How IT Companies Pay Taxes in Belarus

Understanding the intricacies of taxation is paramount for the successful operation of all types of companies, including IT businesses in Belarus. A comprehensive grasp of the tax system is essential for optimizing tax burdens, adhering to legal obligations, and mitigating penalties. Furthermore, being well-informed about taxation specifics enables companies to effectively plan their finances, make informed decisions regarding investments and expenses, and take advantage of potential tax benefits and regimes provided by Belarusian laws.

Additionally, having a solid grasp of the tax system allows companies to maintain transparency and legality in their financial transactions, ensuring that all financial activities are conducted in a compliant manner.

Optimizing Taxation for IT Enterprises in Belarus

Tax optimization for IT companies in Belarus involves taking advantage of various tax benefits and programs specifically designed to support the growth of the IT sector, particularly for companies located in the Hi-Tech Park. The goal is to optimize taxes by utilizing government initiatives and available tax incentives. Some methods of tax optimization for IT companies in Belarus include:

• Taking advantage of tax exemptions for specific circumstances.
• Making use of applicable tax benefits that apply to the company.
• Ensuring timely tax payments and accurate filing of tax returns.
• Maintaining proper accounting and tax records in accordance with the required standards.

Engaging in tax optimization allows IT companies in Belarus to improve their competitiveness, reduce financial risks, and enhance their overall financial position. It is important to note that tax optimization strategies must comply with the law and adhere to tax regulations.

Under the Simplified Taxation System (STS), companies in Belarus have specific tax obligations. They are required to pay taxes under the simplified taxation system and payroll taxes, including taxes on dividends. However, companies under the STS are exempt from paying certain taxes, including Value Added Tax (VAT), income tax (except for income tax withheld and paid by the company as a tax agent), property tax, environmental tax, and collection from suppliers.

It is important to note that VAT may still need to be paid in specific cases, such as when importing goods into Belarus. Additionally, income tax must be paid on dividends, gross profit from securities transactions, and profits derived from selling shares in a company’s authorized capital.

Property tax is applicable for leased properties. When it comes to accounting for income and expenses under the STS, companies are required to maintain records in a specialized book, which can be kept electronically.

Eligibility for the Simplified Taxation System

Companies and individual entrepreneurs residing in the Hi-Tech Park in Belarus are not eligible to use the simplified tax system. Therefore, if a company intends to become a resident of the Hi-Tech Park, it is crucial to plan ahead and switch to the standard tax system in advance. This proactive approach ensures a seamless transition and prevents any difficulties in determining the tax base for income tax and VAT turnover in the reporting period after becoming a registered resident of the Hi-Tech Park.

When the STS is reachable

Non-resident IT companies in Belarus have the opportunity to take advantage of the simplified taxation system (STS) under certain conditions. These conditions include:

1. The average number of employees per year should not exceed 50 individuals.
2. The gross revenue, calculated on an accrual basis, must not exceed 2,150,000 rubles in 2023. If the gross revenue exceeds this threshold in 2023, the company will no longer be eligible for the STS in 2024.
3. If the cumulative gross revenue for the first 9 months of 2023 exceeds 1,612,500 rubles, the company will be prohibited from transitioning to the STS starting from 2024.

It is important to be aware that the deadline for transitioning to the STS in 2024 is April 1, 2024.

To explore the possibilities and potential for your company’s transition to the STS, we recommend seeking advice from our knowledgeable accountants who specialize in the IT sector.

Income Tax Payment for IT Companies

Resident IT companies in the Hi-Tech Park in Belarus enjoy certain exemptions from income tax, with the exception of income tax obligations related to acting as a tax agent.

The income tax rates that apply in this situation are as follows:

1. 12%: This rate is applied when calculating dividends for Belarusian companies.
2. 6%: This rate is applied when calculating dividends for Belarusian companies if there has been no distribution of profits among company owners in the previous three calendar years.
3. 0%: This rate is applied when calculating dividends for Belarusian companies if profits from the previous five years have not been distributed among company owners.
4. 9%: This rate is applied to profits derived from the sale of shares in the company by the owner, the sale or repayment of securities, placing money in deposits, dividends from abroad, and certain types of income for owners upon leaving the ownership structure or changes in their shares.

However, resident companies of the Hi-Tech Park are subject to a standard rate of 20% for transactions that do not fall under the specific tax provisions applicable to IT companies. For example, this includes the sale of property that the company has owned for less than 12 months from the date of purchase.

For IT companies that do not hold residency in the Hi-Tech Park

The standard income tax rate is set at 20%.

Dividends received from sources outside Belarus are subject to an income tax rate of 12%.

A reduced tax rate of 5% applies to profits generated from the sale of self-produced goods that are classified as hi-tech goods according to the designated list.

Resident companies of the Hi-Tech Park in Belarus are exempt from paying Value Added Tax (VAT) under the following circumstances:

• When they sell their products within the territory of Belarus.
• When they purchase certain goods and services from foreign companies that do not have representative offices in Belarus. These goods and services include:
  • Intellectual property rights;
  • Advertising, marketing, consulting services;
  • Hosting services;
  • And other specified services.

However, when resident companies purchase the aforementioned rights and services from foreign individuals or individual entrepreneurs, they are not eligible for VAT exemption. In such cases, VAT must be paid at the standard rate of 20%.

Non-resident IT companies of the Hi-Tech Park are subject to the following VAT regulations

IT companies that operate under the simplified tax system (STS) in Belarus are generally exempt from paying Value Added Tax (VAT) when selling products within the country.

However, non-resident IT companies that operate under the general taxation system are required to pay VAT. Additionally, when goods are imported into Belarus, Import VAT is levied.

“Internal” VAT is paid in the following situations:

• When purchasing property from foreign companies and individual entrepreneurs in Belarus.
• When conducting transactions with foreign companies.

The VAT rate is set at 20%.

Determining the applicability of VAT when providing services to non-residents depends on determining the place of service provision. If the place of service provision is outside Belarus, VAT is not required to be paid. Our experienced accountants can assist yo-in determining the place of service provision, and we encourage yo-to consult with them regarding this matter.

Tax on income of foreign organizations

The tax on income of foreign organizations applies to Belarusian companies that make payments to foreign companies without representative offices in Belarus and that are not registered with the Belarusian tax authorities. Since Belarusian IT companies often collaborate with non-resident companies, it is crucial to evaluate whether there is a requirement to pay this tax.

For IT companies – residents of the Hi-Tech Park

When it comes to income payments to foreign organizations without a permanent representative office in Belarus, the following rules apply for IT companies that are residents of the Hi-Tech Park:

1. Income payments made by a resident company of the Hi-Tech Park to a foreign organization are subject to a zero tax rate. This applies to the following types of income for foreign companies:
   • Income generated from the sale of shares in resident companies of the Hi-Tech Park to foreign companies that have held shares in such companies throughout the year.
   • Payments made by resident companies of the Hi-Tech Park for services like data processing, web hosting, online advertising space, communication channels for server information placement, as well as debt obligations and royalties.
2. When paying dividends, residents of the Hi-Tech Park are required to pay income tax on foreign organizations at a rate of 5%, unless an international agreement establishes a more favorable tax rate.

In summary, income payments from resident companies of the Hi-Tech Park to foreign organizations without a permanent representative office in Belarus may be subject to either a zero tax rate or a 5% income tax rate, depending on the type of income involved.

For non-resident IT companies of the Hi-Tech Park

Non-resident IT companies in the Hi-Tech Park are subject to a 15% tax rate on the income they receive from foreign organizations.

Foreign companies can earn income from various services, including:

• Data processing;
• Web hosting;
• Data entry and processing, database management, and data processing reporting;
• Data storage;
• Providing access to databases;
• Sales of advertising space and time on the Internet;
• Operation of web portals with search engines.

Belarus has entered into international agreements with certain countries, such as Austria, Azerbaijan, Belgium, the United Kingdom, the United Arab Emirates, and Israel. Under these agreements, income received in Belarus by foreign companies for IT services rendered is exempt from income tax in Belarus.

To confirm the location of a non-resident company and avoid double taxation, it is recommended to request an extract from the international catalogue (directory) from the non-resident company. This extract can help determine the company’s jurisdiction of origin and ensure compliance with tax regulations.