Entry into the Belarusian Market for Foreign IT Companies

Every year, Belarus increasingly attracts the attention of foreign IT companies with its dynamically developing market and high level of technological equipment. Entry into the Belarusian market is a promising direction for foreign IT companies ready to expand the geography of their activities and explore new market segments. In this article, we will look at several ways to enter the Belarusian market for foreign IT companies and the specifics of these ways to enter the Belarusian market.

Creation of a company with foreign investments

A foreign IT company can become an investor – one of the owners of an IT company registered in Belarus. The minimum size of the authorized capital is determined in Belarus only for joint-stock companies: for an open joint-stock company – about 4,500 euros. For a closed joint-stock company – about 1,100 euros. For companies of other organizational and legal forms, the size of the authorized capital has not been determined, which may be beneficial for investors. Contributions to the authorized fund can be made with money and (or) property. A foreign investor can make a monetary contribution in foreign currency, Belarusian rubles, in non-monetary form after assessing the value of the non-monetary contribution. The authorized capital can be formed not immediately upon registration of the company but within a year from the date of state registration.

To create a company, you need to choose the place where it will be registered—the legal address and name of the company—and carry out a number of procedures for the development and approval of the charter, registration of the decision of the founders’ meeting on the creation of the company, appointment of the head, and transfer of documents for state registration.

After state registration, the company receives a Certificate of state registration. It automatically becomes a taxpayer, a payer of social insurance contributions to the Social Protection Fund for employees and a payer of compulsory insurance premiums for compulsory insurance against industrial accidents in Belgosstrakh.

After state registration, the company can open bank accounts, hire employees, conclude contracts on its behalf, and purchase and lease property.

Registration of a company in the Belarusian Hi-Tech Park

After the state registration of a company with foreign investments, such a company can become a resident of the Belarusian Hi-Tech Park. The Hi-Tech Park is a special legal regime for resident companies engaged in various types of activities, including software development, scientific research, experiments in the fields of natural and technical sciences, and mining and other industries. IT companies become residents of the Hi-Tech Park after registration by the Park’s Supervisory Board.

Residency in the Hi-Tech Park provides several advantages to IT companies. Such advantages are associated with tax benefits, customs duties when importing equipment for their work, and attracting foreign employees. An example of a tax benefit is that residents of the Park pay income tax at the rate of 9%, whereas companies that are not registered as residents of the Park pay at the rate of 20%.

Also, one of the advantages of residency in the Hi-Tech Park is the opportunity to legally conduct activities related to cryptocurrencies: the activities of crypto brokers and crypto brokers.

To register in the Hi-Tech Park, you do not need to change the company’s legal address and location – the company can be located anywhere in Belarus. 

An essential condition for registration as a resident of the Hi-Tech Park is that the company needs to develop a business project that outlines its financial plans and development goals and submit it to the Supervisory Board of the Hi-Tech Park for consideration.

Opening of a representative office of a foreign company

A foreign IT company can open a representative office in Belarus to explore the market and investment opportunities and create a company with foreign investments. 

The representative office will not be a separate company but a branch of a foreign company in Belarus. It can employ no more than 5 people, including the head. It is not a representative office that hires employees but a foreign IT company.

To open a representative office for a foreign company, you need to get permission from the regional executive committee or the Minsk city council if you plan to open a representative office in Minsk. The authorized capital is not required for a representative office. Still, the representative office must be registered as a taxpayer and report to the executive committee, granting permission to open a representative office.

Purchase of a block of shares or a stake in a Belarusian IT company

A foreign company can purchase a block of shares or a stake in a Belarusian company in an amount that allows it to influence business decision-making. This investment will enable you to manage business processes to a certain extent and distribute profits (dividends). In Belarus, there are features for withdrawing distributed earnings to foreign investors’ accounts.

Purchase of an option in a Belarusian IT company

A foreign IT company can find an attractive startup among the residents of the Hi-Tech Park and invest in it using an option to conclude a share purchase agreement in the authorized fund or an option share purchase agreement. 

In each case, the foreign investor does not immediately buy a stake in the company but becomes an “investor under conditions”. During the term of the options, the investor evaluates the investment prospects and decides whether or not to join the ownership of the IT company.

Option to conclude a share purchase agreement

When buying an option to conclude a share purchase and sale agreement, the investor pays the Belarusian IT company a certain amount of money determined by the parties to the agreement – an option fee. In the agreement, the parties specify the conditions for the purchase of a share, and during the agreement’s validity, the investor evaluates his interest in buying a share. In this case, the investor risks only an option fee, usually not refunded if the investor changes his mind about investing in an IT company.

Option agreement for the purchase of a share

When concluding an option agreement, the investor undertakes to acquire a share in the ownership of an IT company within the period specified in the contract if the company has fulfilled the conditions specified in the agreement and has reached specific indicators. If the company has fulfilled all the conditions and indicators, and the investor is delaying investments, the IT company may require the investor to execute an option agreement.

Hiring Belarusian employees

A foreign IT company can hire Belarusian IT specialists to study the market, perform business tasks, develop and test software, and meet other business needs. The employer may be a foreign IT company itself or a Belarusian company that provides relevant recruitment services—a recruitment agency or an EOR company.

• When the employer is a foreign company, this company concludes employment contracts with Belarusian employees according to the rules that apply at its location. 
• When the employer is a Belarusian company, employment contracts with Belarusian employees are concluded according to the rules in Belarus.

Applying for EOR services

Employer of Record (EOR) services for Belarus include a wide range of services related to personnel management and compliance with labour laws. EOR services in Belarus provide a convenient entry to the market for foreign IT companies, as they imply compliance with legislation and professional support in personnel management and other aspects of business. Below are some of the services provided by EOR companies for the entry of foreign IT companies into the Belarusian market:

1. Company registration
   Assistance in the registration of a legal entity in Belarus for conducting activities in the local market.
2. Personnel management
   Support in local legislation selection, hiring, management and dismissal of employees.
3. Registration of documents
   Preparation and conclusion of employment contracts and maintenance of necessary documentation.
4. Accounting and payment of wages
   Keeping payroll records, processing employee payments, paying taxes and other mandatory payments.
5. Compliance with tax legislation: calculation and payment of local taxes
   Guarantee compliance with local tax laws, including income taxes, payroll taxes, and social insurance.
6. Risk management and security
   Support is needed to minimize the risks associated with labour relations and ensure compliance with workplace safety standards.
7. Advice and support
   Providing professional advice and expert assistance on personnel management issues in Belarus.

Using EOR services to enter the Belarusian market provides foreign IT companies with several advantages:

• This reduces the risks and costs associated with opening your own office in Belarus, as EOR services provide full legal and administrative support. 
• This approach allows you to quickly and efficiently start working in the local market without creating your team of specialists and infrastructure. 

Using EOR services facilitates compliance with local legislation and fulfilment of tax obligations, which simplifies interaction with government agencies and provides legal security for a foreign IT company.