Belarus Tax Code 2019 Update on key changes - January 2019
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Belarus Tax Code 2019 Update on key changes January 2019
Key changes
PwC in Belarus prepared an update on the key changes introduced by the new Tax Code (Tax Code) which
entered into force on 1 January 2019. In 2018 state bodies and business community had active discussions
on amendments to the Tax Code which ended up in adoption of the new edition of the Tax Code with
numerous changes having both substance and editorial nature. Generally, changes are aimed at simplifying
tax administration and should have beneficial effect on business climate in Belarus.
Tax Code General Part
● Terms and definitions ● Offset / refund of overpaid taxes may
The Tax Code introduces a new article containing be administered within 5 years
terms and their definitions for the purposes of the
Belarusian tax legislation. It means that for Before 2019, offset / refund of the overpaid amount
interpretation of terms one should now refer to of taxes was possible only within 3 years from the
Article 13 of the Tax Code. date of payment.
Tax Code allows such offset / refund to be
● Late payment interest is limited by the administered within 5 years.
amount of unpaid taxes
The deadlines for decision-making by the tax
Previously, late payment interest calculated due to authorities on offset / refund have also been revised:
non-fulfillment of tax obligations could have often
been significantly more than the amount of unpaid ➔ the decision on carrying out offset should be
taxes. According to the Tax Code, such situation will made within 3 business days (earlier it took 5
never take place. days);
➔ the decision on tax refund should be made
● Suspension of account transactions - only within 15 business days (instead of a month).
within amount of unpaid taxes / late
payment interest ● Criteria for recognition of related
parties are expanded
This is seen as a business-friendly change, as earlier
even if the amount of unpaid taxes was insignificant, Tax Code introduces the following new criteria for
all transactions on the company’s bank accounts the parties to be recognised related:
could have been suspended, so the company’s ➔ companies owned by
activities could have been completely “frozen”. shareholders-individuals that are related
● “Business purpose” concept parties and hold at least 20% of the shares in
these companies;
Tax Code elaborates on the “business purpose” ➔ companies owned by the same beneficial
concept in Belarusian tax legislation. Thus, if the owner-individual.
main purpose of a business transaction is: Furthermore, since 2019 Belarusian courts are
entitled to recognise legal entities / individuals as
(1) non-payment / partial payment of taxes; related parties on other grounds than those
and /or established in the Tax Code. It means that the list of
(2) tax offset / tax refund, criteria has become non-exhaustive.
then the tax base for such transaction is subject to
adjustment based on the results of a tax audit.
How can these changes affect businesses?
It means that each transaction should have a clear The number of related parties will increase, which
business purpose and economic contents. Otherwise, may lead to increase in the number of transactions
the tax consequences of such transaction may be subject to transfer pricing control and thin
revised by the Belarusian tax authorities. capitalisation rules.
PwC 2
Key changes
● Significant changes in transfer pricing According to the Tax Code, in the mentioned case
rules place of supply for VAT purposes can be regarded
beyond Belarus (at the customer’s location), if the
Tax Code has a separate chapter dedicated to the
expenses related to purchase of services are
updated transfer pricing rules which previously fitted
confirmed in the audit report issued by the respective
into one article.
foreign audit company (an auditor).
The key changes in the Belarusian transfer pricing
However, it is still an issue that it is impossible for
rules are:
the foreign company to obtain the respective audit
➔ the list of controlled transactions has been report at the moment of issuing the invoice. Thus, in
revised (for instance, real estate transactions our opinion, the new provision should work as
will be subject to transfer pricing control only follows. The Belarusian supplier will invoice the
in certain cases); services with VAT and then, upon obtaining the
➔ control thresholds are significantly increased; respective audit report from the buyer, will
➔ transfer pricing documentation shall be reimburse VAT to the foreign customer. Though, the
submitted in the established form. It means procedure is still rather ambiguous.
that Belarusian companies belonging to ● Rent taxation
multinational groups should prepare separate
Moment of supply under rental agreements will be
transfer pricing documentation completed in
defined as the last calendar day of the month to
accordance with the Belarusian rules in
which the rent payment relates even if the respective
addition to e.g. the OECD Master / Local file;
rental agreement provides for rent payments on a
➔ some taxpayers are entitled to enter into
quarterly or annual basis.
Advance Pricing Agreement (APA) with the
Ministry of Taxes and Duties of the Republic
● Sale of property rights
of Belarus.
Tax Code changes the approach to determining the
Tax Code Special Part moment of supply of property rights for VAT
purposes and provides the same approach for
VAT
corporate income tax. Either of two options can be
● Place of supply if consuming the chosen by a taxpayer for the moment of the supply /
services by representative office revenue recognition: (i) on the day of property rights
(permanent establishment) of a foreign transfer according to respective primary accounting
company document; or (ii) on the last calendar day of every
month to which the property rights transfer relates.
According to the previous edition of the Tax Code,
before 2019 services provided by Belarusian ● E-services VAT
companies to non-residents for which the place of
supply was determined as the customer’s location (i.e. The Tax Code provides that penalties for late
beyond Belarus) were treated as provided in Belarus payment of e-services VAT amounts by foreign
should they be aimed to be consumed by companies for 2018 compliance year should not be
representative office or a permanent establishment of calculated and paid, if foreign companies pay
those non-residents in Belarus. e-services VAT due in 2018 before 22 January 2019.
As a result, in most cases non-resident customers
paid VAT twice: VAT invoiced by the Belarusian
suppliers (often impossible to offset) upon purchase
of services and VAT due in the home country.
PwC 3
Key changes
Corporate income tax
● Limited Expenses ● Non-operating expenses
The Tax Code introduces “limited expenses” that can The Tax Code allows for bad debt reserves to be
be recognised for corporate income tax (CIT) recognised as non-operating expenses deductible for
purposes. Limited expenses among others cover a CIT purposes. Such bad debt reserves can be
special type of expenses called “other expenses”. non-operating expenses if they are created in the
While limited expenses generally existed and reduced result of overdue debts inventory and do not exceed
CIT base before the Tax Code was adopted, “other 5% of revenue from sale of goods (works / services),
expenses” include expenses that either have never proprietary rights, intangible assets, VAT inclusive.
been recognised for CIT purposes before (e.g. delayed The rules for calculating such expenses vary
interest on loans), or those that were recognised depending on the date when bad debt emerged.
without limits before 2019 and will be subject to a
● Thin capitalisation rules
limited recognition from 2019 on (e.g. representation
expenses). Tax Code establishes unified rules to determine
controlled debt before Belarusian and foreign
“Other expenses” can decrease CIT base only in the
shareholders (their affiliates). Accordingly, controlled
amount of 1% from the revenue calculated VAT
debt structure and limit are the same for Belarusian /
inclusive.
foreign shareholders (their affiliates). Under renewed
rules, debt structure and debt-to-equity ratio (3:1) that
Below you may find the selected examples of other
applied to debts before foreign shareholders / their
expenses:
affiliates before 2019 are extrapolated to any
➔ Certain payments under employment controlled debt. Peculiarities of controlled debt types
contracts (e.g. annual bonuses, certain types in Belarus have remained: not only interest, but also
of vacation compensation); expenses for certain services (e.g. marketing,
➔ Costs for holding certain events (e.g. official management, outsourcing), royalties and penalties /
ceremonial events arranged to celebrate state other contractual sanctions are subject to thin
holidays); capitalisation rules.
➔ Payments to the members of the Supervisory
When calculating capitalisation coefficient, controlled
Board;
debt is calculated as the aggregate of all debts before
➔ Representation expenses;
all creditors. Under the Tax Code, controlled debt
➔ Certain expenses on transporting the
includes currency differences that emerge when
customers / consumers;
re-evaluating debts denominated in foreign currency.
➔ Compensation for using private vehicles /
rent; ● Permanent establishment
➔ Membership fees; The Tax Code generalises definition of fixed place of
➔ Delayed interest on loans. business which is a step to harmonising Belarusian
permanent establishment (PE) regulations with the
● Investment deduction OECD approach used to draft the majority of DTTs,
The Tax Code increases the rate of investment including those signed by Belarus. That means that
deduction: from 10% to 15% of the initial value for from 2019 fixed place of business is a place through
buildings, constructions, transfer devices and from which a foreign company’s business or other activity is
20% to 30% for machinery and equipment. wholly or partly carried out in Belarus. Previously,
definition included the approximate list of activities
which could lead to PE (e.g. carrying out construction
works, selling goods from warehouses in Belarus).
Tax Code also increases the threshold for provision of
services to lead to PE from 90 to 180 calendar days.
PwC 4Key changes
Withholding tax
● Tax period ● Partnerships
Calendar quarter becomes the tax period for The Tax Code regulates taxation of income derived by
withholding tax (WHT) in regard to income generated partnerships which are taxed in the country of their
from legal entities and individual entrepreneurs. incorporation by means of taxing partners only. So,
Individuals (who are not registered as individual if the income is received by the partnership, DTT
entrepreneurs) being WHT agents may choose the tax applies to the income of each of the partners that
period to be either a calendar quarter or a calendar provided the Belarusian tax authority with
year. certificates of their tax residence.
If the partners are registered in different
● Beneficial ownership
jurisdictions, foreign partnership / one of the
According to Belarus tax regulations, to enjoy DTT partners / tax agent in Belarus shall provide to the
benefits for dividends, interest and royalties (apply a Belarusian tax authorities the list of partners, audit
decreased rate or an exemption), income recipient report that confirms the income amount received by
shall be regarded a beneficial owner in regard to such the partners. No such requirement for partnerships
income. Before 2019 when a foreign company had no with partners registered in the same jurisdiction.
contract with the Belarusian resident, but in fact
received income (except for dividends) as a beneficial
owner, such foreign company was not allowed to
apply the decreased rate / exemption.
The Tax Code provides that foreign companies even if
they have no direct contractual relations with the
Belarusian resident and do not receive any income
from it directly, but are tax residents in the countries
which have DTTs with Belarus, can apply DTT
benefits. To support the beneficial owner status in
this case, the foreign company has to provide the
certificate of its tax residence, as well as copies of the
documents that confirm there are obligations
between the foreign companies (a beneficial owner
and a conduit (intermediary) company) in regard to
such income.
Generally, to support beneficial ownership a foreign
company can provide any documental proof
evidencing that the foreign company can dispose of
the income without any limitations, as well as
documents / information that evidence the foreign
company carries out business activity in the country
of its tax residence.
PwC 5Key changes
Personal Income Tax
● New concept of tax residency
operation during the year, if the construction
The Tax Code introduces a new concept aimed at deadlines provided by the design documentation
combating “resident of nowhere” status. If the were breached.
individual is not a tax resident of any state, he
● Real estate tax rates and land tax
should be treated as a tax resident in Belarus, if he
rates
has Belarusian citizenship or a residence permit in
Belarus. RET rates were changed. The rates will depend on
the moment of putting capital construction into
How that may impact your income?
operation after 1 January 2019. Accordingly, rates
Sometimes individuals do not spend enough time
from 0,2% to 0,8% (vs. general 1% rate) will apply,
in any country to recognise them as tax residents
depending on this moment.
of that territory. In this situation the issue is how
/ where income received by such individuals The land tax rate and base (cadastral value) are set
should be taxed. According to the Tax Code in BYN with adjustment by anticipated inflation
“residents of nowhere” are residents in Belarus if rates for certain territories.
they are citizens of Belarus or hold a residence
permit in Belarus, regardless of the number of ● Increase / decrease coefficients
days spent in Belarus. This means their income is
to be taxed in Belarus. The local administrative bodies can increase
(decrease) the rates of RET and land tax by 2,5
times. However this coefficient will be reduced to 2
● New tax rates of personal income tax
starting from 2020.
Personal income tax (PIT) rates of 6% and 0% are
The list of companies which should not be subject
applicable, if the profits were not distributed between
to the increased coefficient has been expanded and
the shareholders (the residents of Belarus), within
now includes e.g. bankrupt companies.
previous 3 or 5 calendars years, respectively.
● Tax return filing deadline has changed Local administrative bodies are not longer entitled
to increase up to 10 times the rates of RET for not
The deadline for tax return filing is extended to 31 used or inefficiently used real estate and the rates
March following the reporting year. Deadline for of land tax applicable to the land plots occupied by
payment is 1 June. The tax return can be submitted the mentioned real estate.
to any tax authority regardless of the place of
Tax Code excludes increased rates of RET on
registration of the taxpayer.
construction objects for which the construction
deadlines are breached, 10-times coefficient to the
Real estate tax and land tax rates of land tax on land plots provided for
temporary use, but not returned by the
● Objects of taxation established deadline.
The construction in progress beyond the completion
date, collapsible and mobile buildings are excluded
Land tax amounts calculated on land plots
from the items of subject to real estate tax (RET). provided for temporary use, but not returned
by the established deadline, or those occupied
The Tax Code also cancels the restriction on the use
without permission are not recognised as
of RET benefits in relation to capital buildings expenses for CIT purposes.
(buildings, structures) which were first put into
PwC 6How PwC in Belarus can help?
Should you have any questions on the new Tax Code, PwC team in Belarus will be happy to support you with a
detailed consultation or provide any other legal and tax support.
PwC services in Belarus:
1. Tax services:
• Corporate taxation and tax structuring of deals
• Consulting on recognition of expenses for corporate income tax purposes
• Consulting on transfer pricing rules (including preparation of transfer pricing documentation) and
thin capitalisation rules
• Indirect taxation and customs regulations
• Tax compliance, preparing statements, tax accounting
• Control and facilitation in regard to tax regulations compliance
• Tax support for M&A projects (due diligence structuring, drafting and review of tax clauses in the
contracts)
• International tax planning, tax optimisation
2. Accounting services:
• Services on setting-up accounting and accounting compliance for entities and representative
offices
• Control of accounting compliance, preparation of tax reports
• Payroll services, payroll and staff reporting
Key contacts:
Eugenia Chetverikova Daria Denisiuk
Tax and Legal Services Leader Senior Associate, Tax and Legal
+375 17 3354000 Services
eugenia.chetverikova@pwc.com +375 17 3354000
daria.denisiuk@pwc.com
Maryna Mishakova Dzina Pinchuk
Senior Associate, Tax and Legal Senior Associate, Tax and Legal
Services Services
+375 17 3354000 +375 17 3354000
maryna.mishakova@pwc.com dzina.pinchuk@pwc.com
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information contained in this publication without obtaining specific professional advice. No representation or warranty (express or implied) is given as to the accuracy
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