2018 Investment Climate Statements: Belarus

Policies Towards Foreign Direct Investment

The GOB states attracting FDI is one of the priorities of the country’s foreign policy, and net inflows of FDI have been included in the list of government performance targets since December 2015. The GOB also does not have any specific requirements for foreigners wishing to establish a business in Belarus. Investors, whether Belarusian or foreign, reportedly benefit from equal legal treatment and have the same right to conduct business operations in Belarus by incorporating separate legal entities. However, the existing laws and practices often discriminate against the private sector, including foreign investors regardless of the country of their origin.

Limits on Foreign Control and Right to Private Ownership and Establishment

The GOB asserts foreign and domestic private entities have the right to establish and own business enterprises and engage in all forms of remunerative activity. The GOB also states there are no general limits (statutory, de facto, or otherwise) on foreign ownership or control. In reality, however, the GOB establishes such limits on a case-by-case basis. The limits on foreign equity participation in Belarus are above the average for the 20 countries covered by the World Bank Group’s Investing Across Borders indicators for Eastern Europe and the Central Asia region. Belarus, in particular, limits foreign equity ownership in service industries. Sectors such as fixed-line telecommunications services, electricity transmission and distribution, and railway freight transportation are closed to foreign equity ownership. In addition, a comparatively large number of sectors are dominated by government monopolies, including, but not limited to, those mentioned above. Those monopolies, together with a high-perceived difficulty of obtaining required operating licenses, make it difficult for foreign companies to invest in Belarus. Another example is that under local law, foreign ownership cannot exceed 30 percent in charter funds of Belarusian insurance companies. Finally, the government may restrict investments in the interests of national security (including environmental protection, historical and cultural values), public order, morality protection, public health, as well as rights and freedoms of people.

Although the GOB claims that it does not screen, review, or approve FDI, the above practices suggest the opposite. Belarus retains elements of a Soviet-style command economy, which prescreens and approves all significant foreign investment.

Belarus’s Ministry of Antimonopoly Regulation and Trade is responsible for reviewing transactions for competition-related concerns (whether domestic or international).

Other Investment Policy Reviews

The UN Conference on Trade and Development reviewed Belarus’s investment policy in 2009 and made recommendations regarding the improvement of its investment climate. http://unctad.org/en/Docs/diaepcb200910_en.pdf 

Business Facilitation

Individuals and legal persons can apply for business registration via the web portal of the Single State Register (http://egr.gov.by/egrn/index.jsp?language=en ) – a resource which includes all relevant information on establishing a business.

Belarus has a regime allowing for a simplified taxation system for small and medium-sized, and foreign-owned businesses.

Belarus defines enterprises as follows:

• Micro enterprises – less than 15 employees;
• Small enterprises – from 16 to 100 employees;
• Medium-sized enterprises – from 101 to 250 employees.

Belarus’s investment promotion agency is the National Agency of Investments and Privatization (NAIP). NAIP is tasked with representing the interests of Belarus as it seeks to attract FDI into the country. The Agency states it is a one-stop shop with services available to all investors for:

• organizing fact-finding missions to Belarus, including assisting with visa formalities;
• providing information on investment opportunities, special regimes and benefits, state programs, and procedures necessary for making investment decisions;
• selecting investment projects; and
• providing solutions and post-project support, i.e. aftercare.

To maintain an ongoing dialog with investors, Belarus also has the Foreign Investment Advisory Council (FIAC). Its activities include, but are not limited to:

• developing proposals to improve investment legislation;
• participating in examining corresponding regulatory and legal acts;
• approaching government agencies for the purpose of adopting, repealing or modifying the regulatory and legal acts which restrict the rights of investors. The FIAC is chaired by the Prime Minister of Belarus and includes the heads of government agencies and other state organizations subordinate to the GOB, heads of international organizations, foreign companies and corporations.

Outward Investment

The government does not promote or incentivize outward investment, nor does it restrict domestic investors from investing abroad. According to government statistics, Belarusian businesses’ outward investments in 2017 totaled $5.2 billion.

BITs or FTAs

The GOB maintains foreign entities have the same investment opportunities as Belarusian ones.

Belarus has signed 66 bilateral investment agreements (BITs) with the following states: Armenia, Austria, Azerbaijan, Bahrein, Bangladesh, Belgium, Bosnia and Herzegovina, Bulgaria, Cambodia, China, Croatia, Cuba, Cyprus, Czech Republic, Denmark, Egypt, Estonia, Finland, France, Georgia, Germany, Great Britain, India (terminated 24 March, 2017), Iran, Iraq, Israel, Italy, Jordan, Korea, Democratic People’s Republic of Korea, Republic of Kuwait, Kyrgyzstan, Laos, Latvia, Lebanon, Libya, Lithuania, Luxemburg, Macedonia, Mexico, Moldova, Mongolia, Netherlands, Oman, Pakistan, Poland, Qatar, Romania, Saudi Arabia, Serbia, Singapore, Slovakia, Slovenia, Sudan, Sweden, Switzerland, Syria, Tajikistan, Turkey, Turkmenistan, Ukraine, United Arab Emirates, United States, Venezuela, Vietnam, and Yemen

Such agreements routinely provide for:

• national or most-favored treatment;
• minimum standards; and
• no expropriation for reasons other than for the public benefit on a nondiscriminatory basis and according to the appropriate legal procedure and on conditions of fair compensation.

Currently Belarus is negotiating or renegotiating BITs with several countries, including the Czech Republic, Hungary, India, Slovenia and Sri Lanka.

Belarus is a party to two regional investment agreements within the framework of the Commonwealth of Independent States (CIS): the Agreement on Cooperation in the Field of Investment Activities of December 24, 1993 and the Convention on Protection of the Rights of the Investor of March 28, 1997. Belarus is also a party to the Agreement on Promotion and Reciprocal Protection of Investments in the Member States of the Eurasian Economic Community of December 12, 2008 (other parties are Kazakhstan, Kyrgyzstan, Russia and Tajikistan). Foreign investments among the members of the Eurasian Economic Union (Armenia, Belarus, Kazakhstan, Kyrgyzstan, and Russia) are governed by Annex 16 to the Treaty on the Eurasian Economic Union signed on May 29, 2014.

According to the GOB, Belarus is also a party to the following agreements:

• Free Trade Agreement between the Eurasian Economic Union and its Member States, and the Socialist Republic of Vietnam;
• Treaty on Eurasian Economic Union;
• Agreement on Trade in Services and Investment in the Member States of the Common Economic Space of Belarus-Kazakhstan-Russia;
• Agreement on Promotion and Reciprocal Protection of Investments in the Member States of the Eurasian Economic Community;
• Convention on Protection of Investor Rights;
• Partnership and Cooperation Agreement Establishing a Partnership between the European Communities and Their Member States, of the One Part, and Belarus, of the Other Part; and
• The Energy Charter Treaty.

Belarus is a party to the Agreement between the Government of Republic of Belarus and the Government of the United States of America on Promotion of Capital Investment (24 June 1992). Belarus and the United States also signed the Agreement between the Republic of Belarus and the United States of America on Stimulation and Protection of Investments (Minsk, 15 January, 1994). That agreement, however, did not enter into force.

Belarus has been a member of the Multilateral Investment Guarantee Agency (MIGA) of the World Bank since December 1992. In July 2011, Belarus ratified amendments to the Convention on Establishing MIGA and concluded agreements on the legal protection of guaranteed foreign investment and the use of local currency. According to Belarus’s Economy Ministry, these agreements finalized procedures for Belarus to become a full member of MIGA.

Bilateral Taxation Treaties

Belarus is the successor of the USSR in the Convention between the Union of Soviet Socialist Republics and the United States of America on Matters of Taxation (Washington, June 20, 1973). In addition, Belarus has 65 such agreements with other countries.

Transparency of the Regulatory System

The government states that its policies are transparent and the implementation of laws is consistent with international norms to foster competition and establish clear rules of the game. However, independent economic experts note that private sector businesses are often discriminated against in relation to public sector businesses. In particular, SOEs often receive government subsidies, benefits and exemptions, including cheaper loans and debt forgiveness. Such beneficial treatment is generally unavailable to private sector companies.

According to Belarusian legislation, drafts of laws and regulations pertaining to investment and doing business are subject to public discussion. Draft legislation is published on government agencies’ websites.

International Financial Reporting Standards (IFRS) have been a part of Belarus legislative framework since 2016. Public-interest entities, which include banks, insurance companies and public corporations with subsidiary companies, are required to publish their financial statements, which comply with IFRS. Such statements are subject to statutory audit.

IFRS in Belarus can be accessed through the Ministry of Finance at the following links:

• http://www.minfin.gov.by/accounting/inter_standards/docs/71f9f73c3eb44bb2.html ;
• http://www.minfin.gov.by/accounting/inter_standards/docs/fa70d11e0cb14c56.html ;
• http://www.minfin.gov.by/accounting/inter_standards/docs/f8f75f4fd1e848df.html ;
• http://www.minfin.gov.by/accounting/inter_standards/docs/eb7753f40f6f49f0.html ;
• http://www.minfin.gov.by/accounting/inter_standards/docs/9d4e40da559e40d4.html .

Belarus has no informal regulatory processes managed by nongovernmental organizations or private sector associations.

International Regulatory Considerations

Belarus is not a WTO member but announced in April 2016 it will step up efforts to join the organization. Belarus has previously committed to hasten efforts to join the WTO without taking corresponding decisions to speed up its possible entry into the WTO. After a 12-year break between meetings of the Working Party on Belarus’s Accession to the WTO, the group met for the eighth time in Washington in January 2017 and the ninth time in September in Geneva. A Belarusian delegation also attended WTO Ministerial conference in Buenos Aires in December 2017 at which time the MFA announced that Belarus still needed to conclude bilateral negotiations on market access for goods and services with 11 WTO members, including the United States, before it can accede to the organization.

Legal System and Judicial Independence

The Belarusian legal system is a civil law system with a legal separation of branches and institutions and with the main source of law being legal act, not precedent. Presidential edicts and decrees, however, typically carry more force than legal acts adopted by the legislature, which risks weakening investor protections and incentives previously passed into law. There is sometimes a public comment process during drafting of presidential decrees, but the process is often not transparent or sufficiently inclusive of investors’ concerns. There are also questions about the judiciary’s independence, which could limit investors’ recourse against the government and SOEs. Article 44 of Belarus’s Constitution guarantees the inviolability of property. Article 11 of the Civil Code safeguards property rights. Belarus has a written and consistently applied commercial law, which is broadly codified. The law, however, contains many inconsistencies and is not always considered to be business friendly.

Each of Belarus’s six regions and the capital city of Minsk have economic courts to address commercial and economic issues. In addition, the Supreme Court has a judicial panel on economic issues. In 2000, Belarus established a judicial panel on intellectual property rights (IPR) protection. Under the Labor Code any claims of unfair labor practices are heard by regular civil courts or commissions on labor issues. However, the judiciary’s lack of independence from the executive branch impedes its role as a reliable and impartial mechanism for resolving disputes, whether labor, economic, commercial, or otherwise.

Laws and Regulations on Foreign Direct Investment

Foreign investment in Belarus is governed by the July 12, 2013 laws On Investments, and On Concessions as well as Presidential Decree No. 10 On the Creation of Additional Conditions for Investment Activity in Belarus which was signed on August 6, 2009) and other legislation as well as international and investment agreements signed and ratified by Belarus. The GOB declares there is no executive or any other interference in the court system that could affect foreign investors. In reality, however, there have been instances of executive interference in the judiciary that have harmed foreign investors’ operations in Belarus.

The GOB regularly updates the following websites with the latest in laws, rules, procedures and reporting requirements for foreign investors:

• http://www.investinbelarus.by/en/ 
• http://www.economy.gov.by/ 
• http://president.gov.by/en/official_documents_en/ 

Competition and Anti-Trust Laws

The June 3, 2016 presidential edict number 188 authorized the Ministry of Antimonopoly Regulation and Trade to counteract monopolistic activities and promote competition in Belarus’s markets.

Expropriation and Compensation

According to Article 12 of the Investment Code, neither Party may expropriate or nationalize investments both directly and indirectly by means of measures similar to expropriation or nationalization, for other purposes than: for the public benefit; on nondiscriminatory basis; according to the appropriate legal procedure; and on conditions of compensation payment,

Belarus has signed 66 bilateral agreements on the mutual protection and encouragement of investments. According to such agreements, neither party may expropriate or nationalize investments either directly or indirectly by means or measures similar to expropriation or nationalization, for purposes other than public benefit or according to the appropriate legal procedure.

Expropriation of private property sometimes occurs in Belarus in the form of de-privatization. That is, the government sometimes seeks to secure majority share in some joint stock companies under various pretexts, e.g. securing the interests of workers, long record of profit-loss, etc. Some successful local businessmen have been forced out of business through bureaucratic methods. In the past there have been instances of confiscation of business property as a penalty for violations of law. Although under the Investment Code, fair compensation for the expropriated property should be offered, the government usually refers to breaches of domestic laws and offers no compensation.

Confiscations are not usually related to any particular industry and are not targeted exclusively at international firms. Both foreign and domestic assets sometimes become subject to expropriation.

Dispute Settlement

There were no known investment disputes with American investors in 2017.

ICSID Convention and New York Convention

Belarus is a party of the Conventions on the Settlement of Investment Disputes between States and Nationals of Other States of March 18, 1965 (ICSID Convention) and of August 9, 1992, and Conventions on the Recognition and Enforcement of Foreign Arbitral Awards of June 10, 1958 and February 13, 1961.

The GOB states that local courts recognize and enforce foreign arbitral awards in compliance with the above conventions, national laws and regulations. The enforcement of arbitral awards in Belarus is governed by Chapter 28 of the Code of Commercial Procedure.

Most of the BITs concluded by Belarus include a provision on international investment arbitration as a mechanism for settling investor-state disputes and recognize the binding force of the awards issued in investment arbitrations.

Under Belarusian law, if an international treaty signed by Belarus establishes rules other than those established by local law, the rules of the international treaty shall prevail.

Investor-State Dispute Settlement

Local economic court proceedings normally do not exceed two months. The term of such proceedings with the participation of foreign persons is normally no longer than seven months, unless established otherwise by the international agreement signed by Belarus.

International Commercial Arbitration and Foreign Courts

Judgments of foreign courts are accepted and enforced if there is a relevant international agreement signed by Belarus. Courts recognize and enforce foreign arbitral awards. International arbitration is accepted as a means for settling investment disputes between private parties. In principle, the GOB accepts binding international arbitration of investment disputes between foreign investors and the state, although the Embassy is not aware of any cases where this has been put to the test. The Belarusian Chamber of Commerce and Industry has an International Arbitration Court. The July 12, 2013 law on mediation, as well as codes of civil and economic procedures, established various alternative ways of addressing investment disputes.

Bankruptcy Regulations

Belarus has a written bankruptcy law adopted on July 13, 2012 and several additional presidential edicts, which are not always consistently applied, especially with regard to SOEs. Some other legal acts, such as the Civil Code, also include certain regulations on bankruptcy-related issues.

Under the bankruptcy law, foreign creditors have the same rights as Belarusian creditors. Belarusian law criminalizes false and intentional insolvency as well as concealing insolvency. According to the World Bank’s 2018 Doing Business Report, Belarus was ranked 68 in Resolving Insolvency, up from 69 in 2017 and 95 in 2016 (rankings available at: http://www.doingbusiness.org/data/exploreeconomies/belarus ).

Investment Incentives

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.

Tax benefits

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.

Real Property

Property rights are enforced by the Civil Code. Mortgages and liens are available, and the property registry system is reliable. Investors and/or duly established commercial organizations with the participation of a foreign investor (investors) have the right to rent plots of land for up to 99 years. According to the Belarusian Land Code, foreign legal persons and individuals are denied land ownership.

For information on the ease of property registration see the World Bank’s Doing Business Report rankings available at: http://www.doingbusiness.org/rankings .

Intellectual Property Rights

Belarus continued to work to improve IPR protections, including through enforcement of its legislation, in 2017. Two years after the U.S. decision to remove Belarus from the Special 301 Watch List, Belarus continues to experience challenges in adequately enforcinging its IPR laws. Enforcement agencies either lack sufficient qualifications to investigate and counter IPR violations or remain focused on areas that have a greater impact on the GoB’s economic model. Despite this, the GoB increasingly understands the need to protect IPR, both to attract and protect foreign investment and also to create a legal framework to protect its own burgeoning IT sector.

According to Belarus’s National Center of Intellectual Property, Belarus, along with fellow Eurasian Economic Union (EAEU) member states Armenia, Kazakhstan, Kyrgyzstan and Russia, signed the Agreement on Management of Copyright and Related Rights on a Collective Basis in December 2017 in order to harmonize various copyright regulations across the EAEU. Also in December 2017, Belarus amended its Law on Patents for Inventions, Utility Models, and Industrial Designs for the purpose of bringing its provisions into compliance with the 2002 Patent Law Treaty which is administered by the World Intellectual Property Organization. The updated Belarusian law expanded validity of a utility model patent from eight to ten years and also provides a mechanism for verifying utility model’s patentability if it is brought before the Board of Appeals of the Patent Office.

In 2015, Belarus was taken off the USTR’s Special 301 Report Watch List. The U.S. remains concerned, however, about the prevalence of counterfeits and continued obstacles to effective enforcement of IPR and expects Belarus to continue improving its IPR regime as part of its WTO accession negotiations. The United States will continue to assist Belarus with technical consultations to that end. Belarus does not appear in the USTR’s Out-of-Cycle Review of Notorious Markets.

The World Intellectual Property Organization (WIPO) provides 186 Country Profiles, including Belarus. These profiles are available at: http://www.wipo.int/directory/en .

For additional information about treaty obligations and points of contact at local IP offices, please see WIPO’s country profiles at http://www.wipo.int/directory/en/ .

Resources for Rights Holders

Monica Sendor
Economic Officer
tel.+375 (17) 210-1283
e-mail: usembassyminsk@state.gov

Capital Markets and Portfolio Investment

The Belarusian government welcomes portfolio investment and has taken steps to safeguard such investment and ensure a free flow of financial instruments. The Belarusian Currency and Stock Exchange is open to foreign investors, but it is still largely undeveloped because the government only allows companies to trade stocks if they meet certain criteria, which are often burdensome for many companies, especially private ones. Private companies must be profitable and have net assets of at least 1 million Euro. In addition, any income from resulting operations is taxed at 24 percent. Finally, the state owns more than 70 percent of all stocks in the country, and the government appears hesitant and unwilling to trade in them freely. Bonds are the predominant financial instrument on Belarus’s corporate securities market.

In 2001, Belarus joined Article VIII of the IMF’s Articles of Agreement, undertaking to refrain from restrictions on payments and transfers under current international transactions. Loans are allocated on market terms and foreign investors are able to get them. However, the discount rate of 11 percent (as of October 2017) makes it too expensive for many private businesses, which, unlike many SOEs, do not receive subsidized, reduced interest loans.

Starting in March 2016, Belarus’s National Bank allowed businesses to buy and sell foreign exchange at the Belarusian Currency and Stock Exchange through their banks. Previously they could only buy or sell foreign currencies from or to banks. As part of its liberalizing monetary policy, the National Bank reduced the mandatory sale requirement for businesses from 20 to 10 percent in October 2017, saying at the time “the reduction of the mandatory sale requirement for foreign currency proceeds will contribute to the development of the export potential of economic entities of the Republic of Belarus and will become a consistent step aimed at harmonizing currency regulations within the framework of the Eurasian Economic Union.” The National Bank is said to be poised to abolish mandatory sales by businesses of foreign currency revenues altogether in the first half of 2018.

Money and Banking System

Belarus has a central banking system. The country’s main bank, the National Bank of the Republic of Belarus, represents the interest of the state. It is the main regulator of the country’s banking system. The President of Belarus appoints the Chairperson and Members of the Board of the National Bank, designates auditing organizations to examine its activities, and approves its annual report.

As of January 1, 2018, the banking system of Belarus included 24 commercial banks and three non-banking credit and finance organizations. According to the National Bank, the share of troubled loans in the banking sector was 12.9 percent as of January 1, 2018. The country’s five largest commercial banks, one of which is fully private, account for 77 percent of the total assets of the country’s banking sector, totaling the equivalent of some USD26 billion. To the best of the Embassy’s knowledge, rules on hostile take-overs are clear, and applied on a non-discriminatory basis.

Foreign Exchange and Remittances

Foreign Exchange Policies

According to the GOB, Belarus’s foreign exchange regulations do not include any restrictions or limitations regarding converting, transferring, or repatriating funds associated with investment. Foreign exchange transactions related to FDI, portfolio investments, real estate purchasing, and opening bank accounts are carried out without any restrictions. Foreign exchange is freely traded in the domestic foreign exchange market. Foreign investors can purchase foreign exchange from their Belarusian accounts in Belarusian banks for repaying investments and transferring it outside Belarus without any restrictions.

Since June 1, 2015, the Belarusian Currency and Stock Exchange has traded the U.S. dollar, the euro, and the Russian ruble in a continuous double auction regime. Local banks submit their bids for buying and selling foreign currency into the trading system during the entire period of the trading session. During the trades the bids are honored if and when the specified exchange rates are met. The average weighted exchange rate of the U.S. dollar, the euro, and the Russian ruble set during the trading session is used by the National Bank as the official exchange rate of the Belarusian ruble versus the above-mentioned currencies from the day on which the trades are made. The cross rates versus other foreign currencies are calculated based on the data provided by other countries’ central banks or information from Reuters and Bloomberg. The stated quotation becomes effective on the next calendar day and is valid till the new official exchange rate of the Belarusian ruble versus these foreign currencies comes into force. The IMF has listed Belarus’s exchange rate regime in the floating exchange rate category.

Remittance Policies

There have not been reports of problems exchanging currency and/or remitting revenues earned abroad.

Sovereign Wealth Funds

Belarus has the State Budget Fund of National Development, which is used for implementing major economic and social projects in the country.

Although the number of SOEs is smaller than that of private businesses, SOEs dominate the economy in terms of assets. According to independent economic experts, the share of Belarus’s GDP derived from SOEs is at least 75 percent. Belarus does not consider joint stock companies, even those with 100 percent government ownership of the stocks, to be state-owned and generally refers to them as part of the non-state sector, rendering official government statistics regarding the role of SOEs in the economy as misleading.

According to independent economic media reports, private businesses are often discriminated against compared to SOEs in terms of access to government contracts, subsidized credits, and debt forgiveness. SOEs are allowed to purchase from or supply goods or services to private sector/foreign firms. SOEs are also generally subject to the same tax burden and tax rebate policies as their private sector competitors. Private enterprises are generally disadvantaged against SOEs in terms of preferential access to land and raw materials. Since Belarus is not a WTO member, it is not a party to the Government Procurement Agreement (GPA).

Privatization Program

Belarus’s privatization program is in practice extremely limited. According to the State Property Committee, just one SOE was bought by private investors in 2017, and there were zero privatizations in 2016. The president of Belarus has noted on several occasions that any SOE in the country could be privatized partially or completely, provided an investor offers a good price. It is believed, however, that what the government assesses as a good price and what a potential investor assesses are often vastly different. The country does have a list of open-joint stock companies the stocks of which are available for privatization. The list http://www.gki.gov.by/ru/auction-auinf-auishares/  includes basic information on privatization conditions, and sometimes a brief description of assets listed for privatization.

Interested investors are encouraged to forward a brief letter of interest to the State Property Committee. Letters are reviewed by a special commission that decides on the feasibility of preparing a decision of the President on privatization of shares via tender, auction, or direct sale. The investor may also send a letter of interest regarding assets that are not on the State Property Committee list and the government will examine such offers.

The State Property Committee occasionally organizes and holds privatization auctions. Many of the auctions organized by the State Property Committee have low demand as the government conditions privatizations with strict requirements, including preserving or creating jobs, launching a successful business project within a limited period of time, etc.

In 2016, Belarusian joint stocks were allowed trans-border placement of their stocks via issuing depositary receipts. However, to the Embassy’s knowledge, this instrument of attracting investments has not been put to test in Belarus.

Post continues to develop resources and information on the current state and development of responsible business conduct.

Belarus has effective and non-discriminatory anti-corruption legislation, which includes certain provisions of the Criminal Code and Administrative Code as well as the Law on Public Service and the Law on Combating Corruption. The latter is the country’s main anti-corruption document and was adopted in July 2015. Government organizations directly engaged in anti-corruption efforts are prosecutors’ offices, internal affairs and state security agencies.

Belarusian anti-corruption law covers family members of government officials and political figures. The country’s regulations require addressing any potential conflict of interests of parties seeking to win a government procurement contract. The list of such regulations include the July 13, 2012 law On public procurement of goods (works, services), the December 31, 2013 presidential decree On conducting procurement procedures, and the March 15, 2012 Council of Ministers resolution on the procurement of goods (works, services). Some of the same concerns with the independence of the judiciary also apply in the context of corruption. The lack of an independent judiciary means investors have little recourse to deal with corruption concerns.

Bribery is considered a form of corruption and is punishable with a maximum punishment of 10 years in jail and confiscation of property. Belarus is a party to a number of international anti-corruption conventions and agreements. The Republic of Belarus has consistently ratified and complied with requirements of main international anti-corruption acts, such as the Convention of the Council of Europe 173 On criminal liability for corruption (S 173) (concluded in Strasbourg on 27 January, 1999); The United Nations Convention Against Transnational Organized Crime, signed by Belarus in Palermo on 24 December, 2000, and the United Nations Convention Against Corruption (concluded in New York on 31 October, 2003); the Civil Law Convention on Corruption (concluded in Strasbourg on 4 November, 1999) (ratified in 2005). Belarus also signed a number of the intergovernmental agreements to address this problem.

In December 2017, the Council of Europe’s Group of States against Corruption (GRECO) published summaries of new corruption monitoring reports on Belarus. According to GRECO, the ratification by Belarus of the Council of Europe’s Criminal Law Convention against Corruption has yet triggered a proper revision of the country’s Criminal Code. GRECO notes that in Belarus some developments, such as the adoption of a new anti-crime and anti-corruption program are welcome, yet they are insufficient to ensure compliance which remains globally unsatisfactory.

According to the GOB, Belarus provides protection to NGOs involved in investigations of corruption crimes. According to Belarus’s General Prosecutor’s Office, the greatest number of corruption crimes in 2016 stemmed from government officials as well as individuals in healthcare, trade, industry, agriculture and construction. The Office claims the share of corruption crimes among all registered crimes did not exceed 1.5-2 percent.

Belarus signed and ratified in November 2004 the United Nations Convention against Corruption. Belarus has not joined the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions but is currently considering joining the Convention.

In the Embassy’s estimation, the potential for widespread, politically-inspired violence that would adversely affect foreign property interests is low.

Belarus has a highly skilled and well-educated work force, due to its advanced system of higher and specialized education. Wages are much lower than in Western Europe, the United States, and even Russia.

Belarus has been a member of the International Labor Organisation (ILO) since 1954 and is a party to almost 50 ILO conventions. In 2004, the ILO made several recommendations regarding workers’ rights to organize and freedom of association. Belarus has not adequately responded to those recommendations by the 2004 ILO Commission of Inquiry.

Belarus’s Labor Code regulates all labor issues. Businesses are allowed to offer unlimited short-term contracts. Dismissals of redundant workers are legally allowed without notice to the government. Severance pay in the case of reduction in force is 13 weeks of salary, and 8 weeks’ notice is required for dismissal. Normal work hours in Belarus are 8 hours per day and 40 hours per week. Belarusian law is stringent in limiting overtime hours. Nevertheless, it is allowed to establish a non-standard work hour regime without fixing the number of work hours. In that case an employee must be provided with up to 7 days of additional annual leave. In general, employees must be granted at least 24 calendar days of paid leave a year.

There are special provisions on employing foreign citizens who have no permanent residence permit. Such citizens have to secure a work permit, which can be usually granted only if an unemployed Belarusian citizen cannot perform the required work. To date, the Embassy has not heard of discriminatory or excessively onerous visa, residence or work permit requirements inhibiting foreign investors, nor of restrictions placed on the numbers or duration of employment of foreign managers brought in to supervise foreign investment projects. In practice, however, few firms employ significant numbers of foreigners, apart from Russian citizens, who benefit from Russia’s and Belarus’s common employment regulations streamlined under the Eurasian Economic Union arrangement of Russia, Belarus, Kazakhstan, Armenia and Kyrgyzstan.

In July 2000, President Clinton signed a proclamation withdrawing benefits under the Generalized System of Preferences (GSP) for Belarus. This decision was based on a 1997 American Federation of Labor-Congress of Industrial Organizations (AFL-CIO) petition to the United States Trade Representative (USTR). The petition alleged that Belarus was not acting in accordance with the Trade Act of 1974, as amended, regarding internationally recognized worker rights. These include the freedom to form independent trade unions and the right to organize and bargain collectively. The rights of independent trade unions are often subject to government attack, as documented in the Department of State’s Report on Human Rights Practices for 2017. According to the Report, “the government severely restricted independent unions. The government-controlled Federation of Trade Unions of Belarus is the largest union, claiming more than four million members. It largely resembled its Soviet predecessors and served as a control mechanism and distributor of benefits. The Belarusian Congress of Democratic Trade Unions (BCDTU), with four constituent unions and approximately 10,600 members of independent trade unions, was the largest independent union umbrella organization, but tight government control over registration requirements and public demonstrations made it difficult for the Congress to organize, expand, and strike.”

Under Section 5 (Sense of Congress Relating to Sanctions Against Belarus), paragraph C (Prohibition on Loans and Investment) of the Belarus Democracy Act signed by the president on October 20, 2004, No loan, credit guarantee, insurance, financing, or other similar financial assistance should be extended by any agency of the United States Government (including the Export-Import Bank and the Overseas Private Investment Corporation) to the Government of Belarus, except with respect to the provision of humanitarian goods and agricultural or medical products.

According to official statistics, Belarus received $1.24 billion in FDI in 2017, just below the $1.3 billion it received in 2016. Russia, Cyprus, and the United Kingdom are considered the top foreign investors in Belarus. For detailed statistics on foreign direct investments in and outside Belarus for 2010-2016 see the website of Belarus’s National Bank: http://www.nbrb.by/engl/statistics/ForeignDirectInvestments/ .

For the latest available statistics on foreign portfolio investments in Belarus see the website of Belarus’s National Bank: http://www.nbrb.by/engl/statistics/PortfolioInvestment .

Table 2: Key Macroeconomic Data, U.S. FDI in Host Country/Economy

Data not available.

Table 3: Sources and Destination of FDI

Data not available.

Table 4: Sources of Portfolio Investment

Data not available.

Monica Sendor
Economic Officer
46, Starovilenskaya St., Minsk, 220002, Belarus
tel. +375 (17) 210-1283
email: usembassyminsk@state.gov