Incentives for foreign investors in Belarus

 

A Free Economic Zone is a part of the territory of a country with exactly defined borders and a special legal regime that provides more favorable conditions for business. Basically, the objective of these zones is to attract and ensure the effective use of foreign and national investments, for the creation and development of goods for export, and will be based on the latest technologies, as well as effectively using the available production space.

 

Resident of a free economic zone is a legal entity or an individual registered by the administration of the free economic zone or an individual acting as an entrepreneur without establishing a legal entity and that is subject to the legal regulations of the relative free economic zone.
There are 6 free economic zones in the Republic of Belarus. The appeal, for a potential investor, of a special legal regime like FEZ, is preferential taxation. The residents of the FEZ pay certain taxes at reduced rates: profit tax - 12%, transport duty - 1.5%, VAT - 9%. Excise duties are applied by the residents of FEZ at the halved rate. Profit received by the residents of FEZ from the realization of goods (works, services) of own production is exempt from profit tax for the period of 7 years as from receiving such profit. Besides, the residents of FEZ do not pay a turnover tax at the rate of 2%.

The registration procedure for residents of free economic zone is regulated by the regulation on free economic zones. For example, in order to be registered in the Minsk free economic zone an organization should provide the documents stipulated by the legislation and its investment project should meet the following criteria: amount of charter capital should not be less than US$20,000; the economic life of not less than 90% of the imported production equipment should not exceed five years.

 

Belarusian legal entities (including those with 100% foreign investment) and individual entrepreneurs, whose activities are concerned with the analysis, development and software support of information systems and data processing, can be members of HT Park in Belarus. The regime of HT Park provides full exemption from almost all of taxes and duties, including profit tax, VAT and real estate tax. What is more, the technical equipment imported by the residents of HT Park into the customs territory of the Republic of Belarus is exempt from customs duties and VAT. The exhaustive list of such inventories is determined by the state authorities and includes computer, copying and facsimile devices.

The income paid to a foreign entity originating from HT Park resident's sources can be subject to withholding tax at a rate not exceeding 5%. The residents of the Park do not pay offshore duty on the dividends paid to their shareholders.

 

Effective from 2008, a special tax regime has been provided for both foreign and Belarusian legal entities and individual entrepreneurs located (residing) in rural areas (as well as town centers populated by not more than 50,000 persons and included in the list by the Council of Ministers of the Republic of Belarus) and carrying out business activities involving manufacture of goods, performance of works, or provision of services in those or other rural areas (town centers).

They are exempt from profit tax, turnover tax, transport duty and real estate tax on the real estate located in rural areas, from customs duties and VAT payable on production equipment, its spare parts and accessories imported with the object of forming or increasing the charter capital of the legal entities; from mandatory charges payable to the state innovation funds till December 31, 2010, if they carry out construction, renovation, and special installation works in rural areas.

Foreign and Belarusian legal entities mentioned above are exempt from compulsory sale of foreign currency in the amount of 30% for 5 years from the date of their registration. In addition, they may apply free pricing to those goods they produce which are sold internationally, may independently determine the employees' salary, use services of foreign insurance companies, etc.