AUDIT ● OUTSOURCING ● CONSULTING ● IFRS TAX GUIDE-2019 CONTENTS INTRODUCTION 4 TAX SYSTEM OF THE REPUBLIC OF BELARUS. GENERAL PROVISIONS 5 REPUBLICAN TAXES, FEES (DUTIES) 6 Value added tax (VAT) 6 Excise duties 9 Corporate income tax (CIT) 11 Transfer pricing 12 Tax loss carryforwards 15 The rule of thin capitalization 15 Rules of accrual of depreciation 16 Tax treatment of the income taxation in certain areas of activity 17 Tax treatment of the foreign legal entities operating through permanent establishment 18 Withholding tax of foreign legal entities not operating in Belarus through permanent establishment (WHT) 19 Personal income tax 22 Real estate tax 23 Land tax 26 Ecological tax 27 Tax for the extraction (removal) of natural resources 28 Offshore duty 29 Stamp duty 31 Consular fee 32 State duty 32 Patent fees 33 Utilization fee 34 LOCAL TAXES AND DUTIES 36 Dog ownership tax 36 2 Tax guide-2019 Resort duty 36 Duty for packer shippers 37 OBLIGATORY INSURANCE PAYMENTS TO THE SOCIAL PROTECTION FUND AND PENSION FUND. INSURANCE FEES FOR OBLIGATORY INSURANCE AGAINST OCCUPATIONAL DISEASES AND ACCIDENTS AT PRODUCTION FACILITIES 38 SPECIAL TAX REGIMES 39 Simplified tax system 39 Single tax from individual entrepreneurs and other individuals 41 Single tax for producers of agricultural products 43 Tax on gambling business 45 Tax on income from lottery activity 46 Tax on income from organization of electronic interactive games 46 Duty for craft activities 47 Duty for rendering services in the field of rural tourism 47 Single tax on imputed income 48 PREFERENTIAL CLUSTERS 50 Taxation in free economic zones (FEZ) 50 Taxation of Hi-Tech Park residents 51 Taxation of China-Belarus industrial park «Great Stone» 53 Taxation in middle, small towns and in countryside 55 Taxation of retail trade, public catering and household services in countryside and small towns 56 Taxation of subjects of Orsha district of Vitebsk region 58 TREATIES THAT GUARANTEE AVOIDANCE OF DOUBLE TAXATION 60 rates of withholding tax on dividends in treaties that guarantee avoidance of double taxation 61 rates of withholding tax on interest in treaties that guarantee avoidance of double taxation 64 rates of withholding tax on royalty in treaties that guarantee avoidance of double taxation 66 3 INTRODUCTION This Tax Guide provides information about the tax system in Belarus, including some useful notes and tax rates, based on the current tax legislation. The tax information contained in this guide is accurate as at the date of its publication. The guide is intended for general guidance to the tax system of the Republic of Belarus only and does not constitute professional advice. For any specific subject, the reader is encouraged to refer to the appropriate tax consultant. For more information, please contact us at our office. Contact details can be found at the end of this guide. (c) Baker Tilly Bel LLC, 2019. Baker Tilly Bel LLC trading as Baker Tilly is an independent member of Baker Tilly International. Baker Tilly International Limited is an English company. Baker Tilly International provides no professional services to clients. Each member firm is a separate and independent legal entity, and each describes itself as such. Baker Tilly Bel LLC is not Baker Tilly Inter- national’s agent and does not have the authority to bind Baker Tilly International or act on Baker Tilly International’s be- half. None of Baker Tilly International, Baker Tilly Bel LLC, nor any of the other member firms of Baker Tilly International has any liability for each other’s acts or omissions. The name Baker Tilly and its associated logo is used under licence from Baker Tilly International Limited. 4 Tax guide-2019 TAX SYSTEM OF THE REPUBLIC OF BELARUS. GENERAL PROVISIONS The Tax Code of the Republic of Belarus, which is made up from the General Part and Special Part, is the main document that defines the structure of the tax system in the country. The General Part of the Tax Code, that came into legal force on January 1, 2004, formulates the notions of tax obligation, taxpayers, and an object of taxation. It also contains regulations regarding tax ac- counting and control, and describes the procedure of appeal against decisions made by tax authorities. The Special Part of the Tax Code, that came into legal force on January 1, 2010, regulates particular taxes and duties, defines taxpayers, objects of taxation, rates, procedure of tax calculation and pay- ments of respective taxes and duties. The new edition of the Tax Code came into legal force in 2019. Tax payments existing in the Republic of Belarus are divided into the following ones based on the ter- ritorial feature and the level of the subject that carries out the legal regulation of taxation: 1) republican taxes, fees (duties) include the following: • value added tax; • excise duties; • corporate income tax; • withholding tax on income of foreign legal entities, which do not operate through a permanent establishment in Belarus; • personal income tax; • real estate tax; • land tax; • ecological tax; • tax for the extraction (removal) of natural resources; • offshore duty; • stamp duty; • consular fee; • state duty; • patent fees; • utilization fee. 2) local taxes and duties include the following: • dog ownership tax; • resort duty; • duty for packer shippers. There are also other types of payments: • dues to the Social Protection Fund and Pension Fund; • dues paid by employers for obligatory insurance of employees against professional illnesses and accidents at production facilities. Together with general taxation system, there are specific regimes of taxation, which provide a number of benefits, reduced tax rates, reduced number of taxes and etc. 5 REPUBLICAN TAXES, FEES (DUTIES) Value added tax The value added tax (VAT) is included into the price of products (works, services). Taxpayers: 1. legal entities; 2. individual entrepreneurs: 2.1. in the case of sale of goods (works, services), property rights: 2.1.1. an individual entrepreneur applying the general taxation procedure, if the amount of revenue from the sale of goods (works, services), property rights and income in the form of lease (financial leasing) of property on an accrual basis from the beginning of the year exceeds 420,000 Belarusian rubles, excluding taxes and fees calculated from the revenue; 2.1.2. an individual entrepreneur applying a simplified taxation system, if the amount of revenue from the sale of goods (works, services), property rights and income in the form of lease (finan- cial leasing) of property received from commercial organizations (except for joint stock compa- nies) where he (she), his (her) spouse, parents (adoptive parents), children (adopted children) are the owners of the property, the shareholders on an accrual basis from the beginning of the year exceeds 420,000 Belarusian rubles, excluding taxes and fees calculated from the revenue; 2.1.3. an individual entrepreneur, regardless of the circumstances specified in clauses 2.1.1 and 2.1.2, if he (she) has made a decision to pay VAT and submitted a notification of the deci- sion to the tax authority at the place of registration; 2.2. an individual entrepreneur is recognized as a taxpayer in respect of all objects of taxation be- fore the end of the tax period: 2.2.1. in case of circumstances specified in clauses 2.1.1 and 2.1.2, starting from the month following the month of occurrence of such circumstances; 2.2.2. in case of making a decision on payment of VAT — starting from the month following the month of submission of the notification of the decision; 3. trustees on the turnover of goods (works, services), property rights arising in connection with the trust management of property received in trust management, in the interests of the trustors and (or) beneficiaries; 4. individuals who, in accordance with the Tax Code, customs legislation and/or acts of the President of the Republic of Belarus, are obliged to pay the VAT levied when importing goods into the territory of the Republic of Belarus. Rates: 0% • placed under the customs procedure of export, provided that the actual export of goods out- side the territory of the Republic of Belarus is documented; • goods placed under the customs procedure for export and exported (without obligation to re-import them into the territory of Belarus) to the member-states of the Eurasian Econom- ic Union (including goods exported under lease agreements (contracts), loan agreements, agreements (contracts) for manufacture of goods) provided that real export of goods out of the territory of Belarus is documented; • works (services) connected with accompanying, loading, transfer and other similar works (services) directly connected with the selling of exported goods, which are placed under the 6 Tax guide-2019 customs procedure of export, as well as goods exported (without obligation to re-import them into the territory of the Republic of Belarus) in the member-states of the Eurasian Economic Union; • exported works on production of goods made from toll raw materials provided that the actual export of such goods outside the territory of the Republic of Belarus is documented; • exported transport services including transit transportation; • repair works (modernization, re-equipment) of aircraft and their engines, units of trains, per- formed for foreign legal entities or individuals; • goods of own production to a duty-free shop’s owner for the purpose of their subsequent sale in duty-free shops; • goods in retail trade through shops to individuals who