Taxes Paid by Employers and Employees in IT

In the modern world of information technology, not only innovations and achievements play a crucial role, but also the financial aspects that accompany working relationships. Taxes are an essential component that determines both employers’ obligations and employees’ rights. In the field of IT, where the nature of employment can vary from freelancing to standard employment contracts, understanding tax obligations becomes particularly relevant. In this article, we will look at what taxes are paid by an employer and an employee in IT, how taxes are distributed between them, and how they can be legally reduced. Understanding the tax will help you avoid legal problems and optimize your financial planning.

Why is it essential to understand the distribution of the tax burden on salaries in the IT industry?

Understanding the distribution of the tax burden between an employer and an employee in the IT industry has many important aspects:
1. Financial planning
Knowing what taxes and how much to pay helps both employers and employees plan their budgets effectively. Employers can better estimate payroll costs and tax expense ratios, and employees can better account for their real after-tax income.
2. Attracting and retaining employees
Understanding the tax burden in a highly competitive IT labor market can help employers offer more competitive conditions. This may include the salary level and additional benefits, such as tax compensation or social benefits.
3. Compliance with the law
Misunderstanding or ignoring tax obligations can lead to serious legal consequences, including fines and penalties. Understanding the tax burden helps both parties to comply with the laws and avoid potential problems.
4. Optimization of tax expenses
Both employers and employees can take advantage of tax deductions or benefits, reducing the overall tax burden. Knowing these opportunities helps you make better financial decisions.
5. Understanding labor relations
The distribution of taxes between an employer and an employee is directly related to the employment contract terms and the rights of both parties. This knowledge contributes to a better understanding of labor relations and better communication between them.
6. Social responsibility
The proper distribution of the tax burden helps to create a healthier economy. Taxes finance public services and infrastructure, supporting the development of the IT industry and other sectors.
Thus, awareness of tax responsibilities and their distribution is a crucial factor in building effective labor relations and the sustainable development of the entire IT industry.

“Salary” taxes paid by the employer in IT

An employer who accepts employees under an employment contract, as well as under a civil contract, pays:

• 13% of income tax from salaries and employees’ (contractors’) income. For employers who are residents of the Hi-Tech Park of Belarus, the income tax rate is set at 9%, but in 2023 and 2024, the generally established rate of 13% is applied.
• Mandatory contributions to pension insurance – 28% of the salary fund.
• Social insurance contributions – 6% of the salary fund.
• Contributions to the insurance organization Belgosstrakh for compulsory insurance against industrial accidents and occupational diseases—0.6% quarterly of all payments the company made to employees and contractors for the quarter.

Mandatory payments that are deducted from employees ‘ salaries

Employers deduct 1% from the salaries of employees and the income of individual contractors with whom they have concluded civil contracts in the form of mandatory contributions to pension insurance.

Distribution of mandatory payments between employer and employee

In total, employers deduct 35% from the salary fund:

• Mandatory pension insurance contributions (28% of the total salary fund + 1% of employees ‘ salaries), mandatory social insurance contributions (6% of the total salary fund), and compulsory contributions to Belgosstrakh are also included.
• The employer deducts 13% of the income tax from the employee’s salary (the income of an individual contractor).

These payments to the state should not affect the wages announced when applying for a job. Job descriptions often indicate the salary before taxes. Therefore, it makes sense for employees to be interested in the wages after tax—this is the real salary that the employee will receive on hand.

Do the IT company employees pay taxes themselves?

Salaried employees of IT companies do not pay taxes themselves. All” salary ” taxes are calculated and paid by the employer. This is also the case with contractors-individuals with whom civil contracts are concluded.
An employee of an IT company can register their business activities as self-employed and pay professional income tax or a single tax. In such cases, they pay taxes on such types of activities to the Belarusian budget on their own. The employer has nothing to do with the employee’s activities and does not calculate and pay taxes in such cases.

An employee can reduce their income tax

We are not talking about reducing the income tax rate of 13%. You can reduce the amount from which the income tax (tax base) is calculated by applying tax deductions from this amount. Tax deductions are amounts of money that correspond to specific criteria defined by the state. Often, the employee must confirm the right to deductions with documents. The employer deducts the deductions from the tax base and then calculates the income tax. At the end of the calendar year, the employee can apply to the tax inspectorate to recalculate the amount of tax deductions.
Tax deductions that are set for 2024:

Standard ones. 

1. Low-income employees are eligible for this deduction. The employer does not need the employee’s documents confirming the right to such a deduction. The deduction amount is 174 rubles per month if the income from which the income tax is calculated is not more than 1,054 rubles per month. In the IT field, this is possible, perhaps, only if inexperienced interns are paid.
2. Deductions for each child under 18 years of age and a dependent (for example, a spouse on parental leave, disabled parents)-51 rubles per month. The company provides such deductions based on documents that the employee brings: a child’s birth certificate and a copy of the document stating that a family member is on parental leave). Single parents, widows, widowers, foster parents, guardians or carers, as well as parents of two or more children under the age of 18 or disabled children under the age of 18, are granted a deduction of 97 rubles per month for each child.
3. Deductions for 246 rubles per month are received by liquidators of the Chernobyl accident, disabled people of groups I and II, and some other persons.
4. Young professionals who work according to the distribution (received a certificate of employment) and those who have received training in specialties for military formations and paramilitary organizations receive deductions in the amount of 620 rubles per month.

Social networks.
1. These are deductions of the amounts that the employee or his close relatives paid for the first paid education of a person in Belarus or the amounts of a loan or loan received from Belarusian companies or individual entrepreneurs and spent on obtaining such education. We are discussing the first higher education, secondary special education, and vocational education. To get such a deduction, you need to submit certain documents to the company’s accounting department: a contract for paid training, a certificate that the employee or his close relative is studying, and a document on payment for training.
2. Deduction of amounts paid to insurance organizations of the Republic of Belarus as insurance premiums under voluntary life insurance contracts and supplementary pensions concluded for at least three years, as well as under voluntary medical expenses insurance contracts (from now on referred to as the voluntary insurance contract).
Similarly, amounts paid by an individual as insurance premiums under voluntary insurance contracts concluded in the interests of close relatives (for example, by a guardian or trustee for their wards, including former wards who have reached the age of 18) are deductible.
3. Deduction of the amounts the employee paid as insurance premiums under the additional funded pension insurance contract.

Property rights.
1. These deductions are due to employees who need housing improvements and make expenses for the construction or purchase of housing. This applies to the purchase of housing on lease and the return of loans to banks. 
2. Deductions related to income from the sale of property. Such deductions are usually applied not by the employer’s accounting department but by the tax inspectorate. The tax inspectorate provides deductions for expenses related to income generation and the employer at the place of work—20% of income from the sale of property.

Professional ones.
These are deductions from the income of individuals who are the authors of intellectual property objects. The deduction equals the expenses for creating, using, and disposing of intellectual property objects. Expenses must be documented. If the author has such documents, the tax inspectorate provides the deduction at the end of the year.
The employer may grant a deduction in the following amounts:

• 20% of the income accrued is when creating computer programs, derivative and composite works, and others.
• 30% of the accrued income – for photos, inventions, utility models, and industrial designs.
• 40% of the accrued income is for fine and applied artworks.