Taxation in Belarus: What's Going On

05 June 2018
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Taxlinked (TL): What is Belarus doing in terms of regulating and taxing Bitcoin and other cryptocurrencies?

Roman Shpakovsky (RS): Belarus was among the first countries that regulated transactions with cryptocurrencies in a radical way. The regulations were established by the decree that entered into force this March. The draft was prepared mostly by lawyers and IT entrepreneurs, thus avoiding state bureaucracy and making it very business-friendly.
The decree regulated ICOs and cryptocurrencies, though limiting most provisions to the residents of the High Tech Park (HTP) “special regime.”
With respect to cryptos, starting from the end of March 2018:
  • All operations of individuals with cryptos are tax free;
  • HTP residents can mine, buy, exchange and perform other operations with cryptocurrencies and tokens;
  • No VAT/company tax on crypto operations for 5 years;
  • ICOs are legal but must be done by HTP companies or through special companies – “crypto-platforms” (not a single license issued yet), and;
  • Crypto currency exchanges and crypto currency operators will appear in HTP.
Recently, special accounting rules on tokens were also approved, but the overall regulatory framework for companies heavily involved with cryptos (e.g. ICOs) are not yet clear.
Nevertheless, given the fact that Belarus is relatively independent in terms of access to banking regulations (as it is outside EU), I expect that it will get its fair share of crypto business.

TL: What are some of the main advantages afforded to companies setting up IT operations in Belarus’ High-Tech Park (HTP)?

RS: Residence in the HTP is for companies producing and developing high technologies. It is mostly IT companies, of course. But a company engaged in developing technologies in medicine, biology, aviation, media and cyber sport products is also qualified.
HTP residents enjoy the following tax benefits:
  • No company tax: only 1% of gross revenues of the HTP administration;
  • Reduced income tax (9% instead 13%), and;
  • Reduced social payments, one of the most important benefits.
And, finally, HTP residents may apply some “English law” agreements such as convertible loan agreements, representations and warranties, indemnity agreements, non-compete and non-solicitation agreements. It is positioned as an experiment for introducing such instruments to Belarusian law.
This is a “person-based” regime, i.e. the company is not tied to the physical HTP territory.

TL: How successful has the Chinese-Belarus Great Stone industrial park been in attracting investors? What are some of the main benefits for investors looking to set up shop there?

RS: Compared to HTP, residents of Great Stone are supposed to build their production within the designated area. As of today, it is still in the early stages of development and sometimes faces heavy skepticism. Currently, there are 33 residents from 8 countries but only a few have finished construction.
Benefits offered:
  • 10 years corporate income tax exemption and a 50% discount later;
  • No real estate tax;
  • No dividend tax for 5 years;
  • Reduced personal income tax;
  • Reduced social security payments;
  • Import VAT and custom duties exemptions, and;
  • Visa-free entry.
Residency embraces “hard” rather than “soft” projects. Thus, industries involved include mechanical engineering, electronics, fine chemistry, biotechnology, production of new materials, logistics, pharmaceuticals, etc.

TL: Belarus recently introduced a VAT for e-services. What should businesses in this sector know about this new tax?

RS: VAT for e-services, or so-called “Google tax,” will be applied starting from 2018. VAT for e-services is charged only to foreign companies that sell e-services to individuals in Belarus. Thus, e-VAT deals only with B2C transactions.
Such foreign companies in Belarus should:
  • Register online with the Minsk city tax inspection;
  • Keep records of payments, and;
  • Pay VAT at the rate of 20% quarterly.
E-services for VAT purposes include only services provided via the Internet. The essential is that e-VAT is not charged on “physical” transactions carried out via the Internet. In particular, the Google tax does not apply in the case of delivery of goods ordered via the Internet, or the sale of hard or soft copies of games.
Examples of taxable e-services include:
  • Access to software and databases, including additional services and updates (e.g. games and apps in App Store and Play Market, Play Station Plus or Xbox Live subscriptions, offline vocabularies, etc.);
  • Access to books and publications (e.g. Kindle Unlimited, Scribd subscriptions, etc.), and;
  • Access to music, movies and/or images (e.g. Netflix, Apple Music, Hulu Plus, YouTube Music, Tidal subscriptions, etc.)

TL: What are the latest updates in terms of the handling of cross-border VAT in the Eurasian Economic Union (EAEU)?  Has the digital transformation of countries in the area impacted this process?

RS: Digital transformation has not yet gained strong foothold in this area.
The latest updates are aimed at:
  • Removing obstacles, barriers and restrictions, which lead to unequal VAT taxation conditions in member states;
  • Electronic information exchange, and;
  • Development of VAT taxation in electronic commerce.
Obstacles, barriers and restrictions mostly take place with regards to the unequal VAT taxation. For instance, the internal regime is not applied to the VAT taxation of some products in Belarus. For a number of products, a lowered VAT rate equal to 10% is only applied in Belarus if such goods are manufactured in its territory. At the same time, imports of the same goods from other member states are subject to VAT at a standard rate equal to 20%.
The EEC is studying the possibility of harmonization of legislation in the field of taxation in the electronic commerce sector. In particular, the Commission is exploring the possibility of developing a common supranational regulation in this sphere. Introduction of updates within EAEU is challenging due to the fact that regulations in Member States are different. For instance, Belarus and Russia have already pushed for regulations on VAT for e-services. Kyrgyzstan and Armenia are not so up-to-date; there are no regulations that focus on e-commerce transactions.

TL: What is necessary for the introduction of tax consultants in Belarus? Any specific guidelines to follow?

RS: Tax consulting in Belarus has been introduced recently. Since regulations have just been adopted, there are only about 20 tax advisors who have passed the required exam in April.
Tax advisors may have both legal and economic backgrounds, and at least three years of experience in the field is required to be admitted to the qualification exams. It is expected that certified tax advisors would be entitled to represent clients in courts in tax cases.
These new regulations will open the tax advisory and litigation markets to auditors and accounting companies. Previously, they were banned from directly representing clients in court and were not able to defend their tax position past administrative appeal.
Apart from that, the introduction of tax consultants is supposed to improve the quality of tax advice provided by accounting firms by requesting them to have such certificate for the signing of tax declarations.

TL: Is there anything else you would like to share with our community?

RS: Currently, the new edition of tax code is being developed by the commission of professionals and officials. The draft is expected by the end of Q3 in 2018. The task is to make tax laws more business friendly, while at the same time not lose any revenue. However, due to the short timeframe and amount of people involved (over 20), I expect only minor improvements.