime is provided by the international treaties of the Republic of Belarus.
Decree of the President of the Republic of Belarus as of 22.09.2005 No 12 “On the High Technologies Park”;
Decree of the President of the Republic of Belarus as of 21.12.2017 No 8 “On the development of a digital economy”.
A Free Economic Zone (FEZ) is a part of the territory of the Republic of Belarus with strictly defined boundaries and a special legal regime establishing more favorable conditions for carrying out investment and entrepreneurial activities.
There are six FEZs established in the Republic of Belarus for the period up to December 31, 2049: Brest, Minsk, Gomel-Raton, Vitebsk, Mogilev and Grodnoinvest.
Registration and requirements for FEZ residents
FEZ residents are Belarusian legal entities located within the borders of the FEZ and concluded the agreement on activity in FEZ with FEZ administration.
To obtain a status of FEZ resident the following conditions should be met:
- not less than 1 mln EUR of investments to the project implementation (or 500 thousand EUR within three years from the date of registration).
- establishment and/or development of export-oriented production and/or import substitution.
The period of FEZs existence is determined until December 31, 2049. Accordingly, tax benefits also apply until the date specified.
A special regime of taxation of FEZ residents apply to:
- sales of own goods (works, services) produced in the territory of FEZ to foreign legal entities and/or individuals outside the Republic of Belarus;
- sales of own goods (works, services) produced in the territory of FEZ to other FEZ residents;
- sales of own goods produced in the territory of FEZ to foreign legal entities and/or individuals outside the Republic of Belarus.
Profit of FEZ residents from sales of own-produced goods (works, services) is exempt from profit tax.
To apply this tax benefit FEZ residents are obliged to maintain separate records of revenue (income), costs (expenses), amounts involved in determination of the tax base for taxes, charges (duties) on the activities to which a FEZ special taxation applies. If no separate records of such revenue (income), costs (expenses) and amounts are maintained, calculation and payment of taxes, charges (duties) is made by FEZ residents without applying this tax benefit.
Real estate tax
- FEZ residents are exempt from real estate tax:
within three years, starting from the quarter, on which the date of registration of an entity as a FEZ resident falls, on the items subject to this tax, located in the territory of the respective FEZ and acquired (occurred) in the specified three-year period, regardless of the direction of their use.
- on the items subject to real estate tax located in the territory of the respective FEZ , regardless of the direction of their use. This privilege is granted in the quarter, if in the preceding quarter FEZ residents sold goods (works, services) to which FEZ special taxation regime applies.
From the land tax are exempt:
- land plots of FEZ residents located within FEZ boundaries and granted to them after their registration as FEZ residents for construction of facilities, from the first day of the month, on which the date of said registration falls, till the month (inclusive) when the last of the construction facilities, for which a land plot is granted, is accepted for operation, but no more than five years from the date of registration as FEZ resident;
- land plots of FEZ residents, regardless of their designated purpose, located within FEZ boundaries. This privilege is granted from the first day of the first month till the last days of the third month of the quarter, if in the preceding quarter FEZ residents sold goods (works, services) to which FEZ special taxation regime applies. Herewith, it should be noted that this privilege applies till the end of FEZ existence, i.e. December 31, 2049.
The custom’s procedure of the free customs zone applies in the territory of FEZs, which means that goods are placed and used within the territory of FEZs or their part without paying customs duties, taxes, special duties, anti-dumping, countervailing duties, subject to the conditions of placing the goods under this customs procedure and use in accordance with it.
FEZ residents are exempt from customs payments:
- when importing to the free customs zone, for the purposes of the declared investment project implementation, construction materials, equipment, as well as raw stock, materials and components for manufacture of products;
- when exporting outside the customs territory of Eurasian Economic Union unchanged foreign goods placed under the custom’s procedure of the free customs zone, as well as goods produced using foreign raw stock (materials, components).
- FEZ residents don’t pay VAT charged by customs authorities, when exporting to the customs territory of Eurasian Economic Union goods produced using foreign products (raw stock, materials and components) placed under the custom’s procedure of the free customs zone.
Customs charges are paid when exporting to the customs territory of Eurasian Economic Union unchanged foreign goods placed under the custom’s procedure of the free customs zone, as well as goods produced using foreign products (raw stock, materials and components).
Law of the Republic of Belarus as of 07.12.1998 No 213-З “On Free Economic Zones”;
Decree of the President of the Republic of Belarus as of 09.06.2005 No 262 “On certain matters of operation of free economic zones in the territory of the Republic of Belarus”;
Chapter 41 of the Tax Code of the Republic of Belarus.
China-Belarus Industrial Park “Great Stone” is the center of strategic partnership of the Republic of Belarus and People’s Republic of China based on intergovernmental agreements.
Residents of the Industrial Park are legal entities of the Republic of Belarus which are located in the territory of the Industrial Park, registered as its residents according to the procedures prescribed by the Park administration and implement (plan to implement) an investment project in the territory of the Park.
To be registered as residents of the Park the following requirements shall be met:
- The legal entity plans to implement an investment project in the territory of the Park that complies with the main areas of the Park activities, and namely creation and development of industries in the areas of:
-electronics and telecommunications,
– fine chemistry,
– mechanical engineering,
– new materials,
– comprehensive logistics,
-electronic commerce, –
-activity involving storage and processing of large data volumes,
-research, development, and engineering.
2. Declared amount of investment for the project implementation of at least 500 000 USD if investing within 3 years (5 000 000 USD if investing within longer period), and for research and development projects – regardless of the period.
The Industrial Park residents are exempt from profit tax with regard to the profit received from sales of goods (works, services) of own production, manufactured (preformed, provided) in the territory of the Industrial Park — within 10 calendar years from the first tax period (inclusive) in which gross profit occurred for the reporting period in cumulative total over the tax period, including profit from sales of such goods (works, services).
After the expiry of ten years’ period and untill 14.06.2062 profit tax is paid at the standard rate reduced by 50 percent (according to applicable legislation it is 9% instead of 18%).
Untill 14.06.2062 foreign exchange differences are not included into non-operating income and expenses.
Untill 14.06.2062, the Industrial Park residents are entitled to:
— full deduction of VAT sums relating to the goods (works, services) purchased (paid while importing into the territory of the Republic of Belarus) in the territory of the Republic of Belarus, as well as property rights used for development of urban planning projects, along with construction, equipping building and structures located within the Industrial Park, regardless of the assessed VAT amounts.
Real estate tax, land tax
Till 14.06.2062 the Industrial Park residents are exempt from:
— real estate tax on facilities/premises within the Industrial Park, regardless of their designated use;
— land tax on the land plots within the Industrial Park.
Personal income tax
The rate of personal income tax on dividends accrued by residents of the Industrial Park to their founders (participants, shareholders, property owners) being either Belarusian or foreign individuals, is 0% for 5 calendar years.
Untill January 1, 2027, income of individuals gained under labor agreements (contracts) with residents of the Industrial Park is subject to personal income tax at the rate of 9%. (the standard rate is 13%)
Untill January 1, 202,7 income of individuals in the amount not exceeding 500 basic values during a calendar year and not related to performing their employment duties is exempt from personal income tax.
Tax on income of foreign entities having no representative office in the Republic of Belarus
Untill January 1, 2027, royalty tax rate for the Park residents’ royalty payments to foreign entities having no representative office in Belarus made as remuneration for information on industrial, commercial or scientific experience (including know-how), payments for a license, patent, utility model, scheme, formula, industrial design or process, is 5%.
Income tax rate on dividends distributed by the Park residents to their founders (members, shareholders, property owners) being foreign companies – actual owners of income, is 0% for 5 calendar years since the first accrual of dividends.
Social Security Fund
The social security contribution is calculated on the basis of an amount that is not more than the average salary in Belarus for the preceding month.
The Industrial Park residents are entitle to apply the customs procedure of a free customs zone, which makes it possible to import goods and then export them (including processed goods) outside the Eurasian Economic Union without paying VAT and customs duties.
Goods manufactured by the Park residents within the free customs zone are exempt from import VAT in case of their sale in Belarus.
Decree of the President of the Republic of Belarus as of 12.05.2017 No 166 “On the improvement of the special legal regime of the China-Belarus Great Stone Industrial Park”.
For the purposes of development of small urban settlements of the Republic of Belarus, as well as creation of favorable conditions in such settlements for small and medium-sized businesses, the legislation provides for a number of tax privileges to support business entities carrying out activities in rural areas, medium and small-sized towns. One of these regulatory legal acts is the Decree of the President of the Republic of Belarus as of May 7, 2012 N 6 “On the stimulation of entrepreneurial activity in the territories of medium-sized, small urban settlements, rural areas” (hereinafter — the Decree N 6).
To apply tax benefits Belarusian business entities shall comply with all of the following conditions:
– to be registered in the Republic of Belarus with location in the territory of medium and small-sized towns and rural areas;
– to manufacture goods (perform works, provide services) in the territory of medium and small-sized towns and rural areas.
Territory of medium and small-sized towns, rural areas is the territory of the Republic of Belarus, except for the cities of Baranovichi, Bobruisk, Borisov, Brest, Vitebsk, Gomel, Grodno, Zhodino, Zhlobin, Lida, Minsk, Mogilev, Mozyr, Molodechno, Novopolotsk, Orsha, Pinsk, Polotsk, Rechitsa, Svetlogorsk, Slutsk, Soligorsk.
The Decree N 6 can be applied by:
1. business entities of the Republic of Belarus;
2. separate subdivisions of business entities of the Republic of Belarus.
Branches and/or other separate divisions of Belarusian business entities that manufacture goods (perform works, provide services) in the territory of medium and small-sized towns and rural areas, have a separate balance sheet and bank account for conducting their activities.
Corporate profit tax.
Business entities of the Republic of Belarus, separate subdivisions are exempt from profit tax within seven calendar years from the date of their state registration (for separate subdivisions — from the date of decision on creation of such separate subdivisions) in relation to profit gained from sales of goods (works, services) of their own production, unless and until all of the following conditions have been fulfilled:
1) they obtained a certificate of own production from the Belarusian Chamber of Commerce and Industry and showed it to the tax authorities.
2) they maintain separate records of revenue received from sales of own-produced goods (works, service) to which profit tax benefits apply, as well as separate records of expenses for production and sale of such goods (works, service).
3) goods (works, service) to which profit tax benefits apply shall be produced (performed, provided) by business entities without using their fixed assets and employees’ work outside the territory of medium and small-sized towns, rural areas, i.e. business entities applying for the said benefits shall produce their goods (perform works, provide services) only in the territory of medium and small-sized towns, rural areas.
An exception from this rule is services for transportation of cargo, passengers and luggage by road.
Real estate tax
Business entities of the Republic of Belarus, separate subdivisions are exempt from real estate tax within seven calendar years from the date of their state registration (for separate subdivisions — from the date of decision on creation of such separate subdivisions), provided that:
– real estate is located in the territory of medium and small-sized towns, rural areas.
– in the preceding quarter business entities, separate subdivisions sold own-produced goods (performed works, provided services) to which the profit tax privileges prescribed by the Decree No 6 apply.
Goods, not older that five years, imported to the Republic of Belarus for contribution in kind to the authorized capital of newly established legal entities are exempt from import customs duties. Such goods include: different technological equipment, trailers and semi-trailers and some industrial trucks.
Some limitations on use and/or disposal of such goods apply to such goods. They are considered to be conditionally released and are under customs control. Such goods can be used with certain limitations during five years
Decree of the President of the Republic of Belarus as of May 7, 2012 N 6 “On the stimulation of entrepreneurial activity in the territories of medium-sized, small urban settlements, rural areas”
From January 1, 2019 the Decree of the President of the Republic of Belarus as of December 31, 2018 N 506 “On development of Orsha Region of Vitebsk Oblast” introduced substantial tax benefits and preferences for legal entities of Orsha Region.
- Tax rates when applying the simplified tax system:
- 1% – on profits from sales of own-produced goods;
- 2% – on profits from sales of own-produced works (services).
- Investment deduction for the purposes of profit tax apply in the following amounts:
- in relation to buildings, structures and transfer mechanism used in entrepreneurial activities conducted in Orsha Region, — up to 30% of historical cost (the standard rate is 15%);
- in relation to machinery and equipment, as well as transport facilities – up to 50% of historical cost (the standard rate is 30%).
- Money and property donated by legal entities of the Republic of Belarus to the entities of Orsha Region reduce the donor-party’s profit tax base, and the receiving party is exempt from the tax.
- When importing by the legal entities of Orsha Region to the Republic of Belarus certain kinds of goods, exemption from VAT applies.
- Customers (developers) have a right to refund from the budget the excess input VAT when purchasing goods (works, services) used for construction and fitting out of facilities in the territory of Orsha Region.
Decree of the President of the Republic of Belarus as of December 31, 2018 N 506 “On development of Orsha Region of Vitebsk Oblast”.