More foreign technology companies turn their heads towards Belarus

The Minsk office of bnt attorneys in CEE is actively advising clients from the fast-growing technology sector, including on the following questions:

• concluding and reviewing contracts with Belarusian outsourcing companies and individual entrepreneurs, securing the passage of all necessary IP rights to our clients;

• acquisition of Belarussian start-ups, including legal due diligence on corporate, IP, employment and other matters;

• “turnkey” establishing of subsidiaries in Belarus (cross-border structuring, corporate law, labour law, trade secret protection, intellectual property, data protection / GDPR);

• advising on tax and legal benefits of working under the High Technology Park (HTP) regime in Belarus.
Recently the Minsk office of bnt attorneys in CEE has helped clients to arrange for their Belarussian subsidiaries to gain acceptance at the HTP.

What attracts foreign companies here is primarily talented Belarussian engineers, but also the measures taken to promote development of high technologies in the HTP.

Why do IT companies seek to become members of the HTP and what is so special about it?

The HTP regime was first introduced in 2005 and has been constantly progressing since then. The widely known Presidential Decree No. 8 “On Promoting the Digital Economy” of 21 December 2017 is a vivid example of this.

Membership of the HTP opens access to a special legal regime and significant tax benefits. Among the main ones are:

• exemption from corporate income tax (18 %);

• income from sale of shares, businesses, securities, interest, dividends from abroad, from liquidating a subsidiary, termination of participation, from increasing the nominal value of shares at the expense of the company, and similar income ‒ all are taxed at a 9 % reduced rate;

• wide exemption from VAT (20 %);

• exemption from offshore duty on payments for marketing, advertising, intermediary services, on dividends;

• PIT for employees of HTP residents reduced to 9 % (in contrast to 13 % under the general rule);

• employees’ social security payments are only paid from the part of their salaries not exceeding the average monthly salary in the country (currently around 450 Euro);

• foreign companies receiving incomes from HTP residents for provision of certain services pay withholding tax (WHT) at a 0 % rate and are exempted from VAT; 0 % WHT is charged on sale of shares in HTP residents if a foreign company owned the shares for at least 365 days in a row;

• assignment or licensing of IP rights by foreign companies to HTP residents are exempted from VAT;

• dividends paid by HTP residents to foreign companies enjoy a lower WHT rate (5 % instead of 12 %), unless a more favorable regime is stipulated by the applicable DTT;

• HTP residents can import equipment, components, and spare parts free of customs duties and VAT, provided such imports are intended for HTP project implementation*.

Main non-tax benefits include:

• employment of foreigners without obtaining work permits;

• reduced documentation costs (possibility to issue unilateral acts of provided services, to accept accounting source documents in English and/or received through electronic communication in trading with foreign companies);

• possibility for shareholders’ agreements to be subject to foreign law and disputes arising out of them may be subject to arbitration or may be heard by foreign courts, shareholders may waive their pre-emption rights;
• relieved from merger control rules;

• common law instruments (not normally available under general Belarussian law) such as convertible loan agreements, option agreements, indemnity agreements, irrevocable PoAs, non-solicitation agreements, and noncompete agreements with employees are introduced;

• possibility to use smart contracts.

Additionally, specific benefits are envisaged for crypto- activities.

In consideration for the benefits granted, HTP residents pay 1 % from their gross revenue to the HTP Administration.

Only Belarusian companies are eligible to enter HTP. Moreover, they must be involved only in certain types of activities on a quite extensive list, including software development, AI, self-driving vehicles, IT consulting, software publishing, and so forth.

Applications to become a resident are processed under a special procedure. We will be happy to advise you about details.

*Certain limitations and conditions may apply to the tax benefits described.