Doing Business in Belarus

October 2012 2 Doing Business in Belarus The Belarusian Chamber of Commerce and Industry is pleased to present this brochure, prepared by specialists at Ernst & Young, the leading assurance and advisory company in Belarus. The brochure covers the essential information that any company doing business in our country should know — from aspects of the economic system to complex issues with respect to the application of corporate, currency, migration and tax law. In the last few years, the legal framework for doing business in Belarus has substantially im- proved. Active efforts are being made to simplify legislation, reduce administrative barriers and make it easier for foreign investors to do business in our country. There is, of course, much that remains to be done. Each year we see new incentives for Belarusian and foreign investors, and legislative changes are becoming more transparent and predictable. We hope that this brochure will be useful for any businessman contemplating investment in Belarus. For its part, the Belarusian Chamber of Commerce and Industry (as one of the largest and most influential business associations in Belarus) is ready to provide the necessary support for any new project on the hospitable land of Belarus. Special thanks go to the leadership of Ernst & Young for its effective mutually beneficial cooperation and support. Sincerely, Mikhail Myatlikov Chairman of the Belarusian Chamber of Commerce and Industry

Doing Business in Belarus 1 The Ministry of Foreign Affairs of the Republic of Belarus Belarus would like to call your attention to this overview, prepared by Ernst & Young specialists. The Republic of Belarus is attractive for investments given its geographical and political position and its participation in regional integration processes.

Since gaining independence, Belarus has managed to create a stable, mutually beneficial model of cooperation with most countries. Its foreign policy is strategically based on the multi-vector principle, which means readiness to develop well-balanced relations with partners in various regions of the world. Today our country has diplomatic relations with 170 countries. With the formation of the Customs Union of Belarus, Kazakhstan and Russia (hereinafter, the “Customs Union”) and Belarus’s accession to the Common Economic Space (hereinafter, the “CES”), our economy’s investment appeal has only grown. Through Belarus, investors can now obtain free access to all three countries without time-consuming customs procedures and additional customs duties. The CES is legally based on international rules, i.e., the rules of the World Trade Organization. These are clear for companies throughout the world and guarantee a predictable environment for business development in the CES market. The free movement of capital and human resources within the CES will also help to make investments more profitable. Currently, Belarus plays an important role in the transit of Russian energy sources to Europe; it is located at the geographical and political crossroads of trade that connect the EU with Russia and Asia; it is a transport artery for tens of millions of tons of rail and motor vehicle freight. This overview gives detailed information on the key benefits and mechanisms of state support that an investor can enjoy in Belarus. It also explains the requirements for the registration and activity of business entities in free economic zones and the conclusion of investment agreements. We hope that this guide will prove useful and give you a more complete picture of our country, its economy, its investment opportunities and its tax and regulatory aspects. Sincerely, Aleksander Guryanov Deputy Minister of Foreign Affairs of the Republic of Belarus

2 Doing Business in Belarus • The National Agency of Investment and Privatization, with great honor, introduces Belarus to a worldwide audience through the business overview prepared by Ernst & Young in cooperation with the Agency. I am confident that this overview provides useful information for those who seek to establish business in Belarus. No doubt it will be a success story because our country proposes a huge amount of benefits and advantages for investors. Through years of economic reforms and improvements, Belarusian authorities have created pro-business environment that stimulates entrepreneurship and foreign investment. The results are evident and reflected in international ratings. The foreign investment inflow did not stop growing even during global economic recession. Our modern country lies at the crossroads of Eurasia and stands out for the best logistics infrastructure, manpower and intellectual rights protection in the Common Economic Space, with its market of 168 million people. It’s the right place for moving up the value chain to achieve higher sustainable returns and seeking out new business opportunities. The National Agency of Investment and Privatization is the shortest way to Belarus. We propose one-stop shop support and in collaboration with other governmental bodies establish a systematic approach to relationships with investors. Our goal is to encourage foreign companies and businessmen to look at Belarus as their global partner. We build strategic relationships with the most significant investors such as sovereign wealth funds, private equity and venture funds, SMEs and TNCs. I trust that the overview “Doing Business in Belarus” will give you an understanding of how to create one more additional tool for your business’s global expansion. Welcome to Belarus! Dmitry Klevzhits Director of the National Agency of Investment and Privatization

Doing Business in Belarus • 3 Additional copies of this brochure may be obtained from Ernst & Young’s offi ce in Minsk: Korol Str ., 51, 2nd ﬂ oor, offi ce 30, Minsk, 220004, Belarus © 2012 Ernst & Young . All rights reserved . Ernst & Young — 12 years of successful work in Belarus Foreword Ernst & Young’s Minsk office was opened in 2000. Today Ernst & Young is the largest international company in Belarus, providing clients with a full range of professional assurance and advisory services.

Ernst & Young opened its second decade in Belarus by more than tripling its staff and greatly expanding its range of services. In today’s challenging environment, Ernst & Young retains an unwavering commitment to finding innovative methods of serving clients. Throughout its 12 years in Belarus, Ernst & Young has helped companies adapt to changing economic conditions and move forward as the country’s economy, financial markets, laws and regulatory methods develop, as business conditions change in response to new technologies and as the global economy becomes increasingly integrated. We hope that this guide to doing business in Belarus will give you a general idea of this market’s opportunities, challenges and prospects. This brochure, prepared by Ernst & Young specialists in Belarus, is designed to provide company executives with an overview of the tax system and accounting methods and of how business is organized and conducted in Belarus. Making decisions on foreign operations is a complicated task requiring thorough knowledge of the business climate in the country along with an understanding that economic conditions and the legal and regulatory framework in Belarus continue to develop in many areas. Company executives should be prepared to hear widely diverging opinions on the situation in Belarus. It is strongly recom- mended that companies doing business in Belarus or planning to do so obtain up-to-date and detailed information from experienced specialists. This brochure contains information as of 1 October 2012. Ernst & Young provides assurance, tax and legal services as well as transaction and business advisory services in major cities around the world.

Doing Business in Belarus • Foreword 5 Pavel Laschenko Key contacts in Country Managing Partner for Belarus Tel.: +375 17 209 4535 Fax: +375 17 209 4534 Ernst & Young’s [email protected]

Belarus office Oksana Zhitomirskaya Senior Manager, Assurance Tel.: +375 17 209 4535 Cell: +375 29 700 3005 Fax: +375 17 209 4534 [email protected]

Andrei Chumakov Senior Manager, Tax and Law Tel.: +375 17 209 4535 Cell: +375 29 700 3020 Fax: +375 17 209 4534 [email protected]

6 Doing Business in Belarus • Key contacts in Ernst & Young’s Belarus office Contents

Foreword ...... 5 Companies ...... 26 Appendix ...... 58 Corporate forms 27 Appendix 1: Useful addresses Key contacts in Ernst & Young’s Licensing 29 and contacts 59 Belarus office ...... 6 Mergers and acquisitions 30 Appendix 2: Currency exchange rates (as of period’s end) 60 Business climate . General information . . 8 Shareholders’ agreements 30 Appendix 3: Economic indicators 60 Taxes at a glance 30 Belarusian economy ...... 10 Appendix 4: Withholding tax Corporate profit tax 31 Export/import 11 rates for companies that do Withholding tax 36 not operate through a permanent General economic Value added tax 37 establishment in Belarus, development trends 12 Real estate tax 40 in accordance with double Leading industries during the crisis 13 tax treaties 61 Other republican taxes 41 Financial system 13 Ernst & Young in the CIS 66 Special taxation regimes 42 Currency control 14 Ernst & Young worldwide 67 Customs 43 Investment legislation and main Financial reporting and auditing 46 incentives ...... 18 Investment legislation 19 Individuals ...... 50 Law on Investments 19 Employment 51 Investment agreement with Belarus 20 Migration 53 Free economic zones 21 Personal income tax 54 High Tech Park 22 Payroll taxes 56 China-Belarus Industrial Park 23 Investment activity in populated areas with less than 50,000 inhabitants 24

Doing Business in Belarus • Contents 7 Business climate . General information

8 Doing Business in Belarus • Business climate. General information Geography Population Public holidays: The Republic of Belarus (hereinafter, The territory of the Republic is populated • Constitution Day — 15 March “Belarus”) is situated in the heart of by about 9.5 million people. Belarus is a • Day of Unity of the Peoples of Belarus and Europe, at the crossroads of trade routes multinational country with an urban popula- Russia — 2 April from west to east and north to south. It is tion of 70%. • Victory Day — 9 May crossed by the shortest transport commu- • Day of the State Coat of Arms and Flag — nication lines linking the CIS countries with Language the countries of Western Europe. Belarus second Sunday of May Belarusian and Russian are the official state borders on Lithuania and Latvia in the • Independence Day (Republic Day) — languages in Belarus. The most common north, on Ukraine in the south, on Russia in 3 July . languages for business are Russian, English the east, and on Poland in the west. Its geo- and German. Republican holidays : graphic position is of strategic importance for communications between west and east • New Year — 1 January as well as between north and south. From Time zone • Day of Defender of the Fatherland and the Minsk, it is 500 km to Warsaw, 700 km to Belarus is located in the Central European Armed Forces of the Republic of Belarus — Moscow, 1,060 km to Berlin and 1,300 km Time Zone: GMT +2. When it is noon 23 February to Vienna. in Belarus, it is 11:00 a.m. in Paris, • Women’s Day — 8 March 10:00 a.m. in London, 5:00 a.m. in Belarus covers a total area of 207,600 sq. • Labor Day — 1 May New York, 2:00 a.m. in Los Angeles and km, stretching 560 km (350 miles) from 1:00 p.m. in Moscow. • October Revolution Day — 7 November. north to south and 650 km (460 miles) from west to east. It is larger than Austria, The table below shows the flight time Religious holidays: Ireland, Portugal and Greece. The country’s between Minsk and some major cities of the • Orthodox Christmas — 7 January capital, Minsk, is on the same latitude as world as well as the time difference. • Easter — by the Orthodox and Catholic Hamburg and Dublin. Belarus’ highest point, Time calendars Dzerzhinsky Hill (345 m above sea level), is City Flight time difference • Radunitsa — by the Orthodox calendar in the Minsk Region. The country’s lowest London –2 3 h place is the Neman Valley in the Grodno • Memorial Day — 2 November Region (80–90 m above sea level). Moscow +1 1 h 20 min • Catholic Christmas — 25 December . Paris –1 3 h Administratively, the territory is divided into If any official public holiday falls on a week- Frankfurt –1 2 h 25 min six regions. end, usually no extra day of rest is provided. If any of the above holidays falls on a Tuesday Source: http://www.timeanddate.com/, Climate http://www.airport.by/ or Thursday, the preceding Monday or the Belarus has a moderate continental climate following Friday (respectively) is as a rule an featuring winters with frequent thaws, and Public, republican and other holidays official non-working day, while the Saturday nearest to the holiday is a working day. rainy warm summers. The average tem- The following public and main republican perature in January is – 6°C, and in July it is holidays are celebrated in Belarus. The holi- Foreign organizations in Belarus, such as +18°C. The average annual precipitation is days marked bold are officially non-working embassies and consulates, usually enjoy the 550–700 mm. days in Belarus. public holidays of their countries in addition to the Belarusian public holidays.

Doing Business in Belarus • Business climate. General information 9 Belarusian economy

10 Doing Business in Belarus • Belarusian economy Overview In the course of the decade preceding Favorable external conditions also promot- Most of the Belarusian economy remains 2008, the Belarusian economy grew at ed the country’s rapid economic develop- under state control. Thus, more than an average annual rate of 7.5% due to the ment. They include high economic growth a half of Belarusians are employed by country’s reserves and favorable external rates in Russia and other countries, easy state-controlled companies, while others conditions. High investment-to-GDP ratios access to the Russian market and low-cost are employed mainly by private Belarusian and productivity gains due to a well-edu- energy imports from Russia. The total companies, and less than 2% of Belarusians cated and disciplined labor force were the assets of the banking sector grew 3–4 times are employed by foreign companies. main contributors to growth. faster than GDP.

Export/import Belarus actively imports and exports At the end of 2011, Russia accounted for Statistics shows that exports to non-CIS goods, largely chemicals, machinery and 34% of the exports and 54.5% of the im- countries have considerably increased equipment, transport vehicles, ferrous and ports of Belarus, while the European Union recently. nonferrous metals, etc. accounted for 39% and 19%, respectively.

Machinery, equipment 25,000 18.1% and transport vehicles 23.1% 20,000 Chemicals and raw rubber (including chemical ﬁbers 15,000 21.5% 11.7% and threads) Mineral products 10,000 mln. USD mln.

Ferrous and non-ferrous 5,000 metals 36% 41.7% Foodstuffs and 0 agricultural raw materials 2003 2004 2005 2006 2007 2008 2009 2010 2011 6.1% Export to Russia Export to CIS countries Export to non-CIS countries 10% Other 9.6% 7% 8.7% 6.5% 30,000 Export Import 25,000 Source: National Statistical Committee of the 20,000 Republic of Belarus (www.belstat.gov.by) 15,000

In its imports and exports, Belarus depends USD mln. 10,000 on Russia, which is its major trade partner. 5,000 Russia accounts for 45% of Belarusian foreign trade turnover, followed by the 0 2003 2004 2005 2006 2007 2008 2009 2010 2011 European Union, the second largest trade Import from Russia Import from CIS countries Import from non-CIS countries partner of Belarus.

Source: National Statistical Committee of the Republic of Belarus (www.belstat.gov.by)

Doing Business in Belarus • Belarusian economy 11 General economic development trends Like many other countries, Belarus was en- The main distinguishing features of the new • Companies have far fewer opportunities to gulfed in the financial and economic crisis wave of the crisis are: acquire foreign currency to settle foreign in 2008. The crisis in Belarus developed • Considerable inflation. As of the end of trade transactions, including settlements according to global trends, with a few dis- 2011, officially declared inflation was at the actual exchange rate that existed tinctions. It is generally assumed that the 108.7%. According to the joint opinion of until 21 October 2011. crisis in 2008 did not hit Belarus as hard the Big Four companies, the Belarusian • An actual noticeable drop-off in business as it did its neighboring countries. That is economy was hyperinflationary in 2011, activity, expressed first and foremost in largely due to Belarus’s structural economic as a result of which IAS 29 “Financial the suspension of several investment indicators, the low amount of foreign bor- Reporting in Hyperinflationary Economies” projects, or at least in investors’ attempt rowing, the country’s aspiration to main- should be applied when reports are to reconsider the financial and economic tain the prevailing level of production and drawn up with regard to the International terms of projects. employment at all costs, an active social Financial Reporting Standards (IFRS) by In 2011, the Belarusian leadership took policy, the issue of loan bonds to prop up companies whose functional currency is steps to overcome the consequences of the the economy, Russia’s financial support and the Belarusian ruble. a few other factors. crisis. In June 2011 Belarus received for- • Multiple increases in interest rates in eign financial support from the anti-crisis However, the key economic shortcomings the monetary and credit market. The fund of the Eurasian Economic Community were not fully eliminated, and consequently NBRB gradually increased the basic (hereinafter, the “EAEC”). The first three they (together with other factors) some- refinancing rate in Belarusian rubles from tranches were granted in 2011–2012; what worsened the economic situation, 10.5% on 31 December 2010 to 45% on the other three tranches will be granted leading to a new crisis wave (the local “cur- 31 December 2011. in 2012–2013 if the agreed-on economic rency” crisis) from March to October 2011. • “Duality” of the exchange rate of the policy measures, worked out by the Council The economic situation worsened largely Belarusian ruble against the basic foreign of Ministers of the Republic of Belarus due to the large balance of payments defi- currencies until October 2011, i.e., the (hereinafter, the “Council of Ministers”) cit, a reduction and restriction of foreign official exchange rate of the Belarusian and the NBRB and approved by the EAEC, financing sources and a lack of inflow of ruble substantially differed from the actual are successfully carried out. Substantial foreign currency in early 2011. All that exchange rate. On 24 May 2011, for in- support by Russia in providing loans and sharply reduced the international reserves stance, the exchange rate of the Belarusian its participation in privatizing 50% of the of the National Bank of the Republic of ruble against the US dollar was officially shares of the state-owned open joint-stock Belarus (hereinafter, the “NBRB”) in the reduced by 64% in comparison with the company Beltransgaz helped noticeably first quarter of 2011, and was followed by a exchange rate on 31 December 2010. The to increase the international reserves of foreign currency deficit in the country. actual market exchange rate differed from the NBRB as early as December 2011. the official rate by 40%, indicating that According to the officials of the Council there was a substantial foreign currency of Ministers and the NBRB, the size of the deficit in the country. On 21 October 2011, reserves reached a level adequate and the exchange rate of the Belarusian ruble stable enough to prevent a foreign currency against the US dollar was officially reduced deficit and to meet the country’s require- by another 76% in comparison with the ments for foreign short- and medium-term exchange rate on 24 May 2011. Such a financing. duality of the exchange rate in various currency markets no longer exists now.

12 Doing Business in Belarus • Belarusian economy New measures are being elaborated and played an important part in this respect. international reserves and a drop in the re- carried out in 2012. Advantageous oil Consequently, the economy has tended financing rate. Growing interest by foreign and gas agreements with Russia that to revive, as expressed in the reduction companies in projects in Belarus is indirect came into force on 1 January 2012 have of inflation, the growth of the NBRB’s evidence of its economic revival.

Leading industries during the crisis The rapid and steady growth of many The crisis of 2011 also had a considerable certain production units and to stimulate Belarusian industries in the last decade was impact on certain industries. This is partic- the production of assembly parts or develop interrupted by the global economic crisis ularly true of industries that substantially Belarusian analogues to them. in 2008–2009. The fuel and petrochemical depend on imported materials and assem- However, the steps that have been taken sector suffered the most from the price bly parts. In this respect, the reduction of are not systematic, and an evident change shock. Sales problems resulted in frequent the so-called “import dependence” of the in the economic structure has not been work stoppages at many enterprises, espe- economy became one of the main lines of effected so far. cially in the automotive industry and other state industrial policy. This is expressed, for machine-building sectors. instance, in an effort to maximally localize

Financial system

Banking activity regulator State regulator of stock exchanges • Maintaining the state registers of shares The NBRB is the main regulator of banking and the securities market and bonds activity. It issues licenses to all banking The Securities Department of the Ministry • Participating in licensing professional institutions in Belarus. Such a license allows of Finance of the Republic of Belarus and stock exchange activities involving a bank to perform banking operations, (hereinafter, the “Finance Ministry”) is securities including attracting the financial resources engaged in the execution, control, coordi- • Accrediting securities market specialists of individuals and/or legal entities for bank nation and oversight of state regulation of • Controlling and overseeing the issuance, accounts (deposits), opening and maintain- the securities market, as well as the control flotation and redemption of securities ing bank accounts for individuals and/or and oversight of the issuance, flotation and legal entities, settling and/or cash servicing redemption of securities and the activity of • Controlling and overseeing the activity of of individuals and/or legal entities, currency professional participants in the securities professional participants in the securities exchange operations, issuing bank guaran- market and stock exchanges. market and stock exchanges tees, the fiduciary management of financial • Issuing certificates for the flotation of The key functions of the Securities resources and factoring. There are special shares in/outside Belarus Department of the Finance Ministry are: requirements for certain types of banking • Elaborating the standards and norms • Drafting legal acts on state regulation of operations. of corporate conduct for joint-stock the securities market and sending them companies for consideration to the Finance Ministry • State registration of issues of shares and bonds

Doing Business in Belarus • Belarusian economy 13 Currency control

General principles except for those specifically named in Current currency transactions Historically, the currency control area has currency law as current ones, are capital Current transactions include the follow- been a source of confusion and uncertainty currency transactions. ing transactions between residents and for foreign investors operating in Belarus. Residents and nonresidents may conduct nonresidents: Still, it is important that foreign investors current currency transactions without any • Settlements under deals assuming expor- address any potential currency control is- restrictions or permission from the NBRB. tation and/or importation of goods (exclud- sues in advance of concluding any significant ing money, securities and immovable Generally, to carry out capital currency transactions with Belarusian residents. property), protected information, intellec- transactions, Belarusian residents obtain tual property rights, works and services In general, residents must make payments permission from the NBRB. In some cases, to each other in Belarusian rubles. The the currency legislation provides exceptions • Settlements under deals assuming transfer Belarusian Law on Currency Regulation and to this rule. and/or receipt of property in rent (lease) Currency Control (hereinafter, the “Law on • Transfer and receipt of dividends and other Currency Control”) and other legislative acts Nonresidents for the purpose income on investments contain a list of cases in which residents can of Belarusian currency legislation • Non-trade transactions (transfer and settle payments to each other in foreign cur- receipt of monies for salary payments rency (foreign currency securities, foreign Belarusian nonresidents are: or pensions or as part of an inheritance, currency payment documents). • Foreign citizens and stateless persons stamp duties, etc.) (except for those having Belarusian per- Residents can determine a contract’s equiv- manent residency permits) alent price in any foreign currency, but they Currency transactions that require • Foreign legal entities, their branches and still must make payments in Belarusian ru- the permission of the NBRB bles only (unless currency legislation directly representative offices in Belarus and The following transactions of Belarusian stipulates the possibility of settlements in other countries companies-residents (non-banks), inter alia, foreign currency). • Companies that are not foreign legal en- require permission from the NBRB: tities located outside Belarusian territory, Restrictions on transactions between as well as their branches and representa- 1) Acquisition of property located outside residents and nonresidents tive offices in Belarus and other countries Belarus that qualifies as immovable property under Belarusian legislation All transactions in foreign currency or • Diplomatic and other official represen- Belarusian rubles between Belarusian tations and consular offices of foreign 2) Allocation of funds to nonresident banks residents and nonresidents are regarded states located in Belarus and in other or transfer of funds to nonresidents as currency transactions. The Law on countries (except for nonresident banks) for trust Currency Control divides them into current • International organizations, their branch- management transactions and capital transactions. es and representative offices 3) Provision of loans The list of current currency transactions • Foreign countries, their territorial units is closed. All other currency transactions,

14 Doing Business in Belarus • Belarusian economy 4) Settlements under a resident’s obliga- 6) Settlements under the obligations of a Specific requirements for foreign tions as a guarantor towards a nonres- resident towards nonresidents arise on trade agreements ident arising from a guarantee or an the basis of cession agreements or debt Registration of foreign trade agreements indemnity agreement transfer agreements It is obligatory to register every foreign 5) Receipt of loans in case of any of the Also, the law requires Belarusian residents trade agreement with a bank if the fee for following conditions to receive permission from the NBRB to the goods equals or exceeds the equivalent • The interest rate for loans exceeds open bank accounts outside of Belarus in of EUR3,000. banks-nonresidents for the following pur- the level determined by the NBRB (for The resident should not register appendices poses outlined by law: USD and EUR loans it is currently 14% to a foreign trade agreement on transfer per annum) • For the support of a representative office of goods or foreign trade agreements on • The interest rate for loans in the event (except for Belarusian diplomatic and transfer of protected information, intellec- of late repayment (in the event of other official missions) or a branch outside tual property rights, works and services. interest rate increases due to de- Belarus Banks do not charge a fee for registra- layed repayment) and the amount of • For the support of health facilities outside tion (re-registration) of foreign trade penalties (fine, default interest) in the Belarus agreements. aggregate exceeds the level deter- • To finance construction, building main- Execution of foreign trade agreements mined by the NBRB (0.01% per day or tenance or a geological survey and other Residents should complete each foreign 3.65% per annum) field works performed outside Belarus trade transaction within the following • The loan agreement (along with the • For settlements in transactions relating terms: interest rate) contains an obligation to industrial and economic activity in a • For export: within 90 calendar days to carry out other additional charges foreign country (except payments for the use of loans (120 calendar days under commission • To receive a loan from a nonresident bank in the event of late repayment or pay- agreements) of the date of shipment if the terms of the contract provide for ments for paying a penalty) (transfer of protected information or opening a current bank account intellectual property rights), performance • The loan is used to pay the liabilities of • For placement of funds (excluding budget of works or rendering of services the borrower without being received in funds) in a depositary account or escrow the borrower’s bank account • For import: within 60 calendar days of account with a nonresident bank the payment day • Repayment of the loan is not executed from the borrower’s bank account These terms can be extended by the NBRB’s • The lender is registered in an offshore decision if the requirements of the Council zone of Ministers and the NBRB are met.

Doing Business in Belarus • Belarusian economy 15 Advance payments under foreign trade 4) A Belarusian company-importer may • Delay in obligatory sale of foreign curren- agreements carry out advance payments with the cy leads to a fine ranging from 10 to 40 The Law on Currency Control allows an written consent of the NBRB. basic units (approximately USD120 to 470) and, for an individual entrepreneur advance payment in foreign currency by a There are no restrictions on advance pay- or a legal entity, of up to 1% of the unsold resident under a foreign trade agreement ments in foreign currency made to residents foreign currency for every day of delay, with a nonresident, inter alia, in the following of the Russian Federation and Kazakhstan. cases: but not more than the amount of the unsold currency. 1) A Belarusian company-importer may Obligatory sale of foreign currency • Unreasonable understatement of the carry out advance payments using its Every resident should sell 30% of foreign amount of foreign currency that is subject foreign currency available in a foreign currency received from foreign trade to obligatory sale leads to a fine ranging currency bank account and received transactions via auction at the Belarusian from 10 to 40 basic units (approximate- after 15 November 2008 as: Currency and Stock Exchange, except for ly from USD120 to 470) and, for an • Revenue certain cases established by legislation. individual entrepreneur or a legal entity, • Contributions to charter fund a fine in the amount of the unreasonable • Foreign sponsor aid Liability for violating currency law understatement. • Dividends and other income on The penalties for violating currency legisla- • The opening of a bank account outside investments tion can be quite significant. The Belarusian Belarus by an authorized person of a legal Administrative Code envisages different entity or by an individual entrepreneur • Interest under loan agreements con- kinds of currency legislation violations that and the performance of transactions us- cluded with nonresidents are penalized with varying amounts of fines. ing this bank account without the permis- • Interest on foreign currency place- sion of the NBRB leads to a fine ranging Examples of Belarusian currency legislation ment in bank accounts from 20 to 50 basic units (approximately violations are given below: • Interest on Belarusian banks’ debt USD240 to 590). • Illegal acceptance of foreign currency as a obligations • Transfer of revenue from export of goods means of payment leads to a fine ranging (works, services) without its receipt in the 2) A Belarusian company-importer is from 10 to 50 basic units (approximately exporter’s bank account and without the allowed to make advance payments by USD120 to 590; one basic unit is approxi- required permission leads to a fine in the using foreign currency received under mately USD12 in equivalent). loan/credit agreements concluded with amount of transferred funds. • Carrying out a capital currency trans- nonresidents. action without permission of the NBRB 3) A Belarusian company-importer may car- leads to a fine ranging from 10 to 100 ry out advance payments by the “letter basic units (approximately USD120 of credit”. to 1,180).

16 Doing Business in Belarus • Belarusian economy • The failure to receive revenue on time or to complete a foreign trade transaction on export of goods (protected information, intellectual property rights, works and services) by the methods envisaged by law; or the failure to receive goods (protected information, intellectual property rights, works and services) or complete a foreign trade transaction on import by the methods envisaged by law leads to a fine of up to 30 basic units (approximately USD355) and, for an individual entrepreneur or a legal entity, of up to 2% of the amount of the foreign trade transaction for each day of delay, but not more than the total amount of the foreign trade transaction. For certain offences additional criminal liability can be imposed on the executives of the violating legal entity. Non-compliance of banks with currency control regulations may result in the revocation of their licenses. In this respect, it is strongly recommend- ed that this area be given due focus in advance of the conclusion of any material transactions.

Doing Business in Belarus • Belarusian economy 17 Investment legislation and main incentives

18 Doing Business in Belarus • Investment legislation and main incentives Investment legislation The Belarusian Investment Code and services) or any other use of investments The sources of investments can be: Presidential Decree No. 10 “On addition- for the purpose of receiving profit (income) • Investors’ own funds, including depreci- al conditions for investment activity in or achieving another significant result. ation allowance reserves, net profit and Belarus” of 6 August 2009 sets basic regu- The forms of investment activity in Belarus profit from sale of shares lations for investment activity in Belarus. are: • Borrowed funds, including loans from In addition, a draft of the Law on • Establishment of a legal entity banks and non-bank credit and finan- Investments has been developed and is cial organizations, loans from founders • Acquisition of property or property expected to be adopted in 2012. After (shareholders) and other legal entities rights, i. e.: its adoption, sections I, II, IV–V of the and individuals, funded loans Investment Code may cease to be in force. – Share in charter fund of a legal entity, The peculiarities of investment activity Section III “Peculiarities of carrying out including increase of charter fund under different conditions are outlined investment activities on the basis of con- – Real estate below. cessions” should apply until adoption of the – Securities Law on Concessions. – Intellectual property rights The legislation defines investment activ- – Concessions ity as investment in the manufacture of – Equipment goods (performance of works, rendering of – Other capital assets

Law on Investments As mentioned above, the Law on 4) Establishes the conditions for compen- Investments is expected to be adopted in sation for excepted investments or other 2012 and will enter into force six months property developed in the course of after its official publication. performing investments activities Unlike the Investment Code, the Law on 5) Determines the authorized agencies Investments: empowered to resolve disputes (dis- agreements) between a foreign investor 1) Defines investments more thoroughly and Belarus 2) Establishes the basic principles for carry- 6) Excludes the concept of a commercial ing out investment activities in Belarus company with foreign investments 3) Enlarges the list of methods (forms) of investment activities

Doing Business in Belarus • Investment legislation and main incentives 19 Investment agreement with Belarus An investment agreement is a special type required project documentation for each derived from acquiring a land plot for the of contract concluded to provide additional stage of construction together with a de- execution of the investment project government support to investment projects sign for succeeding construction stages • Exemption from paying land tax or rent important to the Belarusian economy. • Rental of the land plot requisite for con- for land plots provided for project con- Investment agreements are concluded struction is provided without auction struction under the investment agree- between a foreign or national investor • The right to remove vegetation without ment during the design and construction (investors) and Belarus as represented by paying compensation for the removed period and until 31 December of the year the Council of Ministers or a republican vegetation during the site’s construction following the year when construction was government body. under the investment project completed • The rental rate is defined as at the date • Exemption from paying contributions to Two levels of investment agreements of the agreement’s conclusion and cannot innovation funds during the terms of the The conclusion of an investment agreement be increased during the entire period of investment agreement may be based on the decision of any of the the investment project’s realization Investors can benefit from any other incen- following state authorities: • Full credit for VAT paid for goods, works, tives stipulated by the internal Belarusian • Republican government body or other services and property rights used for legislation and not exclusively provided for state company subordinated to the designing, construction and equipping of under the investment agreement. Council of Ministers, Administrative sites under the investment project Affairs Office of the President of the • Exemption from paying custom duties Incentives granted by the President Republic of Belarus (hereinafter, and VAT on import of technical equip- “President”), regional executive Investment agreements concluded under ment (assembly and spare parts) under committee the Council of Ministers’ decision with the execution of the investment project Presidential approval may provide for more • The Council of Ministers with the permis- • Exemption from paying the state duty for incentives and benefits even though they sion of the President. the right to conclude the rental contract are not envisaged in the law directly. These • Exemption from paying state duty for incentives are defined individually in each Incentives under an investment obtaining permission for the engagement separate case. agreement of foreign labor in Belarus and special Irrespective of the contracting party rep- work permissions for foreign individuals resenting Belarus, all types of investment attracted for the realization of the invest- agreements assume a number of incentives ment project; in addition, these foreign exclusively provided under the agreement. individuals are exempted from paying the The most important of them are: state duty for a terminal residency permit • The site’s construction under the invest- • Exemption from compensating for ment project along with the elaboration, agricultural and forestry-based losses expert examination and approval of

20 Doing Business in Belarus • Investment legislation and main incentives Free economic zones Free economic zones (hereinafter, “FEZ”) Benefits for FEZ residents • VAT on sales in Belarus by FEZ residents are territories with a special regime for The following key benefits exist: of import-substituting domestic goods (in entrepreneurial activity and with special accordance with the list of import-substi- • Exemption from corporate profit tax incentives for business development, e.g., tuting goods) produced in a FEZ is paid at (hereinafter, “CPT”) for five years from tax and customs benefits. the rate of 10% (instead of the 20% gen- the date of first profit declaration. Profit eral VAT rate). This benefit can be applied Belarus has six FEZs: FEZ Brest, FEZ Minsk, from uncovered activity is subject to until 1 January 2017. FEZ Gomel-Raton, FEZ Vitebsk, FEZ Mogilev profit tax at the general rate of 18%. and FEZ Grodnoinvest. Subsequently, tax is paid at a rate that is FEZ residents pay VAT, excise duties, cut by half, but that is no more than 12%. ecological tax, natural resource extraction FEZ residents Since the CPT rate was reduced from tax, land tax (or rental payment), state 24% to 18% in 2012, FEZ residents are to duty, patent duties, offshore duty, license FEZ benefits are available for FEZ residents calculate CPT at the rate of 9%. and registration fees, stamp duty, customs registered on FEZ territory. • Exemption from real estate tax on build- duties and fees, local taxes and duties and The candidate should submit a set of doc- ings and construction (including over-nor- contributions to the Fund for the Social uments to the FEZ Administration and pay mative construction in progress) situated Protection of People (hereinafter, “social the state duty. One of the requirements for on the territory of the relevant FEZ, security contributions”) according to the registration is to prepare a business plan for irrespective of the way in which they are general procedure. In addition, they act as an investment project, which should stipu- used. The benefit for FEZ residents regis- tax agents. late investment of at least EUR1 million. tered prior to 1 April 2008 will remain un- The preferential tax regime applies to FEZ changed through 31 March 2015, while residents in the following cases: for FEZ residents registered after1 April 2008, it will remain unchanged for seven • Export of goods (work, services) pro- years following the date of registration. duced by residents on FEZ territory • Exemption from land tax on land provided • Sale of goods (work, services), produced for construction during engineering and by residents on FEZ territory, on the ter- construction, but for not for more than ritory of Belarus, provided that the goods five years from the registration date (for are import substituting under the list de- FEZ residents registered after 1 January termined by the Council of Ministers and 2012). For FEZ residents registered prior approved by the President; in this case to 1 January 2012 the benefit applies till the preferential tax regime is effective 1 January 2017, but for not more than until 1 January 2017 five years from the registration date. • Sale of goods (work, services) produced by residents on FEZ territory to other FEZ residents

Doing Business in Belarus • Investment legislation and main incentives 21 High Tech Park The High Tech Park (hereinafter, “HTP”) Benefits for HTP residents • The social security contribution is calcu- was established in Minsk in 2005 to pro- HTP residents pay 1% of their revenue lated on the basis of an amount which mote the IT industry in Belarus. The HTP is to the HTP Administration and enjoy the is not more than the average salary in located east of Minsk and has a special legal following benefits: Belarus for the preceding month (except regime in effect until 2020. for administrative staff, e.g., security • Exemption from CPT guards, cleaners, etc., from whose pay- • Exemption from VAT on the sale of HTP resident status roll social security contributions are paid goods, work or services or from the on general terms) A legal entity and an individual entrepre- transfer of property rights in Belarus • Payments by HTP residents to foreign neur receive HTP resident status if their (a few exceptions include rental pay companies in the form of dividends, roy- activities include: received from leased out immovable alty and interest are subject to withhold- property and sale of goods placed under 1) Analysis, projection and software provi- ing tax at the rate of 5% (if a lower rate is customs procedures of export, re-export sion of information systems not set in the relevant double tax treaty) or exported to Customs Union’s countries 2) Data processing using either the con- without an obligation to return such • The lease rates for state-owned immov- sumer’s, entity’s or entrepreneur’s own goods to Belarus) able property are half the general rates software • Exemption from land tax (but for not • Dividend payments are not subject to an 3) Fundamental and applied research, more than three years) within the HTP offshore duty experimental R&D in the field of natural during the construction by HTP residents • The requirement to sell foreign currency and technical sciences (R&D involving of buildings and structures on it for their revenue received from the above-men- HTP activity) and implementation of own activity tioned activities does not apply to HTP R&D results • Exemption from real estate tax paid for residents 4) Other activity approved by the Council buildings and construction (including • An exemption from customs duties of Ministers after it is agreed on by the over-normative construction in progress) and VAT on importation of goods for President which are in the HTP, except for buildings the above-mentioned types of activity and construction (or parts of them) that (a list of these goods is approved by the are leased out President). HTP resident cannot transfer • Personal income tax rate of 9% is applied the imported goods to third parties or to the income of an HTP resident’s use them in a way other than for the employees (except for administrative above-mentioned types of activity for two staff, e.g., security guards, cleaners, etc., years from their release date. Otherwise, who pay income tax at the general rate customs payments should be made and of 12%) as well as of individual entrepre- other requirements set forth in customs neurs who are HTP residents legislation should be met

22 Doing Business in Belarus • Investment legislation and main incentives China-Belarus Industrial Park The China-Belarus Industrial Park (here- Benefits for CBIP residents • The social security contribution is calcu- inafter, the “CBIP”) was created with the The following main tax benefits exist: lated on the basis of an amount that is not support of the People’s Republic of China in more than the average salary in Belarus • Exemption for 10 years from the date of accordance with the Agreement between the for the preceding month. state registration from CPT for realization Council of Ministers and the Government of of goods (work, services) of a company’s After the expiration of the respective the People’s Republic of China. The CBIP is own production and produced on the ter- periods of benefits all the taxes are paid by located in the southwest part of Smolevichi ritory of the CBIP (that it is a company’s CBIP residents at the general rates. region (55 kilometers from Minsk) and “own production” should be confirmed by occupies a land allotment of 8084 hectares. Other benefits: a certificate from the Belarusian Chamber The CBIP is a territory with a special regime of Commerce and Industry). After this • Exemption from paying state duty for ob- for entrepreneurial activity that is in effect 10-year period expires, tax is paid for taining permission for the engagement of until 2062. another 10 years at half the general foreign labor in Belarus and special work rate (9%). Profit from other activities is permissions for foreign individuals CBIP resident status subject to CPT at the general rate (which • Exemption from paying compensation A Belarusian company can receive CBIP is currently 18%). for agricultural and forestry-based losses resident status if it meets the following • Exemption for 10 years from the date derived from acquiring a land plot for the conditions: of state registration from real estate tax execution of the investment project • It is actually located on CBIP territory on buildings and construction (including • Exemption from obligatory sale of foreign • It is registered with the CBIP over-normative construction in progress) currency gained from activity in the Administration as a resident of the CBIP situated on CBIP territory. After the 10- CBIP (this provision is effective until year period expires, tax is paid for anoth- 1 January 2027) • It is contemplating developing an invest- er 10 years at half the general rate. ment project in the spheres of electronic • Exemption from paying contributions engineering, fine chemistry, biotechnol- • Exemption for 10 years from the date of to innovation funds of the Belarusian ogy, machine industry, and innovative state registration from land tax on land lo- Ministry of Construction technologies cated on CBIP territory. After the 10-year • Exemption from import duties and import period expires, tax is paid for another 10 • The contemplated amount of investments VAT for goods (technological equipment, years at half the general rate. should be not less than USD5 million spare parts and materials) imported for • A personal income tax rate of 9% ap- the realization of investment projects and plies to the income of a CBIP resident’s construction of objects on CBIP territory. employees (this provision is effective until These goods should be used only for the 1 January 2027). indicated purposes; otherwise import • Payments by CBIP residents to foreign duties and VAT must be paid in full companies in the form of royalty are subject to withholding tax at the rate of 5% (this provision is effective until 1 January 2027).

Doing Business in Belarus • Investment legislation and main incentives 23 Business activities in medium and small towns and rural areas There are a number of benefits for the Exemption period is seven years beginning Companies and individual entrepreneurs companies and individual entrepreneurs from the date of the state registration of doing business in medium-sized/small doing business in medium-sized/small business in medium-sized/small towns and towns or rural areas and rendering services towns and rural areas except for those that rural areas. on cargo carriage and transportation of are directly listed by legislation (among passengers and luggage are able to enjoy Companies and individual entrepreneurs areas where the regime is not applicable benefits only if: doing business in medium-sized/small are regional cities — Brest, Vitebsk, Gomel, towns and rural areas may apply for tax • The departure (loading) point and/or Grodno, Minsk, Mogilev — and certain other incentives for corporate profit tax provided destination (discharging) point is located major cities). that: in a medium-sized or small town or a rural area, and Beginning from 1 July 2012 companies and • They keep separate accounting for rev- individual entrepreneurs doing business in enue/expenses received/incurred from • The transport used for such services is medium-sized/small towns and rural areas operations in medium-sized/small towns registered with authorized agencies in and applied for the implementation of this and rural areas a medium-sized or small town or a rural regime, are exempt from: area. • They obtain a certificate of own pro- • Corporate profit tax and personal income duction from the Belarusian Chamber tax respectively during seven years after of Commerce and present it to the tax registration of business authorities • Real estate tax on the objects located in The following incentives are introduced rural areas for subdivisions of companies created in • State duties for obtaining special permis- medium-sized and small towns and rural sions (licenses), introduction of changes areas (for subdivisions created not later into special permissions (licenses) and than 31 December 2018): their prolongation • Exemption from corporate profit tax • Obligatory sale of foreign currency • Exemption from the real estate tax received under transactions with usually paid for buildings (constructions) Belarusian nonresidents and car parking spaces, if this immovable • Customs duties and import VAT for property is recorded on a balance sheet equipment (the list of such equipment of the subdivision is closed) in case of contribution of such • Contributions to innovation funds equipment into the charter fund provided that legal entity will use such equipment for five years in its entrepreneurial activity • Other

24 Doing Business in Belarus • Investment legislation and main incentives Doing Business in Belarus • Investment legislation and main incentives 25 Companies

26 Doing Business in Belarus • Companies Corporate forms A foreign company can undertake business A commercial company with foreign invest- Ordinary companies (including open joint- activities in Belarus either through: ments can be created in several ways: stock companies with foreign investments) • A separate Belarusian legal entity, or • By incorporating it must form their charter fund before their state registration. Current Belarusian legis- • A representative office of a foreign • As a result of the acquisition of shares lation contains no requirements for the size company (participatory interest) in an already of a charter fund, except for closed and open existing Belarusian legal entity The most commonly used types of joint-stock companies. Belarusian legal entities are limited liability • Via acquisition of a Belarusian company Companies with foreign investments should companies, closed joint-stock companies as a “property complex” by a foreign be audited every year, and they cannot be and private unitary enterprises. Other cor- investor liquidated simply by the decision of the regis- porate forms (e.g., full or limited partner- Companies with foreign investments are tration state body; the terms and conditions ships) are theoretically available to foreign granted the right to form a charter fund for of a collective agreement (contract) and investors, but they are rarely used. two years following the moment of state employment contracts (agreements) may registration: 50% during the first year and differ from those established by Belarusian Specific features of companies with 50% during the second year (except for an labor legislation, but should not worsen the foreign investments open joint-stock company). employees’ position as compared with the A commercial company with foreign invest- Belarusian legislation. ments means a legal entity with a charter Table. Comparison of limited liability company, private unitary enterprise fund that partially or fully consists of and closed joint-stock company foreign investments that are equivalent to not less than USD20,000 and the main aim Limited liability company Closed joint-stock company Private unitary enterprise of which is to make profit and/or distribute Standard registration procedures Standard registration procedures Standard registration procedures it between the participants. If the Law on plus registration of shares with the Securities Department of the Investments is adopted, the legal regime Ministry of Finance for the establishment and operating of Profit can be allocated both Profit can be allocated only in Profit is distributed by the owner companies with foreign investments could proportionately and disproportio proportion to shares (except for in the owner’s favor be ambiguous. nately to participatory interest, privileged shares) if that is directly allowed by the Types of commercial companies with for- charter eign investments: Transfer of participatory interest Transfer of shares of closed joint- As the enterprise is 100% owned • Joint commercial company to a third party can be restricted/ stock company to third parties by one legal entity, transfer is prohibited by the charter is only permitted with the other carried out through disposal of • Foreign commercial company shareholders’ consent “property complex” The charter fund of a joint commercial The sale price of participatory The sale price of shares may not Transfer of the enterprise is company consists of the proportion of interest or the method for its be specified by the charter in carried out through disposal of advance “property complex” and the sale the foreign investor and the proportion of estimation may be specified by the charter in advance price may not be specified in physical and (or) legal entities of Belarus. advance The charter fund of a foreign commercial The registration procedure is not The registration procedure is The registration procedure is company is fully represented by foreign very complicated and usually quite complicated because of the the same as for a limited liability investments. takes about a week requirement to issue shares and company register this emission

Doing Business in Belarus • Companies 27 Limited liability company The members of an LLC are not responsible A PUE is liable for its obligations, with all The limited liability company (“LLC” or for its obligations and bear the risk of loss of the property belonging to it by right of “OOO” in Russian) seems to be the most only within the limits of their participatory economic management. It doesn’t bear popular corporate form in Belarus. In interests. liability for the obligations of the owner of practice the majority of foreign companies its property. starting their activities in Belarus prefer to Private unitary enterprise establish an LLC. A private unitary enterprise (“PUE” or Joint-stock company The charter fund of an LLC consists of the “ЧУП” in Russian) is also a very popular Joint-stock companies (“JSC”) might look a nominal values of its participants’ participa- corporate form in Belarus. The main differ- bit more complicated from the administra- tory interests. The minimum charter fund ence from an LLC is that a PUE’s founder tive burden standpoint. JSCs generally fall of an LLC is currently not set (except for remains the direct owner of its property. into two categories: closed and open. The difference between an open and a closed LLCs with foreign investments — see above). The property of a PUE is indivisible and may JSC is that in an open JSC shares may be Payments for participatory interests may be not be divided into contributions (partici- freely sold to third parties, while in a closed in the form of cash and/or in-kind payment patory interest, shares). Both an individual JSC share transfers are subject to the with shares of other companies, assets, (jointly owned by spouses) and a legal pre-emptive rights of other shareholders. equipment, etc. Participatory interests of entity can privately own the assets that be- LLCs differ from shares of joint-stock compa- long to a PUE by right of economic manage- The minimum charter fund requirement for nies, because participatory interests are not ment. Common ownership of a PUE’s assets incorporation is currently: securities and should not be registered with is prohibited. • 100 basic units (approximately a governmental body. The PUE has the right to dispose of all 1,175 USD) for a closed JSC An LLC’s charter may contain certain restric- the property that belongs to it by right • 400 basic units (approximately tions related to the transfer of a participant’s of economic management except for real 4,700 USD) for an open JSC rights, such as a prohibition against sales of estate (if other restrictions are not set by The maximum number of shareholders participatory interests to third parties and the founder in the charter). Any disposal of cannot exceed 50 for a closed JSC but is the withdrawal of a participant from the LLC real estate (including sale, lease, recogni- unlimited for an open JSC. The JSC shall without the consent of other participants. zance, etc.) can be carried out only by the have a minimum of two founders. If the charter provides for the right of with- founder’s decision. drawal, the withdrawing participant should Joint-stock companies can distribute two The minimum charter fund of a PUE is cur- be paid the actual value of its participatory types of shares: ordinary (voting) and rently not set (except for PUEs with foreign interest in the LLC. preference shares. The owner of a prefer- investments - see above). Payments into ence share receives fixed dividends and The number of participants in an LLC can be the charter fund may be both in cash and has the right to equity when a company up to 50. An LLC shall have a minimum of in kind, when it is paid with shares of other is being liquidated, but does not get the two founders. companies, assets, equipment, etc. right to vote in managing the company. The The governing bodies of an LLC are the gen- The maximum number of participants in a nominal value of such preference shares eral meeting of participants and the board of PUE is one. that are distributed must not exceed 25% of directors (optional). An individual executive the company’s charter fund. body (director) runs its day-to-day business; The governing body of a PUE is the director, there can also be a collective executive body who shall be appointed by the owner or An open JSC must comply with a number (managing board) running it. by a body authorized by the owner and of information disclosure requirements. accountable to it. For this reason a closed JSC is generally

28 Doing Business in Belarus • Companies preferred and may be used for setting up a Registration of companies in Belarus joint venture with a Belarusian partner. In Companies must be registered with the If any documents submitted in connection most cases, if a company is an open JSC, it state registration authority, which takes with registration are unsatisfactory, the means that previously it was a state unitary care of further registrations with the applicant may need to re-file them. Also, enterprise and was transformed into an tax authorities, the Fund for the Social certain registrations must take place in a open JSC in the course of privatization (the Protection of People, the statistics bodies, prescribed sequence; thus, a delay at one state continues to be the stakeholder). the Belarus republican unitary insurance stage of the process can delay subsequent enterprise Belgosstrakh, etc. stages. Representative offices A representative office should be accredit- A newly created company (a representative Foreign companies may also operate in ed with the Belarusian Ministry of Foreign office) should take additional steps to be Belarus without creating a legal entity Affairs. After that it should separately apply fully operational, e.g., open bank accounts, by establishing a representative office. A for registration with the tax authorities, the manufacture a corporate seal and register representative office is generally understood Social Security Fund, the statistics bodies the shares issuance (for JSCs only) with to be a subdivision of a foreign legal entity and the Belarus republican unitary insur- the securities authorities. that represents the company’s interests in ance enterprise Belgosstrakh. Belarus, and not a separate legal entity. On the whole, setting up a representative Its main purpose is generally to promote office is much more burdensome, i.e.: commercial relations between the foreign legal entity and Belarusian enterprises and Representative office of a foreign Legal entity to gather information about the Belarusian company market. Representative offices are officially Time of registration allowed to undertake commercial activity. In About 1.5–2 weeks About 1–1.5 months (setting up) practice, many of them do engage in commercial activity. State duty amount 5 basic units (approxi- 65 basic units (approximately mately 60 USD) 765 USD) for each year of existence The term of the representative office’s operation is determined by the company when it applies to open a representative office. The term can be renewed.

Licensing A special permit (license) is required to car- products and tobacco goods, distributive ry on certain business activities. Currently, trade in oil and oil products, medical activi- there are 37 such activities (including 230 ty, transportation services and publishing. components). The most important are: The licensing authorities issue licenses banking transactions, gambling business, within 15 working days from the date of production and wholesale of alcoholic prod- submission of all required documents. ucts and tobacco goods, retail of alcoholic

Doing Business in Belarus • Companies 29 Mergers and acquisitions Shareholders’ agreements

Antimonopoly control Restrictions applicable to strategic The legislation and judicial practice of Belarus do not provide for shareholders’ Under the Competition Law, certain trans- companies agreements. It is, however, expected that actions (including mergers and acquisi- Foreign investors are prohibited from shareholders’ agreements will be intro- tions, establishment of new companies, investing in the following fields: duced soon. purchase and sale of shares and/or assets) • Defense and security of Belarus are subject to antimonopoly control. • Production and sale of drugs, strong and An antimonopoly body’s approval should be toxic agents obtained prior to registration and the purchase of shares of the company-monopolist Foreign investment in legal entities that on the Belarusian market. are monopolies on the Belarusian market is not allowed without the approval of the Belarusian Ministry of Economy.

Taxes at a glance Main tax rates (a) The list of taxes is not exhaustive. Taxes (a) Rates Additional information is given CPT 18% further on. Capital gains tax 18%/9% (b) (b) A 9% rate applies to profit from the Branch remittance tax 0% sale of shares (participatory interest in charter capital). Income tax rates for foreign companies not engaged in activity in Belarus through a permanent establishment: (c) The tax rate is 2% for objects of Payment for transportation and freight (including demurrage and other 6% over-normative construction in prog- payments upon transportation) in the event of international traffic, and ress. The local authorities may set an for the provision of transport forwarding services increasing or decreasing 2x coefficient. Interest income derived from any debt obligations, including income 10% (d) The amount includes 1% payable by an concerning loans (deposits, credit lines, the right to use temporarily employee. In this case, tax is withheld available resources in accounts in Belarusian banks) and securities and paid by the employer. Dividends 12% Royalty, income from licenses and other income according to the list 15% set forth in legislation Value added tax 20% Real estate tax 1%/2% (c) Social security contributions: 35% Compulsory social insurance for retirement, disability and loss of 29% (d) breadwinner (pension insurance) Compulsory insurance premiums for disability, maternity, etc. 6%

30 Doing Business in Belarus • Companies Tax system • Local taxes and duties. Regulatory legal The periodicity of audits depends on the acts of the local Councils of Deputies es- risk group to which a taxpayer belongs. The The President, the Belarusian National tablish them on the basis of the Tax Code. tax authorities plan audits depending on Assembly and the Finance Ministry are These taxes are payable on the relevant the risk profile of a company: responsible for determining the basic prin- territories only. ciples of taxation and developing the tax • A high risk group — not more than once policy in Belarus. The Belarusian Ministry of a calendar year. If there are no identified Taxes and Duties (hereinafter, the “Taxation Tax audits tax law violations, they plan the next Ministry”) and its territorial (regional, The Tax Code envisages several types of tax audit in two years at the earliest. district) inspectorates practice operative audits, including in-house (desk) and on-site • An average risk group — not earlier than control over taxation. (field) audits. An audit should not take more once in three years. If there are no identi- than 30 workdays. A planned audit can be fied tax law violations, they plan the next Today, Belarus has a two-tier tax system: prolonged by not more than 15 workdays. audit in five years at the earliest. • Republican taxes and duties. The Tax There are no restrictions on repeating an • A low risk group — when the need arises, Code of the Republic of Belarus (General audit of already audited periods. However, but not more than once in five years. and Special Parts) (hereinafter, the “Tax the Belarusian tax bodies do not as a rule Code”) and the Presidential Decrees conduct tax audits for periods exceeding five Planned audits are semiannually placed on establish them. These taxes and duties years or repeat audits of tax audit periods. the website of the Belarusian State Control must be paid on the whole territory of Belarus has a ban on audits for two years Committee not later than 15 December and Belarus. from the registration date of a new company. 15 June (www.kgk.gov.by).

Corporate profit tax

Taxpayers Permanent establishment of foreign in its interests, and/or having and using CPT payers are (i) Belarusian companies companies the foreign company’s authority to enter and (ii) foreign companies engaged in Foreign companies pay CPT on profit re- into contracts or agree on their material activity in the Republic of Belarus through a ceived through a permanent establishment in terms (dependent agent) permanent establishment. Belarus by selling goods (work, services) and A construction site and an assembly unit property rights as well as on non-sale income Belarusian companies are also permanent establishments if they reduced by non-sale expenses. have existed in Belarus for over 180 days in Belarusian companies pay tax on profit A foreign company’s permanent establish- any 12-month period. received in Belarus and abroad. ment in Belarus is: A place used only for one or several of the Taxes for a group or in the event of con- • A structural subdivision (establishment) following purposes is not a foreign compa- solidation cannot be reduced, because or other place of supply of goods (work, ny’s permanent establishment: each company of the group is a separate services) or of engagement in other ac- • Storage, exhibition or supply of goods of taxpayer. Branches with separate bank tivity in Belarus through which a foreign own production (“supply” means delivery accounts and separate balance sheets company carries on entrepreneurial or and shipment of goods without selling submit separate CPT returns and pay CPT other activity to make profit them in Belarus through a permanent separately, i.e., a branch’s losses will not • A company or individual engaged in activ- establishment) affect the tax base of another branch or the ity on behalf of a foreign company and/or parent company.

Doing Business in Belarus • Companies 31 • Procurement of goods for a foreign Tax benefits Tax deductible expenses company CPT exemptions: The list of tax deductible expenses is not ex- • Gathering or distributing of information • Profit received from a real estate sale haustive. All expenses (except for expenses for a foreign company in the amount of the cost for creating that are not deductible or deductible within • Involvement in other types of activity if an engineering transport infrastructure certain limits) should be fully deducted if the activity is, on the whole, preparatory leading to the real estate that was then they relate to the production/sale of goods or auxiliary. transferred free of charge to mainte- (work, services, property rights) or if they nance companies are non-sale expenses. Double tax treaties signed by Belarus with other states may have other rules for deter- • Profit from the sale of certain innova- In practice, form prevails over substance mining a permanent establishment tive goods or high tech goods of own in tax authorities’ audits and, therefore, production certain expenses may be non-deductible Object of taxation. Tax base • Income from operations with bonds if the taxpayer cannot confirm them by an issued from 1 April 2008 to 1 January agreement, an acceptance certificate, an CPT applies to (i) gross profit and (ii) divi- 2013 by legal entities deemed tax resi- invoice, etc. dends accrued by Belarusian companies. dents of Belarus Interest expenses — thin capitalization There are two methods to recognize sales • Profit (not more than 10% of gross profit) rules revenue: transferred to certain budget-funded Thin capitalization rules restrict tax deduc- • Upon receipt of payment for the supplied Belarusian companies or used to pay the tion of a certain portion of interest on loans goods (work, services and property bills for goods (work, services) acquired for CPT purposes. The rules will come into rights) (cash method) and transferred to such companies force as of 2013. • Upon the supply of goods (work, services • Profit of companies that employ disabled They apply when the debt to equity ratio is and property rights) (accrual method) persons if such persons are at least 50% more than 3:1. of the staff for a tax period Banks use the accrual method only. It is ex- The following are cases in which a con- pected that starting in 2013, all taxpayers • Profit from the sale of goods (work, ser- trolled debt arises: will apply the accrual method. vices) at roadside service sites — for five years from the date of start of operations CPT rate 1) A foreign company that granted a loan • Profit from child food production owns, directly or indirectly, over 20% in a The CPT rate is 18%. Profit from the sale of • Profit of insurance companies from Belarusian company’s charter capital shares (participatory interest in the charter the investment of insurance resources 2) A Belarusian company that grants a capital) of a Belarusian company is taxed under agreements concerning voluntary loan is an interrelated entity of a foreign at the rate of 9%. A CPT rate of 12% applies insurance relating to life insurance, which company that directly or indirectly owns to dividends paid by Belarusian companies. is used to increase the accumulation in over 20% in a Belarusian company’s Reduced tax rates are also applied in some insured persons’ deposit accounts, etc. charter capital other case. Tax deductible interest is calculated by the following formula:

Controlled debt Maximum amount of Interest = deductible interest accrued Borrower’s equity Lender’s share in the / ( capital × borrower’s capital × 3 )

32 Doing Business in Belarus • Companies Thin capitalization rules do not apply to Depreciation/amortization is calculated on Dividends banks, insurance companies, lessors or the basis of assets’ initial value less the part Dividends received by Belarusian compa- landlords (if the received rental payment of the immediately deducted initial value. nies from residents and nonresidents are (lease payments) exceed 50% of the total Other expenses subject to CPT at the rate of 12%. Dividends revenue from the sale of goods (work, ser- distributed by Belarusian companies are Current legislation sets limits for the deduc- vices) and property rights as well as income taxed at source. CPT on dividends is with- tion of business trip expenses, fuel and en- from rent-out and lease-out operations). held and transferred to the budget by the ergy expenses, payroll expenses, insurance companies that pay the dividends. Interest expenses — other specific features expenses and some other expenses. Interest expenses on overdue loans do not When dividends are paid by foreign reduce the CPT base. Loss carry forward companies, income tax may be withheld in a foreign state. Actually, the amount Interest expenses on loans for the acquisi- A loss is an excess of the total amount of of tax withheld in a foreign state may be tion of fixed assets are capitalized before the the costs of production and sale of goods offset when paying CPT in Belarus (see the assets are put into operation, while they are (work, services), property rights and certain section “Offset of taxes paid in a foreign capitalized or accounted as non-sale expens- non-sale expences (leasing out property, state”). es after the assets are put into operation. negative FOREX and sum differences) over the total revenue from the sale of goods Depreciation/amortization (work, services, property rights) and cer- Profit/loss from capital gain Depreciable/amortizable assets are tangi- tain non-sale income (leasing out property, Profit from the sale of tangible and intan- ble/intangible assets either used or not used positive FOREX and sum differences) less gible assets is defined on the basis of sales in entrepreneurial activity. Depreciation/ revenue taxes. revenue less revenue taxes, assets’ net book amortization charges are deductible only value (for depreciable/amortizable assets) or The losses can be carried forward within if the taxpayer uses the tangible/intangible acquisition cost (for non-depreciable assets, the next 10 years, starting with those assets in entrepreneurial activity. e.g., construction-in-progress sites and land incurred in 2011 (the rules will be in force lots) and sale costs. The loss from the sale Taxpayers can use the following depreci- as of 2012). ation/amortization methods: the linear of tangible and intangible assets reduces the method, the reducing balance method Losses are carried forward in groups of op- tax base. erations against identical types of income: (nonlinear), the direct sum-of-the-years’- The CPT rate on profit from the sale of digits method (nonlinear), the inverse • 1st group — operations with financial securities (except for cases indicated in the (reverse) sum-of-the-years’-digits method derivatives and securities section “Tax benefits”) is standard. Special (nonlinear) and the units of production • 2nd group — alienation of fixed assets, rules apply to calculation of profit in REPO (output based) method. construction-in progress sites and unin- transactions. stalled equipment At the acquisition of tangible and intangible Profit from the sale of Belarusian shares assets, a taxpayer can immediately deduct Further, the remaining losses are carried (participatory interest in the charter capital a part of their initial value for CPT purposes forward irrespective of the operations and of Belarusian companies) is taxed at the rate as follows: activity from which they were incurred. of 9%. • Not more than 10%, for buildings and To apply loss carry forward rules, a compa- structures ny should maintain separate accounting, • Not more than 20%, for machinery and and should also keep documents confirming equipment, transport vehicles and intan- the amount of losses. gible assets

Doing Business in Belarus • Companies 33 Tax return filing and tax payment Tax accounting tax purposes it is recognized in future The tax period for CPT is the calendar year. Tax accounting is based on financial state- reporting periods The amount of CPT for the tax period is ments with necessary adjustments. A tax- An analytical record of temporary differ- determined on an accumulated basis. payer’s accounting policy should stipulate ences is maintained in the analytical tables, the tax accounting procedure. The taxpayer submits a CPT return annu- on separate off-balance sheet accounts or ally not later than 20 March of the year Deferred tax assets and liabilities arise when by another method. The chosen method is following the reporting tax period. income and expenses in the accounting disclosed in an accounting policy. and for tax purposes coincide, but they are The taxpayer uses one of the following The amount of deferred tax assets is recognized in different reporting periods. methods to determine CPT advance determined by multiplying the deductible Deferred tax assets and liabilities are ac- payments: temporary difference of the current report- counted in accordance with the instructions ing period by the CPT rate effective on the • On the basis of the taxpayer’s activity in of the Finance Ministry. reporting date. The amount of deferred tax the preceding tax period: every quarter liability is determined by multiplying the a company pays one fourth of the CPT Typical cases when deferred tax assets and taxable temporary difference of the current amount for the preceding tax period. This liabilities arise are: reporting period by the CPT rate effective method cannot be used if a company suf- • Use of capital allowance on the reporting date. fered a loss in the preceding tax period. • Loss carry forward Deferred tax assets and liabilities are • On the basis of the presumed CPT • Receipt of free assistance amount: every quarter a company pays reflected in the accounting ledgers of the one fourth of the estimated CPT amount. Deferred tax assets and liabilities arise due reporting period when the temporary differ- The amount of tax so paid should be at to deductible and taxable temporary differences arose. ences, accordingly. least 80% of the actual amount of CPT Deferred tax assets are reconsidered according to the results of the current tax Deductible temporary differences arise annually at the reporting date to determine period. when: whether they can be recognized. Deferred The taxpayer can change the tax payment • Expenses in the accounting are recog- tax assets are recognized when there are method (if the second calculation method nized in the current reporting period, taxable temporary differences or when it replaces the first method). For this purpose while for tax purposes they are recog- is very likely that deductible temporary it submits an adjusted tax return not later nized in future reporting periods differences may reduce taxable profit in future. Previously recognized deferred tax than the twentieth of the third month of the • Income in the accounting is recognized asset is written off when there are no tax- quarter in which the calculation method in future reporting periods, while for tax able temporary differences or it is unlikely changed. purposes it is recognized in the current that deductible temporary differences will reporting period Current CPT payments are made not later reduce taxable profit in future. than 22 March, 22 June, 22 September Taxable temporary differences arise when: and 22 December of the current tax period. • Expenses in the accounting are recog- Offset of taxes paid in a foreign state nized in future reporting periods, while The taxable profit of a Belarusian com- for tax purposes they are recognized in pany includes profit from activity outside the current reporting period Belarus, in relation to which it is registered • Income in the accounting is recognized as taxpayer in a foreign state. To avoid in the current reporting period, while for double taxation, profits tax actually paid in the foreign state may be offset against CPT

34 Doing Business in Belarus • Companies in Belarus. The offset amount should not be (approximately USD2.4 million) in one The following methods are consistently greater than that to be paid in Belarus. calendar year and the price of the trans- used when determining, for tax purposes, action deviates by more than 20% from the conformity of transaction prices to A Belarusian company must submit to the the market price at the acquisition or sale market prices: local tax authorities a reference from the date foreign tax body confirming payment of the • Comparable uncontrolled prices method . relevant amount in the tax period when the In this respect, foreign trade means: This compares the transaction price with the market price range for identical (or, if reference was given. The reference should • Sale (including commission, assignment unavailable, homogeneous) goods. The indicate the following: and other similar agreements) of goods market price range is two or more market • Taxpayer’s name to foreign legal entities and/or foreign prices determined under available data on individuals • Name of tax prices for the relevant period or for the • Date of tax payment and the period for • Acquisition (including commission, nearest date prior to the transaction. If which it is paid assignment and other similar civil-law the price of the transaction is less than the agreements) of goods from foreign legal • Object of tax and amount of tax base minimum value of the range, the minimum entities and/or foreign individuals price of the market price range is used for • Tax rate and amount of tax paid to the tax purposes. foreign budget The comparability of prices to market prices is checked only for the purpose of calculat- • Resale minus method . The market price is For an offset, a taxpayer may also submit ing CPT and only if it will increase the tax. determined as the difference between the confirmation or another document in the price at which the goods were resold by The Tax Code gives a list of prices that are form established by the foreign tax body or the purchaser and the expenses for resale not checked: other competent authority if it confirms the and promoting the goods on the market, amount of CPT paid in that state. • Prices set by the requirements of the and also the purchaser’s ordinary profit on antimonopoly bodies (Price Policy resale of goods (without taking account of Transfer pricing Department of the Ministry of Economy) the purchase price for the goods). Tax authorities may control prices only • Prices formed by trade sessions at a • Cost plus method . The market price is during an on-site tax audit in the following registered commodity exchange or in the determined as the sum of the incurred ex- cases: course of public sale penses and the ordinary level of profit for • Sale of immovable property — when the • Prices determined by an appraiser if an such activity. Ordinary expenses incurred prices are more than 20% lower than the appraisal is mandatory for a transaction in such activity for the production and/or market prices on the date of the immov- • Prices regulated in accordance with sale of goods, transportation, insurance, able property’s sale Belarusian or foreign legislation storage, etc. are taken into account for this method. • Foreign trade (including related par- • Prices set by a state control body, or ty transactions) — if the price of one when there are limits to prices, markups Prices are compared with one or several transaction (transactions with one or discounts, or when there are other transactions of goods. If the transactions entity) at the date of purchase/sale of limitations on profitability incurred in different periods, comparable goods is more than 20 billion rubles prices are adjusted for price indexes.

Doing Business in Belarus • Companies 35 Withholding tax

Taxpayers shares) and sale of goods under assign- When foreign companies that do not have a Taxpayers paying withholding tax (herein- ment, commission and other related permanent establishment in Belarus receive after, “WHT”) are foreign companies that agreements the following types of income from other receive income from sources in Belarus • The date of accounting of income foreign companies, they must submit a tax without carrying out activity in Belarus payment return and pay tax to the budget (it is not through a permanent establishment. clearly regulated how a foreign company can meet such a requirement): Tax rates • Income from the alienation of all or a part Object of taxation. Tax base The tax rates are as follows: of immovable property in Belarus The following income from sources in • 6% of payment for carriage and freight • Income from the alienation of all or a part Belarus is taxable: (including demurrage and other pay- of Belarusian shares (participatory inter- • Dividends and other related income ments upon carriage) relating to est in the charter capital of Belarusian international traffic and the provision of • Interest income from debt obligations companies) transport forwarding services • Royalty • Income from leasing out assets (financial • 10% of interest income from any debt • Income from the alienation of immovable lease), rent and other use of assets that obligations irrespective of how they were property, securities, and equity capital are in Belarus formed (stocks and shares) • Income from immovable property in • 12% of dividends and related income as • Income from the provision of advisory, Belarus that is placed under fiduciary well as income from the alienation of accounting, legal, transport, messenger, management all or part of Belarusian shares (partic- intermediary and management services ipatory interest in the charter capital of • Income from the provision of services in • Other types of income (there is an ex- Belarusian companies) (this rate is not the fiduciary management of immovable haustive list of taxable income) applied when PUEs are sold) property in Belarus The tax base is usually determined as all in- • 15%, which is the generic rate applicable • Income from the use of, or provision of come less documented expenses. If income to other types of income subject to WHT the right to use, in Belarus, property is received in kind, tax is calculated with rights to works of literature, art and The double tax treaties of Belarus with regard to its worth in cash. science, computer applications and other states may contain more preferential other works concerning copyright and/or The tax payment obligation arises at that terms. related rights date of income accrual to a foreign compa- For information on the applicable WHT • Income from securities sale (redemption) ny that is the earliest of the following dates: rates under double tax treaties and transactions in Belarus • The date of accounting of the completion Belarusian legislation, see Appendix No. 4. • Income from holding and/or taking part of work (or services), the acquisition of in shows in Belarus and from sideshows immovable property and the acquisition Tax agents and menageries of shares (participatory interest in charter capital), or a part of it WHT is calculated, withheld and paid to Individuals can also be regarded as tax the budget by Belarusian legal entities and • The date of accounting of obligations to agents in several transactions. individual entrepreneurs that accrue and pay dividends interest, royalty, sale pay income to foreign companies. (redemption) of securities (apart from

36 Doing Business in Belarus • Companies Provisions of double tax treaties • Full name of the foreign company and its tax at the rates set by the Tax Code. This To apply the provisions of double tax registered address tax, however, can be offset or reimbursed treaties, a company must receive confirma- • Confirmation that the foreign company when the foreign company presents the tion that it has a permanent location in a was (is) a tax resident of a certain state relevant documents. foreign state with which Belarus has a valid in order to apply the provisions of inter- double tax treaty. Such confirmation may national double tax treaties in the period Tax return filing and tax payment be provided in the form established by the under consideration A tax period is a calendar month. Taxation Ministry or in any other form set by Confirmation should be submitted to the the government of a foreign state. A tax agent submits a WHT return not later tax authorities either directly or through a than the twentieth of the month following In the latter case, such confirmation should company that withholds income tax. the tax period. Tax should be paid to the contain the following mandatory data: If the foreign company does not meet this budget not later than the twenty-second of • Date of issue (or term of validity) requirement, the tax agent withholds the the month following the tax period.

Value added tax

Taxpayers the lease-out of units and the handover Tax rate The VAT payers are: of goods as pledge in the event of failure The basic VAT rate is 20%. It applies to to fulfill obligations 1) Companies most goods and services sold in Belarus. • The import of goods into Belarus. 2) Individual entrepreneurs (with regard to The sale of farm products (apart from several specific features) When goods (work and services) and prop- flowers and decorative plants), livestock 3) Trustees erty rights are sold, the VAT base is: products (apart from furs), fish and apicultural goods produced in Belarus, as well 4) Individuals obligated to pay VAT, which is • The sale prices (tariffs) of goods (work, as the import and/or sale of baby food and collected when goods are imported into services) and property rights including children’s goods in accordance with the list Belarus excise duties (if applicable) without VAT approved by the President, are subject to • Regulated retail prices with VAT included Tax registration VAT at 10%. For tolling operations from customer-sup- There is no separate registration for VAT The import of cut and uncut diamonds of plied raw materials, the VAT base is the cost purposes. A company undergoes tax regis- all types and other precious stones into of treatment, processing or other transfor- tration upon its state registration or when a Belarus for production needs from the mation of the raw materials without VAT. representative office is being registered and member-states of the Customs Union of the is effective for all taxes. When conducting intermediary activity, the Republic of Belarus, the Russian Federation VAT base is the amount received as remu- and the Republic of Kazakhstan (hereinaf- Object of taxation. Tax base neration under assignment, commission and ter, “the Customs Union”) is subject to VAT other similar agreements. at 0.5%. VAT applies to: • The sale of goods (work, services) and When an object of financial lease (leasing) Goods for export and transport forwarding property rights in Belarus, including ex- is transferred by the lessor to the lessee, the services related to export are subject to change, transfer free of charge, the sale tax base is the amount of lease payments. VAT at 0%. of goods by a company to its employees,

Doing Business in Belarus • Companies 37 Place of sale of goods (work, developing, formalizing and modifying web The date of the supply of work or services services) and property rights pages and creating databases and ensuring is deemed the date of their transfer under access to them; the rendering of services supporting documents (delivery and Belarus is the place of sale of goods if pertaining to providing and hiring staff if acceptance statements and other similar the goods are on its territory, if they are it works at the purchaser’s premises; the documents). not shipped and are not transported and/ rendering of services pertaining to renting or if the goods are on the territory of The date of property rights supply is the and leasing movable property, except for Belarus when they begin to be shipped or date on which the right to receive payment transport vehicles; the rendering of services transported. arises. (work) pertaining to developing computer Belarus is the place of sale of work, services applications and databases (programs and If a taxpayer recognizes revenue upon and property rights if: information sources and computers) and payment for goods (work, services) and • The work and services directly relate to adapting and modifying them; and a few property rights, the time of the actual immovable property (except for aircraft, other services. sale is the day on which an entry is made in accounting for receipt of cash from the marine vessels, inland ships and space- If the sale of work and services is of an purchaser, but not later than 60 days from craft) that is in Belarus (this provision auxiliary nature in relation to the key work the day of supply of goods (work, services, also applies to leasing out immovable and services, the place of this auxiliary sale property rights). If payment is not received property and taking it on lease) is deemed the place of sale of the key work within 60 days from the date of transfer, • The work and services relate to movable and services. VAT is charged on the relevant amount of property within Belarus receivables. • Services are actually rendered in Belarus Recognition of sales revenue in the fields of culture, art, education, The taxpayer recognizes sales revenue for VAT-exempt turnover physical training, tourism, recreation and VAT purposes as goods (work, services and The following sales turnovers are sports property rights) at the moment of their VAT-exempt: • The purchaser of the work, services and supply or of the payment for the supply. intellectual property rights is engaged in • Medicines, medical devices, instruments, For the supply method, the time of the ac- activity in Belarus and/or the purchaser’s equipment and articles, as well as med- tual sale is determined as the day on which location/residence is Belarus icines, devices, instruments, equipment goods are shipped (work is performed, and articles serving veterinary purposes The last provision applies to the sale services are rendered) and property rights according to the lists approved by the (transfer) of intellectual property rights; are transferred. The date of shipment is President the rendering of audit, advisory, marketing, deemed: • Insurance services, bank operations legal, accounting, engineering (including • The date of their release to the purchas- • Medical and veterinary services accord- pre-project and project services and design er, to the consignee or to a company ing to the lists approved by the President and development), advertising and design (individual entrepreneur) that transports services; the rendering of services pertain- (forwards) the goods if the vendor does • Cultural services according to the list ing to processing and providing information; not deliver (transport) the goods or approved by the President the fulfillment of R&D, experimental design does not bear the costs of their delivery • Goods (work, services) produced (per- and experimental technological (or simply (transportation) formed, provided) by taxpayers who technological) work; the rendering of ser- • The date when transportation begins in have on average at least 50% of disabled vices supporting computer applications and other cases persons on their industrial production databases and providing disk space; the ren- staffs for the considered period (except dering of services pertaining to projecting,

38 Doing Business in Belarus • Companies for excisable goods, broker and other • Equipment and devices for R&D, materials The taxpayer is entitled to credit input VAT if: intermediary services, the lease-out of and parts making up a set for R&D and • Goods (work, services) and property property and leasing) for experimental design and experimental rights were acquired for VATable • R&D, experimental design and experi- technological work that were imported transactions by Belarusian residents according to the mental technological work entered in the • The VAT charged or paid upon acquisi- procedure determined by the President state register according to the procedure tion, or paid upon importation of units, is determined by the President entered into accounting and the purchase • Property rights to industrial units Import of goods ledger, provided that the ledger is main- • Goods of own production by the ven- Import operations are subject to VAT. tained by the taxpayer dor-Belarusian tax resident under a sale/ In the event of import from states that are • The amount and rate of VAT are indicated purchase agreement with the lessor-Be- not members of the Customs Union, the in the primary accounting and settlement larusian tax resident who acquires the tax base is determined as the amount that documents are submitted by the supplier goods to subsequently transfer them includes the customs value of goods for to the purchaser of goods (services) under an international lease agreement which customs duties and excise duties • VAT is paid to the seller of goods (ser- outside Belarus with right of repurchase (when excisable goods are imported) are vices) (when the taxpayer recognizes the • Interest-bearing cash loans to be paid. VAT is collected by the customs revenue upon payment) authority. The following are also VAT-exempt when If the VAT credit is greater than the VAT imported into Belarus: calculated upon the sale of goods (work, Calculation of VAT • Transit goods services) and property rights, the differ- The VAT to be paid to the budget is calcu- ence is credited first and foremost from the • Film copy software and cultural values lated as the difference between the total total VAT in the next tax period or is to be imported by cultural companies VAT at sale and the VAT credit. refunded to the taxpayer in certain cases. • Goods intended for official use by diplomatic missions and consulates of foreign VAT credit is available for input VAT VAT when acquiring goods (work, states or for personal use by the diplomatic amounts that are: services) from foreign companies and/or administrative and technical staff • Charged by vendors registered as taxpay- of these missions and consulates, and by ers with the Belarusian tax authorities to When a foreign company without perma- international organizations and their rep- the taxpayer upon acquisition of goods nent establishment or Belarusian tax reg- resentations; diplomatic mail and consular (work, services) and property rights in istration sells goods (work, services) and valises Belarus property rights to Belarusian companies and individual entrepreneurs, they must • Goods relating to foreign aid gratis and • Paid by the taxpayer when goods are calculate VAT and pay it to the budget. goods receivable (received) as internation- imported into Belarus al technical assistance and/or acquired by • Paid into the budget when goods (work, This VAT is to be credited according to the means of international technical assis- services) and property rights are acquired general procedure. tance, which are intended for the purposes in Belarus from foreign companies that determined by a project or a program for are not registered with the Belarusian tax international technical assistance, accord- authorities ing to the procedure and under the terms set by the President

Doing Business in Belarus • Companies 39 Tax return filing and payment of VAT Export of goods the standard order, according to which the customs authorities collect VAT). The tax period is the calendar year. VAT When exporting goods, taxpayers apply the payers submit a VAT return monthly or 0% VAT rate and are exempt from paying Export and/or import of work and services quarterly (at the taxpayer’s choice) on a excise duty in the country of registration. VAT is collected in a member-state of the progressive total basis by the twentieth of The taxpayers must submit a set of docu Customs Union whose territory is deemed the month following the reporting period. ments to the tax authorities within 180 the place of sale of work and/or services. The deadline for paying VAT is the twen- days from the date on which the goods are The tax base, VAT rates and procedure for ty-second of the month that follows the transferred. collecting VAT and tax benefits are deter- reporting period. Import of goods mined by the legislation of that state. VAT in transactions with Russian The importing company has a VAT and and Kazakh companies excise duties obligation. It determines the tax base on the basis of the cost of the The Customs Union legislation sets forth acquired goods, including excise duties (for a special procedure for paying VAT on sale excisable goods). The cost of the acquired of goods (work, services) between compa- goods is the supplier’s price. VAT is collect- nies of the member-states of the Customs ed by the tax authorities (this differs from Union.

Real estate tax

Taxpayers • For foreign companies that are not of the leasing agreement, the objects are The payers of real estate tax (hereinafter, engaged in activity in Belarus through a not on the balance sheet of the leasing “RET”) are companies and individuals, tak- permanent establishment, and for individ- company uals (not discussed in this brochure): the ing into consideration the specific features The tax base is the net book value of build- leaseholder company (lessee, borrower) given below. ings, constructions and parking places as well as the cost of over-normative con- In relation to buildings and constructions Object of taxation. Tax base (apart from those put under fiduciary man- struction in progress as of 1 January of the RET objects are: agement and/or acquired during fiduciary calendar year. • Buildings and constructions, including management) situated in Belarus that were Tax rates leased by legal entities or taken for other over-normative construction in progress, chargeable or free-of-charge use, RET and parking places that are owned or The RET rate is 1%. For over-normative payers are: possessed or under the economic man- construction in progress it is 2%. The local ad- agement or operating management of the ministration bodies may increase or reduce • For Belarusian companies: a company taxpayer the tax rates for immovable property for cer- that has this building or construction as tain categories of taxpayers, but by no more well as a parking place on the balance • Buildings and construction as well as park- than half. Taxpayers calculate and pay RET at sheet under contractual terms for rent, ing places situated in Belarus that belong decreased/increased rates from 1 January lease or other chargeable or free-of- to individuals of the year following the year in which the charge use • Buildings and construction situated in relevant decision was made. Belarus that are leased by individual entrepreneurs if, under the contractual terms

40 Doing Business in Belarus • Companies Tax benefits • Road service units for two years from the Tax return filing and tax payment date on which they are put into operation RET exemptions apply to: The tax period is a calendar year. • Buildings and constructions that are • Buildings and constructions of research A RET return is submitted to the tax au- intended to protect and improve the envi- companies and scientific and technological thorities by 20 March of the reporting year. ronment according to the list approved by facilities, and knowhow transfer centers the President (until 1 January 2016) Tax is paid in the amount of one fourth of the annual amount of tax every quarter not • Agricultural buildings and constructions Several other units, including buildings and later than the twenty-second of the third that are either used or to be used by com- constructions deemed to have material, his- month of a quarter. panies to produce fruits and vegetables, torical and cultural value, as well as public meat, fish and apicultural products railways and roads, are exempt from RET. • Buildings and constructions for one year after they are put into operation for the first time

Other republican taxes

Land tax The land tax period is a calendar year. • Transfer of property rights and/or obligations in the course of a person’s Land tax payers are companies and Taxpayers file tax returns to the tax substitution, if the parties to the initial individuals that possess land plots on the authorities annually by 20 February of the transaction are Belarusian and offshore basis of the right of permanent or tempo- current year. They pay tax in quarterly residents rary use, lifetime inheritance demesne or installments not later than the twenty-sec- ownership right. ond of the second month of each quarter. The list of offshore zones includes the The land tax base is determined on the For agricultural land, taxpayers pay tax not British Virgin Islands, Gibraltar, the State of basis of the land’s value in the State Land later than 15 April, 15 July, 15 September Delaware (USA), etc. and 15 November. Register, its purpose and size. The offshore duty rate is 15%. Double tax rates apply to land lots (or parts Offshore duty The Tax Code establishes certain exemp- of them) located under buildings over-nor- tions from offshore duty, i.e., offshore duty The following transactions are subject to an mative construction is in progress. A tax- does not apply when a Belarusian resident offshore duty: payer must apply a double tax rate from the returns loan principal and interest to an first of the month following the month in • Transfer of cash by a Belarusian resident offshore resident. which the normative period of construction to an offshore resident or to another per- expired. son (under commitment to an offshore resident), or to an account opened in an Local government bodies may increase/ offshore zone reduce land tax rates twofold for certain categories of taxpayers. Taxpayers must • The fulfillment of non-cash obligations apply the increased or reduced tax rates to an offshore resident, except for cross from 1 January of the year following the obligations when an offshore resident year in which the relevant decision was transfers cash to the account of a adopted. Belarusian resident

Doing Business in Belarus • Companies 41 Ecological tax Excise duties Other republican taxes: The ecological tax base is the actual volume The following are subject to excise duties: These taxes include: of: • Excisable goods that taxpayers produce • Tax on the extraction of natural resources • Pollutant emission into the atmosphere and sell in Belarus • Duty for the use of public roads of • Emission of waste waters • Excisable goods imported into Belarus Belarus by motor transport vehicles of • Production wastes that are to be stored • Excisable goods imported into Belarus, foreign states or buried upon sale • Stamp duty • Import of ozone-depleting substances, Excisable goods include alcohol products, • Consular duty including those contained in products, tobacco items, motor fuel, etc. The Tax • State duty into Belarus Code establishes excise duty rates in a fixed • Patent fee The Tax Code establishes ecological tax amount per physical unit of excisable goods (specific rate) or in a percentage of their rates for each taxation unit. The tax rate Local taxes and duties may vary from BYR624,000 (approximately value (ad valorem rates). The local government bodies set local taxes USD73) to BYR126.8 million (approximately and duties. The Tax Code regulates the USD14,920) per ton of a contaminant. In general rules applicable to these taxes and some cases, taxpayers must apply special duties. Local taxes and levies include: coefficients to the ecological tax rates. • Dog tax • Resort duty • Procurement duty

Special taxation regimes

Unified tax for manufacturers of Simplified tax system Tax rates in the simplified tax system are the agricultural products Companies may apply a simplified tax following: Unified tax applies to (a) companies with system provided that their average staff size • 7% — for companies and individual revenue from the sale of manufactured agri- is not more than 100 employees and their entrepreneurs who do not pay VAT cultural products of at least 50% for the pre- gross revenue is not more than BYR9 billion • 5% — for companies and individual vious fiscal year, and also to (b) companies (approximately USD1.059 million) for first entrepreneurs who pay VAT with branches or other separate subdivisions nine months of the year before the year in • 2% — for companies and individual which manufacture agricultural products which the taxpayer is planning to apply the entrepreneurs in relation to revenue from and have a separate balance sheet and bank simplified tax system (the latter condition the sale of goods and services outside account, provided that their sales revenue also applies to individual entrepreneurs). Belarus. This provision is effective until from the manufactured agricultural products The tax base is the total amount of revenue 31 December 2013 is at least 50%. The tax rate is 1%. from the sale of goods (work, services) and • 15% — for companies and individual property rights as well as non-sale income. entrepreneurs who use gross income as the tax base

42 Doing Business in Belarus • Companies Gambling tax Lottery tax Unified tax on the activity of Gambling tax applies to game tables, game The lottery tax base is the difference be- individual entrepreneurs and other machines, totalizators and bookmaker tween the amount of income received from individuals offices. The Tax Code sets fixed tax rates for organizing and holding lotteries and the Payers of the unified tax are individual gaming business per taxation unit. The tax- amount of the lottery prize. The lottery tax entrepreneurs as well as individuals who do payer must register these units with the tax rate is 8%. not perform entrepreneurial activity. The authorities before their installation (use). Tax Code establishes a list of taxable activi- Income from lotteries is not subject to: ties and basic rates in Belarusian rubles per The income from gambling activity is not • VAT, except for importation VAT month. The local authorities set the unified subject to: • Corporate profit tax tax rates per month within these basic rate • VAT, except for importation VAT limits. The Tax Code also provides for sever- • Corporate profit tax al unified tax benefits.

Customs

Overview Customs Union of Belarus, There are several exceptions to the Customs Customs regulation in Belarus is based Kazakhstan and Russia Union rules. Certain goods must still be on international standards. Belarus The Customs Union was established in declared to the customs authorities when is a member of the World Customs 1995. The main provisions of Customs they are imported from one member-state Organization, the International Convention Union legislation, however, were introduced to another. on Harmonized Commodity Description only in 2009–2010. The Customs Union and Coding System (Brussels, 1983), the actually started to function on 1 January Import duties Convention on Temporary Import (Istanbul, 2010 when the Unified Customs Tariff Imported goods are generally subject to 1990) and the International Convention (a set of import duties applied by all three import customs duties and import VAT. on the Simplification and Harmonization of member-states) and the unified system Certain categories of goods (such as alco- Customs Procedures (Kyoto Convention) of non-tariff measures (licensing require- hol, tobacco and gasoline) are also subject (Kyoto, 1973). Belarus is expected to enter ments on importation) were adopted. to excise duties (see the section “Other the World Trade Organization (hereinafter, republican taxes” above). The most significant changes took effect the “WTO”). on 1 July 2010, when the Customs Code Customs duty rates generally vary from In addition, Belarus is a party to the of the Customs Union and other important 0% to 25% of the customs value of the Customs Union. For this reason the unified international treaties entered into force. goods. VAT is payable at the standard rate customs legislation of the Customs Union, Currently, goods manufactured or released of 20%, which is calculated on the basis of including the Customs Code of the Customs for domestic consumption in one participat- the customs value and the customs duty. Union (hereinafter, the “Customs Code”), is ing country can circulate in the others free Import VAT paid by the importer is general- directly applicable in Belarus. of customs clearance and without payment ly creditable against its output VAT. of customs duties and VAT or any economic The current customs tariff sets zero duty limitations. Such goods do not have to be rates for books, some kinds of medicines, placed under customs procedures. certain technological equipment and some other goods. Humanitarian aid, goods

Doing Business in Belarus • Companies 43 needed to rectify the consequences of nat- Customs coding sale to the final customers, their final use in ural calamities, accidents and disasters and At present, the Unified Customs the Customs Union or their re-exportation diplomatic goods are exempt from customs Nomenclature of the Customs Union applies outside the Customs Union. The payment of duties and VAT. in Belarus. This nomenclature is based on customs duties and import VAT is post- the Harmonized Commodity Description poned until the actual sale of the goods to Export duties and Coding System of goods. In principle the final customers in the Customs Union and their removal from the customs bonded Certain categories of goods (e.g., oil) are the first six digits of the commodity code warehouse. subject to export customs duties. should be identical in Belarus and in the EU, although there are sometimes differences Goods kept in a customs bonded warehouse Customs value in practice. It is possible to obtain a binding must remain in unchanged condition, i.e., decision from the customs authorities con- it is prohibited to manufacture, assemble Customs valuation in Belarus is based cerning the classification of goods. or transform goods stored in a customs on the WTO rules. The customs value of bonded warehouse. imported goods is usually determined as Customs procedures the value of the goods as indicated in the The period of storage of goods in a customs invoice plus certain other costs related All cross-border transfers of goods and warehouse cannot exceed three years. to the importation of the goods, but not vehicles in Belarus are carried out under After the expiration of the storage period included in the transaction price. These one of the customs procedures prescribed the goods should be placed under another additional costs are typically the costs of by the Customs Union legislation. Each cus- customs procedure. If the goods are re- delivery of the goods to the border (e.g., toms procedure provides different terms for leased for domestic consumption, customs transportation and insurance costs), clearance. This has a considerable effect on duties and VAT are due. If the goods are royalties or other payments for the use of the tariff and non-tariff barriers under im- re-exported outside the Customs Union, intellectual property, the costs of materials port and export transactions. Below is the no customs duty or import VAT are due. provided free of charge by the purchaser to summary of the main customs procedures. Temporary importation the seller, etc. This method of calculation Release for domestic consumption of the customs value of imported goods is The temporary importation procedure is The customs procedure for release for called the transaction value method. the customs procedure under which the use domestic consumption is used when goods of goods in the Customs Union is permitted Normally, the customs value is based on are imported into Belarus without the inten- with full or partial exemption from customs CIP delivery terms (Incoterms 2000 — tion to re-export them. This is the most fre- duties and import VAT. Carriage and Insurance Paid To). If the cus- quently used and the most straightforward toms value cannot be estimated using the procedure. Under this procedure, after the The time period for temporary importation transaction value method, other methods payment of customs duty, import VAT and cannot exceed two years (or 34 months for may apply: the price of a transaction involv- customs clearance fees, the goods are in leased fixed assets). ing identical or similar goods, the deduction free circulation in the Customs Union. The full exemption is granted in limited cas- cost method, the summation cost or the Bonded warehouse es for goods that are intended to be used in reserve method. non-sales operations. Typical examples of When goods are imported under the temporary importation with full exemption bonded warehouse customs procedure, are importation of goods for an exhibition they are kept in a special warehouse under or for testing in the Customs Union. the supervision of the customs authorities (customs bonded warehouse). The goods The partial exemption is granted in other are kept under this procedure until their situations when it is intended that the

44 Doing Business in Belarus • Companies goods will be maintained in the Customs Customs Union, customs duty and import Moldova, Tajikistan and Ukraine) signed the Union for a limited period of time and re-ex- VAT are due on the value of the raw materi- Free Trade Zone Treaty in St. Petersburg on ported afterwards. Under the partial ex- als, as is late payment interest. 18 December 2011. Uzbekistan announ emption, the importer has to pay customs ced its intention to be a party to the Processing of goods for domestic con- payments in monthly installments of 3% of treaty. The document entered into force on sumption . Under this customs procedure, the total amount calculated as if the goods 20 September 2012. Currently the Treaty customs duties are due only once the were released for free circulation. These is ratified by Belarus, Russia, Moldova, finished products are released for domestic amounts are not refunded if the goods are Armenia and Ukraine. consumption in the Customs Union terri- re-exported. tory. Customs duties apply to the finished The Free Trade Zone Treaty abolishes im- Once the period of temporary importa- goods. Imported raw materials for process- port and export duties. It provides guaran- tion has expired, the goods can be either ing are exempted from customs duties, but tees of the nondiscriminatory application re-exported out of the Customs Union or are subject to import VAT. This procedure is of nontariff regulations and the national released for domestic consumption in the available only for certain types of finished regime. Customs Union. If the goods are finally goods the list of which is to be set by the The document also provides for the aboli- released for domestic consumption, the legislation. tion of quantitative restrictions in mutual outstanding customs payments should be Processing of goods outside the customs trade and equalizes the parties in their paid together with late payment interest. territory . The procedure of processing of rights in the event of state procurements. This procedure is widely used in practice, goods outside the Customs Union allows It also envisages freedom of transit and in particular in the case of importation for exportation of goods for their processing the possibility to apply special protective leasing in Belarus and also by general con- and subsequent re-importation into the measures in mutual trade. It regulates the tractors for construction projects. Customs Union. Customs duties and import issues of providing subsidies, establishing VAT are due only on the value added by technical trade barriers, applying sanitary Customs processing procedures the processing operations, but not on the measures and introducing restrictions to There are three different processing value of the imported goods. This proce- ensure the balance of payments. procedures. dure is very useful for goods that need to The Free Trade Zone Treaty replaced be exported for repair outside the Customs Customs processing procedure on the cus- the current bilateral and multilateral Union. toms territory . Companies use this proce- free trade agreements between the dure if their business involves processing of member-countries. goods in the Customs Union. Under certain CIS free trade regime The treaty differs significantly from the conditions they can import goods into the The free trade regime that is currently in agreements effective in the CIS because it Customs Union for their processing without force in the CIS means that customs duties has an instrument obliging parties that do payment of customs duty and import VAT. are not applicable to import of goods origi- not fulfill their contractual obligations to A bank guarantee may be required to nating from the CIS countries to Belarus. It honor their commitments. The rules for re- secure the payments of customs duties and is necessary to import goods from another solving disputes, which are in the appendix taxes that can be due in case of violation of CIS country under an agreement between to the treaty, are such an instrument. the conditions for this procedure. two CIS residents to use this benefit. Once the goods have been processed and VAT and excise duties are charged in this constitute finished products, they should respect. be exported. If the finished products are Eight CIS countries (Belarus, Russia, released for domestic consumption in the Armenia, Kazakhstan, Kyrgyzstan,

Doing Business in Belarus • Companies 45 Financial reporting and auditing The general provisions of the accounting timeliness, relevance, substance over Foreign-currency operations standards, including the Law on Accounting form, matching of revenues and expenses, Companies should post accounting en- and Reporting, envisage that the main aim comparability, consistency and rationality tries and prepare financial statements in of accounting is to establish full and accurate of concepts and principles. Belarusian rubles. information about the activity of a company The application of these principles, howev- and its assets and liabilities. For accounting purposes, companies er, may differ from the application that is recalculate business operations in foreign The Law on Accounting and Reporting common in other countries. For example, currency in Belarusian rubles at the NBRB’s applies to legal entities of Belarus, branches in practice Belarusian accounting tends to official currency rate as of the day of and representative offices, including foreign focus on form rather than substance: the business operation. The NBRB determines companies’ representative offices, business laws are very specific as to the documents the exchange rate of the most widely used groups and simple partnerships (parties to a required to support a transaction. This em- foreign currencies on the basis of trading joint venture agreement). phasis on the legal form may override the on the Belarusian Currency and Stock application of other accounting principles. Foreign companies’ representative offices in Exchange during the previous day. Belarus can form their accounting policy on The going concern issue is relevant in this Generally, companies buy and sell foreign the basis of their home jurisdiction’s rules, emerging market due to the possibility that currency on the Belarusian Currency and provided these rules comply with Belarusian some companies may not continue their Stock Exchange, but in certain limited cases legislation and do not contradict internation- economic activity in their current financial its involvement is not required. al standards of accounting and reporting. position. The Law on Accounting and Reporting does Fixed assets Accounting methods not apply to self-employed entrepreneurs Fixed assets are recognized at their initial (they are regulated by other legal acts). Belarusian companies should base their or reappraised value. One of the following accounting on the policy that is approved The new Chart of Accounts and instructions methods can be used to depreciate fixed by the director’s order annually. The policy on its application, as well as other regulatory assets: indicates the accounting methods that a documents elaborated on the basis of the • Linear method company uses throughout the year. International Financial Reporting Standards • Nonlinear method (calculated by the (IFRS), came into force on 1 January 2012. The following methods apply to recognizing direct sum-of-the-years’ method, the This is helping to gradually effect a transition revenue: inverse sum-of-the-years’ method or to the new accounting methodology and to • Accrual method (in this case, companies the diminishing balance method with an reconcile Belarusian accounting with IFRS. recognize revenue at the actual delivery acceleration multiplier of 1 to 2.5) of goods, work or services, followed by • Production method Key concept the submission of settlement documents The linear method is the most frequently Accounting should be based on accounting to the buyer) used. Companies define a fixed asset’s use- segregation of the assets and liabilities • Cash method (in this case, companies ful life on the date of its acquisition. Useful of an organization, on the sequence of recognize revenue upon the actual re- life period frequently corresponds to a fixed accounting policy application, and on the ceipt of cash from the counterparties) asset’s presumed lifespan. This lifespan time of certain facts of economic activity. Most Belarusian companies use the accrual can be adjusted if the fixed asset’s state Accounting principles include accrual, method. Banks use the accrual method only. changes. Although the methods and means going concern, prudence, completeness,

46 Doing Business in Belarus • Companies of charging depreciation can be chosen • Fixed assets which belong to certain Reporting requirements somewhat freely, the range of available op- groups and subgroups or which are clas- The reporting year for all (except newly tions has become narrower due to several sified by certain fixed asset codes formed) companies is the calendar year legislative restrictions. • Certain fixed assets and uninstalled from 1 January to 31 December. For newly Fixed assets, construction-in-progress and equipment formed companies, it is from the date of uninstalled equipment (which is noncurrent • Construction-in-progress with regard to their state registration to 31 December of assets) are reappraised on the basis of an all the costs concerning the unit to be the same year. index published by the Belarusian National reappraised. Companies present annual financial Statistical Committee. If this index attains statements to their owners, to the Taxation the level of 103% or more the reappraisal is Inventories Ministry and to the state statistics author- performed: Companies recognize inventories at their ities within 90 days after the end of the • For buildings, structures and transmit- initial value. They use one of the following reporting year. ters — by all companies methods to determine inventories’ initial The annual financial statements should be • For other fixed assets, construction- value: considered and approved as prescribed by a in-progress and uninstalled equipment — • Average cost method company’s foundation documents. by state companies and companies with • FIFO method over 50% of state equity (unless they Annual financial statements of the following are commercial companies with foreign • Cost of each unit method companies should be made public: investments) The first method is the most frequently 1) Banks and nonbanking credit and financial institutions A company must reappraise its fixed assets used. The inventories’ actual cost should annually (at the beginning of the year fol- include direct costs and related indirect pro- 2) Insurance and reinsurance companies, lowing the reporting year). It must use one duction costs. insurance brokers of the following three acceptable methods: 3) Open joint-stock companies • Direct appraisal method Disclosure requirements 4) Issuers of securities The statutory financial statements should • Index method All companies registered with the comprise the following: • Currency value conversion method Belarusian Currency and Stock Exchange • The balance sheet present quarterly financial statements (bal- A group of similar fixed assets can be • The profit-and-loss statement ance sheet, profit-and-loss statement, etc.) reappraised not more than once a year. and additional information to the Finance Land and other natural units do not require • The equity statement Ministry within 30 days after the end of the reappraisal. • The cash flow statement quarter. They also present annual financial For accounting purposes, companies can • The statement on the purposeful use of statements when the reporting year ends. set an asset’s useful life within the thresh- the received financial resources olds established by law. When legislation • Explanatory notes allows companies to make a revaluation, The Finance Ministry establishes the format the decision to make it may be adopted for financial statements’ presentation. with regard to: Financial statements are drawn up in the • The entire property Belarusian and/or Russian languages. The Belarusian ruble is the reporting currency.

Doing Business in Belarus • Companies 47 Audit requirements Discrepancies between IFRS and • The mandatory existence of supporting Financial statements of the following com- the Belarusian statutory accounting documentation prepared in accordance panies are subject to obligatory audit: principles with the prescribed format for both accounting and tax purposes • Open joint-stock companies The Belarusian requirements for commercial companies are based on the Civil Code, • The impact of hyperinflation is not re- • Banks and nonbanking credit and finan- the Law on Accounting and Reporting, the flected in the Belarus accounting system cial institutions company’s chart of accounts and incorpo- • The absence of the concepts of “fair • Stock exchanges rate accounting regulations and legal acts value”, “amortization value” and “asset • Commercial companies with foreign of the Finance Ministry and the NBRB. While impairment” in the Belarus accounting investments a number of requirements formally follow system when recognizing and appraising • Insurance companies and insurance IFRS, their application and interpretation financial assets may be materially different. brokers • In spite of the existing guidance for the • HTP residents Despite the existence of accounting stan- preparation of consolidated financial • Companies responsible for the payment dards in the banking system and in legal statements that requires that the parent of guaranteed reimbursement of bank acts of the Finance Ministry, Belarusian stat- company prepare separate and consoli- deposits of individuals utory accounting depends on various orders dated financial statements if it has sub- and letters issued by the Finance Ministry sidiaries, the order is not fully complied • Other companies and individual entrepre- and the NBRB that prescribe accounting with and enforced; in IFRS, on the other neurs who earned over EUR600,000 in methods and approaches. hand, the consolidation concept must be the previous reporting year fully applied These and other circumstances may result in departures from the standard require- • The regular revaluation of entire class- ments and consequently in more incon- es of fixed assets under the Belarusian sistencies with IFRS in addition to those statutory accounting principles is allowed outlined below. The major differences are as under the prescribed rules follows: • Differences in the accounting for equity • In spite of the prescribed principle of and reserves prudence in financial statements stan- • Accounting and reporting in the banking dards, the accrual concept is not fully system is more developed in terms of implemented in statutory accounting of IFRS concepts (for example, fair value companies when accounting for income concept, goodwill, etc.). (which may be recognized on a cash basis) • Definition of reporting and functional currency (financial statements for Belarusian statutory purposes must be prepared in Belarusian rubles only)

48 Doing Business in Belarus • Companies The use of different national statutory Pursuant to the draft accounting law, socially accounting standards and legal acts makes important companies will be required to the comparison of opportunities and prepare statutory and IFRS finance reports financial decisions more difficult and costly in Belarusian rubles effective from 2013. for the potential investor or user of the The Belarusian ruble will be the reporting financial statements. Differences in account- currency and IFRS reports would then be ing standards between IFRS and the subject to obligatory audit. In addition to Belarusian statutory accounting principles banks, the list of such companies will also also impose additional costs on companies include public joint-stock companies, that must prepare financial information insurance companies, professional partici- based on multiple reporting models in order pants in the securities’ market and stock to raise capital in different markets. The exchanges. differences also create potential confusion as to which are the real numbers. The gradual transition to IFRS under the guidance of the Council of Ministers and future adoption of new laws on the preparation of consolidated financial statements in accordance with IFRS are extremely important steps for the development of accounting in Belarus and for global convergence of accounting principles.

Doing Business in Belarus • Companies 49 Individuals

50 Doing Business in Belarus • Individuals Employment The Belarusian labor market has become to a work may technically be required only upon Labor regulations in Belarus guarantee large extent an employee’s market. The lack consent from an employee and should be additional vacation time and several other of qualified employees in some industries has compensated at an increased rate or by pro- benefits for individuals working in harsh become critical and sharpened competition. vision of additional days off. The maximum environmental conditions. This situation has its roots in various factors. duration of overtime work within a year is The decrease in the Belarusian population 180 hours, provided that an employee does Recruitment and a certain loss of educational level have not work overtime for more than 10 hours In addition to a written employment agree- led to a further decrease in the qualified per working week. A working day which ment with an employee, recruitment must labor force in Minsk and other regions. includes overtime work should not be longer be supported by internal documentation than 12 hours. It is possible to establish a The situation radically changed fairly recently through the issuance of a formal appoint- non-standardized working hours regime. due to the economic crisis. Many companies ment order by the employer. This order Under this regime hours are not fixed, but have faced the necessity to reduce their states the name, position and date of ap- the employee must then be provided with up headcount or introduce part-time employ- pointment of the new employee. According to seven days of additional annual vacation. ment, as well as cut the benefits granted to to the labor law, it is normal for an employ- employees. In general, employees must be granted at ment agreement to be entered into for an least 24 calendar (as opposed to working) indefinite term. days of paid vacation a year. The Belarusian Labor Code In fact, entering into a fixed-term employ- The Belarusian Labor Code (hereinafter, Maternity leave (generally 126 days) is ment agreement under the above-men- the “Labor Code”) forms the basis of labor compensated by the Fund for the Social tioned Decree No. 29 is used even more relations in Belarus. It establishes proce- Protection of People in the amount of 100% often in Belarus because it provides notable dures for hiring and dismissal of employees, of average salary, but it shall not exceed benefits to employers. These benefits as well as regulations concerning working triple the amount of the average salary include, inter alia, the possibility of entering time, vacations, business trips, salary pay- set by the legislation. Upon giving birth into an agreement for one year (and up to ment, etc. The Labor Code continues to be to a child, mothers are entitled to receive five years) irrespective of the employer’s very protective for employees. The Decree a onetime allowance of approximately industry and the type of work to be done; of the Belarusian President No. 29 of 26 USD1000. Employees are also eligible to and wider opportunities for an employer to July 1999 operates along with the Labor take childcare leave to take care of a child terminate a contract at its own initiative. Code and sets the peculiarities of fixed-term until he/she reaches the age of three years. An employer hiring an employee may employment agreements. In this case the employer will have to pay usually establish a probation period with a a monthly allowance of about USD100 per Belarusian labor law covers not only maximum duration of three months. month. The Fund for the Social Protection Belarusian citizens, but also expatriates of People will finance this allowance. The employer is also responsible for the working in Belarus, provided that the proper maintenance of labor books for each employment agreement is entered into in Employees are also compensated for employee. If the place of employment is the Belarus. periods of illness by the Fund for the Social first one for the employee, the employer Protection of People: 80% of average salary Normal working hours in Belarus are eight must fill in a labor book and apply for a for working days of the first six calendar hours per day and 40 hours per week. Social Security Card for the employee. days of illness and 100% for the rest of the Belarusian law is stringent in limiting over- days of illness. time hours. Under the Labor Code, overtime

Doing Business in Belarus • Individuals 51 Termination of early termination. It is also possible to Work under a civil law agreement give notice on the last day of the probation An employee may be terminated for one of Besides an employment agreement, an period. the reasons listed in the Labor Code. The employee can also enter into a civil law procedure for termination is also provided agreement for performing work or pro- in the Labor Code and should be strictly Remuneration viding services. The Labor Code does not followed to reduce the risk of challenge Remuneration of employees depends on apply to such agreements. The Civil Code in court. The Labor Code provides for the complexity of the work, the content and and Presidential Decree No. 314 of 6 July following general grounds for employment specificity of the work, the general condi- 2005 regulate civil law agreements and the termination: tions of the work and on the qualification of legal relations arising from them. Certain 1) Mutual consent of the parties the employees. guarantees, including paid leave, which are provided under the Labor Code, do not 2) The expiry of the term of the employ- Until recently, commercial companies and apply to relations that arise from civil law ment agreement (in case of a fixed-term individual entrepreneurs were obliged to agreements. agreement) use the Unified Wage Tariff system to calcu- 3) The employee’s initiative late remuneration. This restrained competi- A civil law agreement must be in writing 4) The employer’s initiative tion on the labor market. and provide for, inter alia, the following items: 5) Circumstances beyond the parties’ con- Since 1 June 2011 commercial companies trol (force majeure) and other reasons (both state and private) and individual en- • A procedure for settlements by the par- trepreneurs are no longer obliged to apply ties, including the amounts to be paid As for the employer’s right to terminate the the Unified Wage Tariff system and may use • The obligation of the client (in other employment agreement, the employer may it in their own discretion. words, of the employer), to pay for indi- terminate employment only if certain con- viduals (in other words, for employees) ditions are met. An employment agreement The Unified Wage Tariff system is a tool for the social security contributions may be terminated by the employer in the setting tariff rates on the basis of a system event of certain violations committed by of wage grades and corresponding tariff • Obligations of the parties to ensure safe the employee or a repeated failure by the indexes. Based on the Unified Wage Tariff working conditions and liability for failing employee to perform his job duties properly. system, an employer must set a unified first to maintain them The employer may also terminate an agree- rate tariff that will be multiplied by the tariff • Grounds for the early termination of the ment in case of certain events such as the index for employee salary settings. civil law agreement liquidation of a company, staff reduction, the At present many employers have begun to • Obligations on the part of the client unsuitability of the employee for the position establish salaries and wages without using to pay a penalty amounting to at least held or work performed and others. In the the Unified Wage Tariff system (e.g., in the 0.15% of the unpaid amount for every latter case the unsuitability should be con- Belarusian ruble equivalent of conventional day of delay if he failures to pay in time firmed by the results of attestation, which is units or foreign currency). Salaries and is also a statutory regulated procedure. wages must be paid in Belarusian rubles The Labor Code envisages the right of irrespective of the established procedure the employer to terminate an employ- for determining them. ment agreement with an employee during the probation period if the results of the probation are unsatisfactory. The employer must give at least three days’ notice in case

52 Doing Business in Belarus • Individuals Migration

Entering and staying in Belarus for • A business trip, on the basis of an invita- him and his family members to maintain a foreign individuals tion from a Belarusian legal entity minimum subsistence level as established in To enter Belarus a foreign citizen must • Private matters, on the basis of, inter Belarus during his temporary residence. obtain a visa (different types of visas are alia, an invitation from an individual III. Visa for exiting and entering Belarus outlined below). Foreign citizens must reg- • Work (with the right to work by hire), on A foreigner who has a temporary residency ister within five days, except for weekends the basis of a special permission to work permit can periodically leave Belarus and and holidays. A foreigner must register by hire or on the basis of the company’s re-enter it if he/she has a valid visa. either with the Ministry of Foreign Affairs, original invitation and endorsed copies the department for internal affairs, the of the founding documents or orders of If an entry visa has expired, a foreigner can hotel or the health resort organization at appointment, as the founder or head receive an exit-entry visa. It is issued by the the place of actual temporary stay. Russian of a commercial company with foreign Citizenship and Migration Department of and Kazakhstan nationals must register investments the Ministry of Internal Affairs at the place within 30 days. of the foreigner’s temporary residence. A long-term entrance visa (category “D”) Foreign citizens who have a valid perma- is issued for multiple entries into Belarus, A multiple exit-entry visa is issued to nent residency permit don’t need to obtain inter alia, for the following purposes: foreign nationals who have received a tem- any visa to enter and exit Belarus. porary residence permit for one year, but • Maintaining business contacts, on the for not longer than the validity period of the I. Entrance visas basis of a request from a Belarus legal temporary residency permit. The entrance visa gives a foreign national entity and other visa-support documents the right to enter, stay in and depart from confirming the existence of business Employment of foreign individuals Belarus. As a rule it is issued by Belarusian contacts with the host company diplomatic missions and consulates in • Private matters, on the basis of, inter The employment of a foreign individual who foreign states. If there is no Belarusian dip- alia, an invitation from an individual has no a permanent residency permit and lomatic representation (consular office) in intends to come to Belarus for the purpose II. Temporary residency permit the country of foreigner’s citizenship, such of employment must undergo a multi-stage foreigner can apply for a Belarusian visa in A temporary residency permit is a document procedure that both the employer and the the airport upon arrival. that allows a foreign national to reside in foreign individual must complete. Belarus during its validity. Entrance visas are classified into transit Employment of foreign individuals includes visas (issued for transit across Belarus), A foreign citizen may get a temporary resi- the following steps: dency permit, inter alia, if he/she comes to short-term visas (issued for up to 90 days) 1) The employer receives a permit to en- Belarus to work or carry out entrepreneurial and long-term visas (issued for up gage foreign manpower (see the section activity. A temporary residence permit is to one year with the right to stay for “Permission to attract foreign human given for the period of up to one year and 90 days). There are single-, double- and resources” below) multiple-entrance visas. allows foreign nationals to stay in Belarus without a visa. A temporary residence per- 2) The employer receives a special permit Short-term entrance visas (category “C”) mit may also be issued to family members of for each foreign employee to work in are issued for the requested period, but for a foreign national who has received a tem- Belarus (see the section “Special per- not more than 90 days, inter alia, for the porary residence permit, provided that there mission to work for hire in Belarus for a following purposes: is a legal source of income that will allow particular employee” below)

Doing Business in Belarus • Individuals 53 3) The employer concludes an employment I. Permission to attract foreign human obtain a special permission to work for hire agreement with the employee and reg- resources in Belarus for every separate employee. If a isters it (see the section “Registration of foreign individual plans to work for several To engage over 10 foreign citizens a labor agreements (contracts)” below) Belarusian employers, he/she must receive Belarusian employer must obtain a permis- a special permit to work for each of them. 4) The employee receives a Belarusian entry sion to attract foreign human resources into visa (see the section “Entrance visas” Belarus. The Belarusian Ministry of Internal Affairs above) issues this permission for a year’s term. Its To receive this permission the employer validity may be extended by a year. 5) The employee is registered with the local submits originals and notarized copies of all bodies of internal affairs upon arrival in required documents to the Citizenship and III. Registration of employment Belarus. Subsequently, the employee may Migration Department of the Ministry of agreements receive a permanent residence permit Internal Affairs. The permission is valid for The employer must register the labor (see the section “Temporary residency one year. agreements (contracts) within one month permit” above) II. Special permission to work for hire in of their signing. The term of validity of a Belarus for a particular employee labor agreement must not exceed the term of the validity of the special permission for After the above permission is obtained (if employment. required) the Belarusian employer should

Personal income tax

Taxpayers Income from sources in Belarus or a foreign company engaged in activity Individuals pay the personal income tax Income from sources in Belarus includes: through a permanent establishment in Belarus (hereinafter, “PIT”). • Salaries for fulfillment of work, provision of a service and the performance • Income from intellectual property use in Taxation objects (non-performance) of an operation in Belarus The following are subject to PIT: Belarus • Income from the lease or other use of • Pension, benefits, stipends and other Belarusian property 1) Income from sources inside and outside similar payments received in accordance • Income from the sale of Belarusian im- Belarus received by Belarusian tax with Belarusian legislation movable property residents • Dividends and interest received from • Income from the sale on Belarusian 2) Income from sources in Belarus received a Belarusian company and/or interest territory of securities or shares (partic- by Belarusian tax nonresidents received from a Belarusian individual ipatory interest in the charter capital of Belarusian tax residents are individuals entrepreneur and/or a foreign company companies) and income from the sale of who have been on Belarusian territory for in connection with its activity through a Belarusian shares (participatory interest more than 183 days in a calendar year. permanent establishment in Belarus in the charter capital of Belarusian com- Individuals who do not meet that require- • Insurance compensation and/or support panies), etc. ment are tax nonresidents. in the event of an insurance case received from a Belarus insurance company and/

54 Doing Business in Belarus • Individuals Tax rates • When income is received by a Belarusian in need of better living conditions on con- tax resident from a source outside struction or acquisition of a house or an Standard tax rate 12% Belarus apartment in Belarus, and to repay loans Income received by employees (apart 9% • When tax agents do not withhold income to Belarusian banks and/or to Belarusian from employees engaged in the tax from an individual’s income companies and/or to Belarusian individu- maintenance and security of buildings, al entrepreneurs (including interest in the • When income is received from entre- premises and land) of HTP residents majority of cases) preneurial activity after an individual under employment contracts entrepreneur has lost his status • In the amount of the documented expens- Income received by individual entre- 9% es actually incurred on the acquisition preneurs who HTP residents Individuals submit an annual tax return not and/or payable alienation of property later than 1 March of the year following the Income received by individuals par- 9% (except for the sale of securities and fixed- reporting calendar year and pay the tax not ticipating in the implementation of a term financial instruments) later than 15 May of the year following the qualifying business project in the field reporting year. These tax deductions are granted by the tax of new technologies and high tech agent (employer at the main place of work) from HTP nonresidents under employ- or by the tax authorities when an individual Tax deductions ment contracts submits a tax return. Income from entrepreneurial activity 15% PIT payers may apply tax deductions as A taxpayer may apply several standard tax (including private notaries or follows: deductions. For example, most taxpayers advocates) • In the amount paid for education in may apply a standard tax deduction of Belarusian educational institutions when BYR440,000 (approximately USD52) per receiving a first higher, a first secondary Procedure for tax levying month if they receive income of not more specialized or a first vocational technical In most cases, tax agents calculate, with- than BYR2.68 million (approximately education, and also in the amount used hold and transfer PIT to the budget for USD315) per month and of BYR123,000 to repay loans received from Belarusian their employees. Tax agents are Belarusian (approximately USD15) per month for banks and/or from Belarusian compa- companies, Belarusian individual entre- each child up to the age of 18 and/or each nies and/or from Belarusian individual preneurs, foreign companies engaged in dependent. entrepreneurs (including interest in the activity in Belarus through a permanent majority of cases). The amounts paid by a establishment, permanent establishments taxpayer to train persons closely related to Tax exempt income of international organizations in Belarus him are also deductable The following income of Belarusian tax and diplomatic missions and consulates of residents is exempted: foreign states in Belarus from which the • In the amount that does not exceed taxpayer has received income. BYR2.55 million (approximately USD300) • Benefits for state social insurance and during a tax period, paid as insurance pre- state social security, except for tempo- Tax agents transfer PIT to the budget not miums under voluntary life insurance and rary disability benefits (e.g., there is no later than the day following the day on additional pension agreements entered income tax on the maternity benefit and which the income was paid. into for at least three years, and under the childcare benefit until the child is Individuals have to submit a tax return to agreements for voluntary insurance of three years old) and the unemployment the tax authorities and pay PIT themselves medical expenses benefit in the following cases: • In the amount of the expenses actually • Pension received according to Belarusian • When income is received from individuals borne by the taxpayer and his family legislation and/or the legislation of for- who are not tax agents members who are registered as persons eign states

Doing Business in Belarus • Individuals 55 • All types of compensation envisaged by • Income from individuals who are not • Income from the payable alienation of legislative acts and resolutions of the individual entrepreneurs that is not over one motor car within one calendar year Council of Ministers (except for compen- BYR26.5 million (roughly USD3,120), • Income from the sale of inherited sation for unused work leave and com- and in the amount received from all property pensation for the deterioration of trans- sources during the tax period as gifts • Income from the sale of other assets port vehicles, equipment, instruments or real estate under a rental agreement (subject to certain limitations) and devices belonging to an employee) gratuitously • Alimony payments and other types of • The amounts of material aid provided in • Income from the payable alienation of income accordance with legislation one house, one apartment, one cottage and one land lot (or other similar real estate) within five calendar years

Payroll taxes

Examples of payroll tax calculation Contributions to the Fund for the The example is prepared on the assumption Social Protection of People that a company employs a qualified welder Payers of social security contributions at EUR24,000 gross per annum. Payers of social security contribution are: • Legal entities, their representative offic- Expenses EUR es, branches, individual entrepreneurs I . Employer’s expenses and private notaries, which give work to 1. Social security contribution 6,173 individuals under employment contracts Rate — 34%, gross salary but not higher than EUR 1,513 per month and civil law contracts for the provision (average salary in Belarus multiplied by four)* of services, performance of work and 2. Obligatory insurance contributions for cases of casualty at work or 144 creation of intellectual property work-related diseases • Individuals providing work to other indi- Rate — 0.6%, base — gross income viduals under employment contracts (not 3. Obligatory contributions for professional pension insurance 654 commented on in this booklet) Rate — 4.8%, base — gross salary but not higher than EUR 1,135 per • Legal entities providing work on the basis month (average salary in Belarus multiplied by three)* of membership (participation) in other 4. Total annual expenses of the employer per each employee 30,971 legal entities of any organizational and II. Employee’s expenses legal form 1. Social security contribution 182 • Working individuals — Belarusian citizens, Rate — 1%, base — gross salary but not higher than EUR 1,513 per foreign citizens and stateless persons month (average salary in Belarus multiplied by four)* working under employment contracts and/or civil law contracts, and on the 2. Personal income tax withheld from employee (12% of gross income) 2,880 basis of membership (participation) in 3. Net annual income per each employee 20,938 other legal entities of any organizational * — for calculation, we used the average salary in Belarus for August 2012, which amounted to and legal form BYR 4,084,895 and the NBRB official exchange rate of BYR 10,800 for EUR 1.

56 Doing Business in Belarus • Individuals • Individuals independently paying social Other social security contribution rates month preceding the month for which these security contributions (not commented for retirement, disability and loss of the contributions are paid. Exemptions similar on in this guide) breadwinner are set for certain categories to exemptions established for the social of taxpayers (e.g., employers engaged in security contribution apply to professional Objects of social security contributions agricultural production, consumer coop- pension insurance contributions. All payments in cash or in nonmonetary eratives, social associations of disabled The professional pension insurance contri- form are subject to social security contri- persons, etc.). butions including payments upon civil law bution rate varies from 1.5% to 4.8%. Payment of social security contributions contracts. The tax base for social security The payment and reporting requirements and report submission contributions is limited by four average are similar to those established for social salaries in Belarus for the previous month. Taxpayers file a report on social security security contributions. contributions quarterly not later than the The relevant legislative act stipulates types twentieth of the month following the report- of payments which are exempt from social Compulsory insurance contributions ing quarter. security contributions. Certain types of for cases of casualty at work material aid, compensation and one-time Taxpayers providing work under employ- or work-related diseases to the payments are among these payments. ment contracts pay contributions not later Belarusian republican unitary than the day set for paying salaries for the insurance enterprise Belgosstrakh Foreign citizens may refuse to participate preceding month. Taxpayers providing work in the state social security program. In this The tax base is all types of payments under civil law contracts pay contributions case, a company does not pay social securi- made to individuals subject to compulsory during days when remuneration is paid ty contributions. insurance against cases of casualty at work under the contracts, but not later than the or work-related diseases. Contributions are Social security contribution rates day set for paying salaries for the preceding not charged for payments that are exempt Taxpayers pay the following social security month. from social security contributions. contributions as a single payment: Companies that have less than 100 employ- The tax base for compulsory insurance for • Social security contributions for retire- ees during the calendar year pay contribu- cases of casualty at work or work-related ment, disability and loss of the breadwin- tions quarterly, but not later than the day set diseases is the payroll; the tax rate is 0.6%. ner (pension insurance) — 29%. These for paying salaries for the last month of the The Belarusian republican unitary insurance contributions include: 28% is paid by the reporting quarter. enterprise Belgosstrakh may increase or employer and 1% by the employee; in this decrease the rate for each taxpayer de- case, an employer directly withholds and Professional pension insurance pending on the type of professional risk. transfers the tax. contributions Contributions are paid not later than the • Social security contributions for tempo- Professional pension insurance covers twenty-fifth of the month following the re- rary disability, maternity, etc. — 6%. employees engaged for a full workday in porting quarter in which employees receive underground work or in work in especially payment. Foreign citizens cannot refuse to harmful and hard conditions, and employ- participate in this compulsory insurance ees of certain professions. program. Contributions are paid for all types of payments made in cash or nonmonetary form. The base is limited by three average salaries of employees in Belarus for the

Doing Business in Belarus • Individuals 57 Appendix

58 Doing Business in Belarus • Appendix Appendix 1: Useful addresses and contacts When making international phone calls, the Belarus code, i.e., + 375, should be dialed.

Administration of the President Ministry of Economy State Customs Committee K. Marksa Str., 38 Bersona Str., 14 Mogilevsakaya Str., 45/1 Minsk, 220016, Belarus Minsk, 220050, Belarus Minsk, 220007, Belarus Tel.: +375 17 222 3751 Tel.: +375 17 222 6048 Tel.: +375 17 218 9000 Website: http://www.president.gov.by Website: www.economy.gov.by Website: www.gtk.gov.by Council of Ministers Ministry of Finance Ministry of Justice Sovetskaya Str., 11 Sovetskaya Str., 7 Kollektornaya Str., 10 Minsk, 220010, Belarus Minsk, 220010, Belarus Minsk, 220004, Belarus Tel.: +375 17 222 6046 Tel.: +375 17 222 6137 Tel.: +375 17 200 8687 Website: www.government.by Website: www.minfin.gov.by Website: www.minjust.by National Agency of Investment and Ministry of Foreign Affairs Ministry of Agriculture and Food Privatization Lenina Str., 19 Kirova Str., 15 Bersona Str., 14 Minsk, 220030, Belarus Minsk, 220030, Belarus Minsk, 220050, Belarus Tel.: +375 17 327 2922 Tel.: +375 17 327 3751 Tel.: +375 17 200 8175 Website: www.mfa.gov.by Website: www.mshp.minsk.by Website: www.investinbelarus.by Ministry of Internal Affairs Ministry of Communications and Belarusian Chamber of Commerce and Gorodskoy Val Str., 2 Informatization Industry Minsk, 220050, Belarus Nezavisimosti Ave, 10 Kommunisticheskaya Str., 11 Tel.: +375 17 218 7895 Minsk, 220050, Belarus Minsk, 220029, Belarus Website: www.mvd.gov.by Tel.: +375 17 387 8706 Tel.: +375 17 290 7249 Ministry of Taxes and Duties Website: www.mpt.gov.by Website: www.cci.by Sovetskaya Str., 9 Ministry of Health National Bank of the Republic of Belarus Minsk, 220010, Belarus Myasnikova Str., 39 Nezavisimosti Ave, 20 Tel.: +375 17 229 7911 Minsk, 220048, Belarus Minsk, 220008, Belarus Website: www.nalog.gov.by Tel.: +375 17 222 6033 Tel.: +375 17 328 5913 Website: www.minzdrav.gov.by Website: www.nbrb.by

Doing Business in Belarus • Appendix 59 Ministry of Education National Statistical Committee State Control Committee Sovetskaya Str., 9 Partizansky Ave, 12 K. Marksa Str., 3 Minsk, 220010, Belarus Minsk, 220070, Belarus Minsk, 220030, Belarus Tel.: +375 17 227 4736 Tel.: +375 17 249 5200 Tel.: +375 17 327 2015 Website: www.edu.gov.by Website: www.belstat.gov.by Website: www.kgk.gov.by Ministry of Emergency Situations State Security Committee Revolyutsionnaya Str., 5 Nezavisimosti Ave, 17 Minsk, 220050, Belarus Minsk, 220030, Belarus Tel.: +375 17 203 6550 Tel.: +375 17 219 9230 Website: www.rescue01.gov.by Website: www.kgb.by

Appendix 2: Currency exchange rates (as of period’s end)

2012 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 (as of end of September 2012) USD/BYR 1,580 1,920 2,156 2,170 2,152 2,140 2,150 2,200 2,863 3,000 8,350 8,500 EUR/BYR 1,391 1,993 2,695 2,955 2,546 2,817 3,166 3,077 4,106 3,972 10,800 10,900 RUB/BYR 52.31 60.41 73.19 77.91 74.86 81.13 87.61 76.89 94.66 98.44 261 275 Source: National Bank of the Republic of Belarus (http://www.nbrb.by)

Appendix 3: Economic indicators

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Nominal GDP (USDbillion) 12.1 14.5 17.7 23.1 30.2 37.0 45.3 60.8 49.2 55.2 47.3 Real annual GDP growth (%) 4.7 5.0 7.0 11.4 9.4 10.0 8.6 10.2 0.2 7.7 5.3 Industrial output growth (%) 5.9 4.5 7.1 15.9 10.5 11.4 8.7 11.5 –2.0 12.0 9.1 Unemployment rate (%) 2.3 2.9 3.1 1.9 1.5 1.1 1.0 0.8 0.9 0.7 0.6 Sources: National Statistical Committee of the Republic of Belarus (www.belstat.gov.by)

60 Doing Business in Belarus • Appendix Appendix 4: Withholding tax rates for companies that do not operate through a permanent establishment in Belarus, in accordance with double tax treaties

Belarus has double tax treaties with the following Republic, Slovenia, the Republic of South Africa, Belarus has double tax treaties as a legal suc- countries: Armenia, Austria, Azerbaijan, Bahrain, Sweden, Switzerland, Syria, Tajikistan, Thailand, cessor to the USSR with the following countries: Belgium, Bulgaria, Germany, China, Croatia, Turkey, Turkmenistan, Ukraine, the United Arab Denmark, France, Japan, Malaysia, Spain, Great Cyprus, the Czech Republic, Egypt, Estonia, Emirates, Uzbekistan, Venezuela, Vietnam and Britain and the USA. According to the Ministry Finland, Hungary, India, Iran, Ireland, Israel, Yugoslavia (effective for Serbia). for Taxes and Levies, the treaties with Canada Italy, Kazakhstan, North Korea, South Korea, and Norway are no longer in force. Belarus also signed a double tax treaty with Kyrgyzstan, Kuwait, Latvia, Lebanon, Lithuania, Libya, but it has not been ratified yet. The following table gives the income tax rates for Macedonia, Moldova, Mongolia, the Netherlands, foreign companies in accordance with double tax Oman, Pakistan, Poland, Qatar, Rumania, the treaties and effective Belarusian tax legislation. Russian Federation, Saudi Arabia, the Slovak Dividends, % Dividends, Interest % income, % Royalty, Dividends, % Dividends, Interest % income, % Royalty, % Dividends, Interest % income, % Royalty,

Armenia 10/12 (a) 0/10 (v) 10/15 (tt) France (q) 12 0/10 (r) 0 Kuwait 0/5 (x) 0/5 (vv) 10 Austria 5/12 (e) 0/5/10 5/15 (uu) Finland 5/12 (e) 0/5/10 5/15 (uu) Latvia 10/12 0/10 10/15 (tt) (gg) (hh) (ww) (s)(ss) Azerbaijan 12 0/10 (v) 10/15 (tt) Germany 5/12 (dd) 0/5/10 3/5/15 Lebanon 7,5 0/5 (v) 5 (ee) (ff) Bahrain 5 0/5 (vv) 5 Lithuania 10/12 0/10 10/15 (tt) Hungary 5/12 (e) 5 5 (ww) (s)(ss) Belgium 5/12 (e) 0/10 (z) 5 Macedonia 5/12 (e) 10 10 Bulgaria 10/12 0/10 (v) 10/15 (tt) (ww) India 10/12 (g) 0/10 15 Malaysia (q) 0/112 (jj) 0/10 10/15 (o) (bb)(vv) (s)(v)(bb) China 10/12 0/10 (ss) 10/15 (tt) (ww) Iran 10/12 (g) 0/5/10 5/15 (uu) Moldova 12 0/10 (bb) 15 (v)(xx) Croatia 5/12 (e) 10 10/15 (tt) Mongolia 10/12 0/10 (nn) 10/15 (tt) Ireland 0/5/10 5 5 (ww) Cyprus 5/10/12 5/10 (xx) 5/15 (uu) (oo) (d) Netherlands 0/5/12 0/5 (yy) 3/5/10 Israel 10/12 0/5/10 (t) 5/10/15 (e)(w) (ff) Czech 5/10 (e) 0/5 (vv) 5 (ww) (cc) Republic Oman 0/5 (ii) 0/5 (ii) 10 Italy 5/12 (e) 0/8/10 6/15 (zz) Denmark (q) 12 0 0 (mm) Pakistan 10/12 (g) 0/10 (s)(u) 15 Korean People’s 10/12 0/10 10/15 (tt) Japan (q) 12 0/10 (ss) 0/10/15 (n) Poland 10/12 (a) 0/10 (bb) 0 Democratic (ww) (s)(v) Republic Kazakhstan 12 0/10 (v) 15 Qatar 5 0/5 (v) 5 Rumania 10/12 (ww) 0/10 (v) 15 Egypt 12 10 15 South Korea 5/12 (e) 0/10 (p) 5 Russian 12 0/10 (v) 10/15 (tt) Kyrgyzstan 12 0/10 (v) 15 Estonia 10/12 0/10 (s) 10/15 (tt) Federation (ww) (ss)

Doing Business in Belarus • Appendix 61 Dividends, % Dividends, Interest % income, % Royalty, % Dividends, Interest % income, % Royalty, % Dividends, Interest % income, % Royalty,

Saudi Arabia 5 5 10 Syria 12 10 15 Uzbekistan 12 0/10 (u) 15 Slovak 10/12 (g) 0/10 (v) 5/10/15 Tajikistan 12 0/10 (bb) 15 Yugoslavia 5/12 (e) 8/10 (h) 10/15 (tt) Republic (i) Thailand 10 0/10 (qq) 15 (effective for Slovenia 5 0/5 (pp) 5 Turkey 10/12 (g) 0/10 (v) 10 Serbia) Republic of 5/12 (e) 0/5/10 (l) 5/10 (m) Turkmenistan 12 0/10 (v) 15 Venezuela 5/12 (e) 0/5 (kk) 5/10 (ll) South Africa Ukraine 12 10 15 Vietnam 12 0/10 (v) 15 Spain (q) 12 0 0/5 (y) United Arab 5/10 (j) 0/5 (s) 5/10/15 Countries Sweden 5/10/12 0/5/10 3/5/10/15 Emirates (k) with which (b) (rr) (c) the Republic Great Britain (q) 0 0 0 Switzerland 5/12 (e) 0/5/8/10 3/5/10/15 of Belarus 12 10 15 (aa) (c) USA (q) 12 0 0 has no double tax avoidance treaties

(a) A 10% rate is applied when the recipient is the capital of the company that pays the income. to be the actual owner of income in order to actual owner of dividends and owns at least Otherwise, a 12% rate is applied. A 5% rate is apply the 10% rate.) 30°% of the capital of the company that pays applied when the recipient of income is the an income. Otherwise, a 12% rate is applied. owner of at least 25% of the capital of the (h) An 8% rate is applied when the recipient company that pays the income. Otherwise, is the actual owner of interest. Otherwise, (b) A 5% rate is applied when the recipient is the a higher rate is applied. (In the event of a 10% rate is applied. actual owner of dividends and owns at least the Netherlands, Yugoslavia (effective for 30% of the capital of the company that pays (i) A 5% rate is applied to the amounts paid for an income. A 10% rate is applied in other Serbia), Switzerland, Austria and Italy, the using the copyright for works of literature, cases when the recipient is the actual owner recipient must be the actual owner of income art or science, including cinema films as well of dividends. Otherwise, a 12% rate is applied. if the 5% rate is to be applied.) as films or recordings and other means for transmitting images or sound. A 10% rate (c) A 3% rate is applied when the recipient is (f) A 3% rate is applied to the amounts paid for is applied to the amounts paid for patents, the actual owner of royalty concerning the the use or grant of the right of use of patents, trademarks, design, charts, models, plans, amounts paid for the use or grant of the right trademarks, design, models, plans, secret secret formulas or processes, for information of use of patents, secret formulas or process- formulas or processes, or for information on on industrial, business or scientific experi- es, or for information on industrial, business industrial, business or scientific experience. A ence, for the use or cession of the right of or scientific experience. A 5% rate is applied 5% rate is applied to the amounts paid for the use of industrial, business or scientific equip- when the recipient is the actual owner of use or grant of the right of use of industrial, ment, or for transport vehicles. Otherwise, royalty concerning the amounts paid for the business or scientific equipment (including a 15% rate is applied. use or grant of the right of use of industrial, road transport vehicles). A 10% rate is applied business or scientific equipment. In all other to the amounts paid for the use or grant of (j) A 5% rate is applied when the actual owner of cases, a 10% rate is applied when the recipi- the right of use of copyright for works of liter- dividends is a company owning USD100,000 ent is the actual owner of royalty. Otherwise, ature, art or science, including cinema films or more in a company that pays dividends. a 15% rate is applied. as well as films or recordings used in TV or Otherwise, a 10% rate is applied. radio programs. Otherwise, a 15% is applied. (d) A 5% rate is applied when the recipient is the (k) A 5% rate is applied to the amounts paid for actual owner of income and has invested. (g) A 10% rate is applied when the recipient is the use or grant of the right of use of copy- the actual owner of income and owns at least right for scientific works, patents, trademarks, (e) At least 200,000 ECU in the equity of the 25% of the capital of the company that pays design, models, plans, secret formulas or company that pays the income. A 10% rate the income. Otherwise, a 12% rate is applied. processes, for the right of use of information is applied when the recipient is the actual (In the event of Pakistan and Turkey, there is on industrial, business or scientific equipment owner of income and owns at least 25% of the no requirement for the recipient of income or transport vehicles, or for information on

62 Doing Business in Belarus • Appendix industrial, business or scientific experience. that are guaranteed or indirectly financed by (y) A 0% rate is applied to the amounts paid A 10% rate is applied to the amounts paid for those bodies or institution. for the use or cession of the right of use of the use or grant of the right of use of copy- (q) Belarus abides by the double tax avoidance copyright for works of literature, music, art right for works of literature or art, including treaty between the former USSR and that or science, except for cinema films as well as cinema films as well as films or recordings state. The table shows the tax rates in compli- films or recordings used in TV or radio pro- used in TV or radio programs. Otherwise, ance with the treaty. grams. Otherwise, higher rates are applied. a 15% rate is applied. (r) A 0% rate is applied to interest on bank and (z) A 0% rate is applied when one of the following (l) A 0% rate is applied when the recipient of the commercial loans. Otherwise, a 10% is applied. requirements is met: interest income is the government, a govern- (s) A 0% rate is applied to interest on govern- • A loan was approved by the government ment body or an company that is fully owned ment-guaranteed loans. by the state. A 5% rate is applied when the • Interest is charged on the sale on credit interest income recipient is a bank or other (t) A 0% rate is applied when the interest terms of industrial, medical or scientific financial institution. Otherwise, a 10% rate is income recipient is a government or local equipment and related services applied. government body or the central bank. A 5% • A loan intended to promote export and rate is applied when the recipient and the (m) A 5% rate is applied to the amounts paid for involves the delivery of industrial, medical actual owner of interest income is a bank or industrial, business or scientific equipment or or scientific equipment and related services other financial institution or when interest is transport vehicles. Otherwise, a 10% rate is has been granted, insured or guaranteed by paid as any industrial, business or scientific applied. the state equipment is sold on credit terms. Otherwise, Otherwise, a 10% rate is applied. (n) A 0% rate is applied to the amounts paid for a 10% rate is applied the use or grant of the right of use of copy- (u) A 0% rate is applied to government-approved (aa) A 0% rate is applied when one of the follow- right for works of literature, art or science, loans or when the interest income recipi- ing requirements is met: including cinema films as well as films or ent is the government or the central bank. • A loan was approved by the government recordings used in TV or radio programs. Otherwise, higher rates are applied. A 10% rate is applied to the amounts paid for • Interest was received due to the sale on the use or grant of the right of use of patents, (v) A 0% rate is applied when the interest income credit terms of industrial, commercial, trademarks, design, charts, models, plans, recipient is the government or the central medical or scientific equipment secret formulas or processes, for information bank. (In the event of Turkey, a 0% rate is also • Interest income is interest on state on industrial, business or scientific experi- applied when interest accrues in Belarus and securities ence, and for the use or grant of the right is paid by Eximbank of Turkey on loans for the of use of industrial, business or scientific purchase of industrial, business, commercial, A 5% rate is applied to interest income equipment. Otherwise, a 15% rate is applied. medical or scientific equipment.) Otherwise, relating to bank loans. An 8% interest rate higher rates are applied. is applied when the recipient is the actual (o) A 10% rate is applied when the recipient is owner of interest income. Otherwise, a 10% (w) A 0% rate is applied when one of the following the actual owner of royalty concerning the rate is applied. amounts paid for the use or grant of the requirements is met: right of use of patents, trademarks, design, • The dividend recipient owns more than 50% (bb) A 0% rate is applied when a loan was models, plans, secret formulas, processes, of the dividend-paying company’s capital, approved by the government. (In the event or copyright for scientific works, for the use provided that the dividend recipient’s con- of Malaysia, a 0% rate is applied only to or grant of the right of use of industrial, busi- tribution to the company’s capital is at least interest income whose recipient is a resident ness or scientific equipment, and for the use 250,000 ECU of the Republic of Belarus.) or grant of the right of use of information on • The dividend recipient owns over 25°% of industrial, business or scientific experience. (cc) A 5% rate is applied only to the amounts the dividend-paying company’s capital, and Otherwise, a 15% rate is applied. paid for using copyright for works of litera- its contribution to the company’s capital is ture, art or science (except for cinema films) (p) A 0% rate is applied to interest income guaranteed or insured by the government or the right to use industrial, commercial or from the sale on credit terms of industrial, (x) A 0% rate is applied when the dividend scientific equipment or transport vehicles. medical or scientific equipment or when the recipient is the government, the central bank A 10% rate is applied when the recipient is interest income recipient is the government, or other government agencies or financial the actual owner of realty. Otherwise, a 15% the central bank, local government bodies, institutions. Otherwise, a 5% rate is applied. rate is applied. and financial institutions performing state functions, or when interest is paid on loans

Doing Business in Belarus • Appendix 63 (dd) A 5% rate is applied when the recipient is state companies with a view to promoting (ll) A 5% rate is applied to the amounts of the actual owner of income and owns over export and is associated with the delivery royalty if royalty was received as remuner- 20% of the income-paying company’s capi- of industrial, commercial, medical or scien- ation for the use or cession of the right of tal, and has made a contribution of at least tific equipment (including Österreichische use of any copyright for works of science EUR81,806.70. Otherwise, 12% is applied., Kontrollbank Aktiengesellschaft). A 5% rate or a computer application, or for the use is applied when the recipient is the actual or cession of the right of use of all types of (ee) A 0% rate is applied when interest origi- owner of the interest income. Otherwise, equipment and transport vehicles. nates in Belarus and is paid to the govern- a 10% rate is applied. ment of the Federal Republic of Germany, Otherwise, a 10% rate is applied to the bank Deutsche Bundesbank, the (hh) A 0% rate is applied when the interest bank Kreditanstalt für Wiederaufbau or income recipient is the government, the (mm) A 0% rate is applied when one of the follow- Deutsche Finanzierungsgesellschaft für central bank, the Finnish Fund for Industrial ing requirements is met: Beteiligungen in Entwicklungsländern, Cooperation (FINNFUND) or the Finnish • Interest is paid by the government or a when the interest income originates due to export credit agency FINNVERA. A 5% rate state body the loans secured by export loan guaran- is applied when the recipient is the actual • Interest is paid to the government, a tees (Hermes-Deckung) provided by the owner of the interest income. Otherwise, government body, a local agency or a German government, when the interest a 10% rate is applied. body (including financial institutions) that income recipient is the government or the (ii) A 0% rate is applied when the income fully belongs to the state or a government central bank of the Republic of Belarus, or body when the recipient is the actual owner of recipient is the government, the central • Interest is paid to any other agency or income and the interest income is paid due bank or the State General Reserve Fund of body (including financial institutions) on to the sale on credit terms of any industrial, the Sultanate of Oman and, in the event loans granted due to the application of business or scientific equipment. A 5% rate of interest income, any company that fully the interstate treaty is applied when the recipient is the actual or largely belongs to the state. Otherwise, owner of the interest income. Otherwise, a 5% rate is applied An 8% rate is applied when the recipient is a 10% rate is applied. (jj) A 0% rate is applied when the recipient is a the actual owner of the interest income. Otherwise, a 10% rate is applied. (ff) A 3% rate is applied when the recipient is resident of the Republic of Belarus and ac- the actual owner of royalty in relation to tually has the right to it. Otherwise, a 12% (nn) A 0% rate is applied to loans granted the amounts paid for the use or cession of rate is applied. to the government or the central bank. the right of use of copyright for scientific (kk) A 0% rate is applied when the recipient is Otherwise, a 10% rate is applied. works, patents, trademarks, design, mod- the actual owner of the interest income and (оо) A 0% rate is applied to dividends whose els, plans, secret formulas or processes, when one of the following requirements is recipients are: or the right of use of information on indus- met: trial, commercial or research experience. • The National Treasury Management • The interest income recipient is the gov- A 5% rate is applied when the recipient is Agency of Ireland ernment or a state body, the central bank, the actual owner of royalty in relation to • The National Reserve Pension Fund of or a company that fully or largely belongs the amounts paid for the use or cession of Ireland to the state the right of use of copyright for the works • Any company, including an agency or an • Interest is paid on a government-guaran- of literature and art, including cinema films institution, that fully or partially belongs teed loan as well as films or recordings used in TV or to the state radio programs, or for the use or cession • Interest is paid on a loan that is intended A 5% rate is applied to dividends whose of the right of use of all types of equipment to promote export and that is connected recipient owns at least 25% of the in- and transport vehicles. Otherwise, a 15% with the delivery of all types of equipment come-paying company’s capital. rate is applied. and transport vehicles by an enterprise of another treaty state (gg) A 0% rate is applied when the loan was (pp) A 0% rate is applied when the payer or approved by the government, when the • Interest is paid due to the sale on credit the payee of the interest income is the interest income recipient is the government terms of all types of equipment and trans- government, a political and administrative or the central bank, or when the inter- port vehicles division, a local government body, or the central bank. Otherwise, a higher rate is est income paid had originated due to a Otherwise, a 5% rate is applied. lending or a loan guaranteed or insured by applied.

64 Doing Business in Belarus • Appendix (qq) A 0% rate is applied when interest is paid (ss) A 0% rate is applied when one of the follow- (ww) A 10% rate is applied when the recipient is to the government, the central bank, and ing requirements is met: the actual owner of dividends. Otherwise, a institutions whose capital belongs fully • Interest is paid to the state, a local 12% rate is applied. . to the state or local government bodies. government body, the central bank, or a Otherwise, a 10% rate is applied. (xx) A 5% rate is applied when the recipient is financial institution that fully belongs to the actual owner of the interest income. (rr) A 0% rate is applied in the following cases: the state Otherwise, a 10% rate is applied. • Interest is paid on a loan that is guaran- • The payer or the payee of the interest (yy) A 0% is applied in the following cases: income is the government, a political and teed, insured or indirectly financed by the administrative division, a local govern- government, the local government body, • The payer or the payee of the interest ment body, or the central bank the central bank, or a financial institution income is the government, a political and that fully belongs to the state (this clause • A loan is approved by the government administrative division, a local govern- is not applied to China, Estonia, Lithuania ment body, or the central bank • A loan is granted and guaranteed by the or Latvia) • Loan was approved by the government state financial body to promote export, Otherwise, a 10% rate is applied. if a lending is provided or guaranteed on • Loan was provided, guaranteed or insured preferential terms (tt) A 10% rate is applied when the recipient is by the government, the central bank or the actual owner of royalty. Otherwise, a • A loan is granted by a bank to promote other body under state control export 15% rate is applied. • Loan was provided or guaranteed by a • Interest is paid on the debt that arises in (uu) A 5% rate is applied when the recipient is financial institution to promote devel- the event of sale on credit terms of any the actual owner of royalty. Otherwise, a opment, or interest is paid on a loan or items or industrial, business or scientific 15% rate is applied. lending designed to acquire industrial, equipment (vv) A 0% rate is applied when the recipient of business, commercial, medical or scientif- A 5% rate is applied when the recipient is the interest income is the government or ic equipment the actual owner of the interest income. local government body, the central bank (zz) A 6% rate is applied when the recipient is Otherwise, a 10% rate is applied. or other government company or financial the actual owner of royalty. Otherwise, a institution. Otherwise, a higher rate is 15% rate is applied. applied.

Doing Business in Belarus • Appendix 65 Ernst & Young in the CIS Belarus Astana Novosibirsk Minsk Kaskad Business Center Kronos Business Center Kabanbai Batyr Ave, 6/1, office 43 Sovetskaya Str., 5 Korol Str., 51, 2nd floor, office 30 Minsk, 220004 Astana, 010000 Novosibirsk, 630007 Tel.: +375 17 209 4535 Tel.: +7 7172 58 0400 Tel.: +7 383 211 9007 Fax: +375 17 209 4534 Fax: +7 7172 58 0410 Fax: +7 383 211 9008 Azerbaijan Atyrau Togliatti Satpaev Str., 19, office 305 Frunze Str., 14B, office 413 Baku Atyrau, 060011 Togliatti, 445037 Hyatt Tower III Tel.: +7 7122 99 6099 Tel.: +7 8482 999 777 Izmir Str., 1033 Fax: +7 7122 99 6097 Fax: +7 8482 999 700 Baku, AZ1065 Tel.: +994 12 490 7020 Russia Yuzhno-Sakhalinsk Fax: +994 12 490 7017 Moscow Militseiskaya Str., 8B, office 207 Yuzhno-Sakhalinsk, 693000 Armenia Sadovnicheskaya Nab. 77, bld. 1 Tel.: +7 4242 49 9090 Moscow, 115035 Yerevan Fax: +7 4242 49 9411 Tel.: +7 495 755 9700 Northern Ave, 1, office 27 Fax: +7 495 755 9701 Ukraine Yerevan, 0001 Tel.: +374 10 500 790 St. Petersburg Kyiv Fax: +374 10 500 706 White Nights Business Center Khreschatyk Str., 19A Malaya Morskaya Str., 23A Kiev, 01001 Georgia St. Petersburg, 190000 Tel.: +380 44 490 3000 Tbilisi Tel.: +7 812 703 7800 Fax: +380 44 490 3030 Fax: +7 812 703 7810 Kote Abkhazi Str., 44 Donetsk Tbilisi, 0105 Ekaterinburg Taras Shevchenko Blvd, 13A Tel.: +995 32 243 9375 Khokhryakov Str., 10 Donetsk, 83055 Fax: +995 32 243 9376 Ekaterinburg, 620014 Tel.: +380 62 340 4770 Kazakhstan Tel.: +7 343 378 4900 Fax: +380 62 340 4775 Fax: +7 343 378 4901 Almaty Uzbekistan Krasnodar Al-Farabi Ave, 77/7 Tashkent Almaty, 050060 World Trade Center Inconel Business Center, 3rd floor Tel.: +7 727 258 5960 Sovetskaya Str., 30, offices 1106–1108 Mustakillik Str., 75 Fax: +7 727 258 5961 Krasnodar, 350063 Tashkent, 100000 Tel.: +7 861 210 1212 Tel.: +998 71 140 6482 Fax: +7 861 210 1211 Fax: +998 71 140 6483

66 Doing Business in Belarus • Appendix Ernst & Young worldwide

Continental Western Europe Far East Belgium, France, Italy, Luxemburg, China, Guam (including Saipan and Morocco, Portugal (including Angola), Micronesia), Indonesia, Korea, Malaysia, Spain, Tunisia, the French-speaking Philippines, Singapore (including Brunei), countries of Africa (Cameroon, Congo, Sri Lanka (including the Maldives), Taiwan, Equatorial Guinea, Gabon, Guinea, Ivory Thailand and Vietnam (including Laos) Coast and Senegal) and Southeastern Europe (Albania, Bulgaria, Cyprus, Greece, Japan Former Yugoslav Republic of Macedonia, Malta, Moldova, Rumania, Serbia and Oceania Turkey) Australia, New Zealand, Fiji

Central Europe North, Central and South America Austria, Germany, the Netherlands, North America (USA and Canada), South Switzerland (including Liechtenstein), America (Argentine, Bolivia, Brazil, Chile, Poland, the CIS countries (Azerbaijan, Colombia, Ecuador, Paraguay, Peru, Belarus, Georgia, Kazakhstan, Ukraine and Uruguay and Venezuela), Mexico and Uzbekistan), the Baltic countries (Estonia, Central America (Costa Rica, Dominican Latvia and Lithuania) and the southern Republic, Salvador, Guatemala, Honduras, part of Central Europe (Croatia, the Czech Nicaragua and Panama), the Bahamas, Republic, Hungary, Slovakia and Slovenia) Bermuda and Cayman islands and the Caribbean. Northern Europe, Middle East, India and Africa Northern Europe (Denmark, Finland, Iceland, Ireland, Norway, Sweden and Great Britain [including the Guernsey and Jersey islands]), the Middle East (Bahrain, Egypt, Iraq, Jordan, Kuwait, Lebanon, Oman, Palestine Autonomy, Qatar, Saudi Arabia, Syria and the United Arab Emirates), India, Pakistan and Africa (Ethiopia, Ghana, Kenya [including Ruanda and Uganda], Malawi, Mauritania, Nigeria, South Africa [including Botswana, Lesotho, Mozambique, Namibia, the Republic of South Africa and Swaziland], Tanzania, Zambia and Zimbabwe)

Doing Business in Belarus • Appendix 67 Ernst & Young

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About Ernst & Young Ernst & Young is a global leader in assurance, tax, transaction and advisory services. Worldwide, our 167,000 people are united by our shared values and an unwavering commitment to quality. We make a difference by helping our people, our clients and our wider communities achieve their potential. Ernst & Young expands its services and resources in accordance with clients’ needs throughout the CIS. 4,000 professionals work at 19 offices in Moscow, St. Petersburg, Novosibirsk, Ekaterinburg, Kazan, Krasnodar, Togliatti, Vladivostok, Yuzhno-Sakhalinsk, Almaty, Astana, Atyrau, Baku, Kyiv, Donetsk, Tashkent, Tbilisi, Yerevan, and Minsk. For more information about our organization, please visit www.ey.com. Ernst & Young refers to the global organization of member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients.

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