According to the GOB’s Strategy for Attracting FDI, the priority sectors, which need FDI include pharmaceuticals; biotechnology; nanotechnologies and nanomaterials; metallurgy; mechanical engineering industry; production of machines, electrical equipment, home appliances and electronics; transport and related infrastructure; agriculture and food industry; information and communication technologies; creation and development of logistics systems; and tourism. NAIP maintains a database of investment proposals at http://www.investinbelarus.by/en/invest/base/. The GOB offers various incentives and programs for FDI depending on the sector and industry. The below incentives outline the specific incentives, usually preferential tax rates.
Investment Agreement with the Republic of Belarus
The list of major incentives and benefits under an investment agreement includes but is not limited to:
- Allocation of a land plot without auctioning the right to lease it.
- Removal of vegetation without compensation during construction.
- Full VAT deduction for the purchase of goods, services (works) or property rights.
- Exemption from import tariffs and VAT on the imports of production equipment.
- Exemption from fees for the right to conclude a land lease.
- Exemption from duties for employing of foreign nationals.
- Exemption from compensation for losses sustained by the agriculture and/or forestry industries due to the use of a land plot under the investment agreement.
- Exemption from land tax on land plots in government or private ownership, and from rent on land plots in government ownership, for a period starting from the first day of the month in which the investment agreement came into effect until 31 December of the year following the year in which the last of the facilities scheduled under the investment agreement started operations.
- Investment agreements concluded under the decision of the Belarusian Council of Ministers and with the permission of the President of Belarus may offer additional incentives and benefits not expressly provided for in legislation. Such incentives are provided on a case-by-case basis.
Free Economic Zones
Each of Belarus’s six regions has its own free economic zone (FEZ): Minsk, Brest, Gomel-Raton, Mogilev, Grodno Invest, and Vitebsk. The tax and regulatory pattern applicable to businesses in these zones is simpler and lower than elsewhere in Belarus. To become a FEZ resident, an investor needs to meet the following criteria:
- minimal investment of EUR 1 million, or at least EUR 500,000 provided that this lesser amount is invested in full within a three-year period;
- production of import-substituting products or goods for export.
In October 2005, the President of Belarus signed the edict that established uniform rules for all FEZs. The list of main tax benefits for FEZ residents was revised in December 2016 to include:
- Exemption from corporate profit tax (CPT) for 10 years from the date when the gross profit was declared. That applies to FEZ residents registered after 31 December 2011. Subsequently, CPT is paid at a standard rate as reduced by 50 percent (i.e. equal to 9 percent).
- Exemption from real estate tax on property located on the territory of a FEZ if a resident’s operations are covered under the FEZ tax regime.
- Exemption from land tax and rent on government-owned land plots located within the boundaries of the FEZ and provided for executing construction projects, The exemption is provided for the whole period of construction but for no longer than five years following the registration as a FEZ resident.
- Other exemption from land tax.
FEZs provide some customs benefits too. Starting From January 6, 2017, FEZ residents are exempt from VAT charged by the customs office in regard to goods manufactured (obtained) from foreign goods placed under the customs procedure of a free customs zone, and placed by FEZ residents under the customs procedure for release for domestic consumption.
Otherwise, FEZ residents pay VAT, excise duties, ecological tax, natural resource extraction tax, state duty, patent duties, offshore duty, stamp duty, customs duties and fees, local taxes and duties, and contributions to the Social Security Fund according to the general procedure.
Great Stone Industrial Park
The Great Stone Industrial park is a territorial entity with a special legal status of approximately 91.5 sq. km. The industrial park neighbors the Minsk International Airport and international highway M1 which extends north to Moscow and south to Berlin. Also, Great Stone has access to Klaipeda seaport on the Baltic Sea. According to the GOB’s master plan approved in June 2013, the Park will include production and living areas, offices and shopping malls, financial and research centers.
Great Stone is a joint Belarus-China project though any company – regardless of the company’s country of origin – can apply for residence in the industrial park. To apply, a company has to submit a business project worth at least USD 500,000 that needs to be invested within three years from the moment of the business’s registration; or submit a business project worth at least USD 5 million without any time limit for investment; or submit a business project worth at least USD 500,000 for research and development business projects.
According to the presidential edict dated June 5, 2012, which was updated in 2014 as well as in May 2017, residents are granted with the following preferences for being part of Great Stone:
- exemption from income tax during the first 10 years from the moment of receiving first income and reduction of current income tax rate by 50 percent until 2062;
- exemption from real estate and land taxes for a period until 2062;
- regime of a free customs zone that gives the right to import goods (raw materials) without payment of customs duties (import tariffs, VAT, excise duties) subject to further processing and export outside the countries of the Eurasian Economic Union; VAT exemption also stays for any exports outside the Eurasian Economic Union;
- benefits for employees of companies operating in the Industrial Park: flat personal income tax rates of 9 percent;
- full VAT deduction paid for acquisition of goods (works, services, property rights) used for design, building and equipping buildings and facilities in the Park;
- exemption from tax on dividend income accrued during 5 years starting from the year a Park resident receives its first gross income;
- permission to use foreign currency, securities and/or foreign-currency payment instruments while settling accounts between the Park residents and residents of the Republic of Belarus in terms of currency transactions aimed at the design and construction of Park buildings;
- exemption from recovery of agricultural and/or forestry production losses caused by withdrawal or permanent use of agricultural land and forest land in the Park borders; from compensatory planting and compensation payment for extraction and transfer of flora resources, compensation payment for negative impact on fauna resources and/or its habitat;
- foreign citizens can be employed by the Park residents and can come and stay the Republic of Belarus without entry visa for a period of up to 180 days;
- other preferences.
When new taxes and fees are established in Belarus, the obligation to pay such taxes and fees for Great Stone residents will not be applied. Also investors can rent plots of land on the territory of theIndustrial Park for a period of 99 years or can purchase land plots on the territory.
High Technology Park (HTP)
The HTP, an area in the eastern part of Minsk with a special legal regime, was created in 2005 to foster development of the IT and software development industry. It provides HTP residents beneficial tax preferences, and it has seen tremendous growth since its inception. In 2017, exports of HTP residents jumped 25 percent and totaled USD 1.025 billion. Over 90 percent of its output is export-oriented, predominantly to U.S. and European clients.
The HTP and IT sector underwent modifications in 2017 with the December 21 signing of Presidential Decree No. 8 On the Development of the Digital Economy. The decree came into effect on March 28, 2018, and extends the HTP regime, initially approved until 2022, until 2049. It also significantly expands the list of activities in which HTP residents may engage.
Belarusian companies may apply for the HTP residence regardless of their location, provided that they are engaged in business activities as listed in Decree No. 8, including:
- Analysis, design and software support of IT systems, including their development and deployment, as well as implementation, maintenance and database creation services;
- Data processing using software;
- Technical and/or cryptography systems for data protection;
- Development and deployment of IT for finance/financial technologies;
- Software publishing and promotion;
- Online advertising and intermediary services using software developed by the HTP resident;
- Development, maintenance and deployment of software and hardware using blockchain technology;
- Cryptocurrency exchange and cryptocurrency converter activities, mining, creation of tokens, coin/token;
- offerings and other activities involving the use of tokens;
- Data center services;
- Development and deployment of unmanned vehicle driving systems;
- Development, implementation and deployment of Internet of Things technologies;
- Education programs in ICT and cybersports;
- Other business activities as set forth in legislation.
HTP residents are required to pay 1 percent of their revenue to the HTP Administration, they are exempt from corporate profit tax and VAT on the sale of goods, services (works) or property rights in Belarus.
HTP residents are exempt from customs duty and VAT on certain kinds of equipment imported into Belarus for use in investment projects. They may also qualify for immovable property tax and land tax benefits with regard to buildings and land within the boundaries of the HTP.
Personal income tax for employees of HTP residents is set at 9 percent. Mandatory social security contributions are calculated and paid not on an employee’s actual pay, but on the national average, which is several times less than in the Belarusian IT industry.
HTP residents are also exempt from offshore duty on dividends paid to their founders/participants registered in offshore jurisdictions.
Pursuant to changes introduced by Decree No. 8, tax on dividends paid by HTP residents will be imposed at 9 percent for individuals and at 5 percent for foreign companies, unless they can benefit from more favorable provisions of the relevant double tax treaty.
In addition, Decree No. 8 exempts HTP residents from Belarusian VAT on licenses and some services of Importance to IT business, including advertising, marketing, consulting and database creation in cases when they are acquired from foreign providers.
Decree No. 8 also enables HTP residents to enter into convertible loan agreements, option contracts and an agreement on providing option to enter into contracts, issue an irrevocable power of attorney and take advantage of certain legal mechanisms, including indemnity and warranties, and representations provisions. For the purpose of regulating relationships between shareholders/ participants, HTP residents will be entitled to enter into shareholders’ agreements governed by laws of a foreign jurisdiction and refer disputes arising under such agreements to courts and arbitration in foreign jurisdictions.
HTP residents will also be entitled to enter into non-competition agreements with their employees and non-solicitation of employees agreements with third parties.
Foreign nationals who are hired by HTP residents under employment contracts or are founders of HTP residents or are employed by such founders will be eligible for visa-free entry into Belarus for a stay of up to 180 days during a year. Foreigners employed by HTP residents will not be required to have working permit in Belarus and will be entitled to apply for a temporary residence permit for the duration of the contract.
HTP residents will be eligible to use a simplified document management procedure when accounting for transactions with nonresidents. Foreign currency surrender requirement does not apply to HTP residents.
After entry into force of Decree No. 8, HTP residents will only be required to notify the competent authorities of their capital currency transactions that normally would require authorization of the National Bank.
Government agencies will not be allowed to inspect operations of HTP residents without prior consent of the HTP Administration.
Investment activities in small towns
Since July 1, 2012, companies and individual entrepreneurs operating in all rural areas and towns enjoy the following benefits in the seven years after registration:
- exemption from profit tax on the sale of goods, work, and services of a company’s own production;
- exemption from other taxes and duties, except for VAT, excise tax, offshore duty, land tax, ecological tax, natural resources tax, customs duties and fees, state duties, patent duties, and stamp duty;
- exemption from mandatory sale of foreign currency received from sale of goods, work, and services of a company’s own production, and from leasing property; and
- no restrictions on insuring risks with foreign insurers.
The special legal regime does not apply to banks, insurance companies, investment funds, professional participants in the securities market, businesses operating under other preferential legal regimes (e.g. FEZ or HTP) and certain other businesses.
Performance and Data Localization Requirements
The host government does not mandate local employment. Foreign investors have the right to invite foreign citizens and stateless persons, including those without permanent residence permit, to work in Belarus provided their labor contracts comply with Belarusian law. The GOB often imposes various conditions on permission to invest, and pursues forced localization policies on a case-by-case basis. Other performance requirements are often applied uniformly to both domestic and foreign investors.
According to official Belarusian information, data storage is not subject to licensing. Law enforcement regulations governing electronic communications do not include any requirements with regard to foreign IT providers. Beginning in 2016, IT providers are required, by law, to maintain all electronic communications for a one-year period.