On 11 August 2016 the second draft of the Belarusian law introducing amendments and changes to the Tax Code (Draft) was published. We set out below for your attention a brief overview of the main novelties that could become a reality from 1 January 2017. Note, however, that the proposed changes may be subject to multiple review before the Draft becomes final and is approved.
Google Tax: Belarusian Edition
- One of the most significant changes proposed by the Draft is the introduction of value added tax (VAT) for services in electronic form provided by foreign organisations to Belarusian users. According to the Draft, providing services in electronic form is an automated form of provision of services by a foreign organisation through the Internet with the help of information technology. The place of providing services is determined as the buyer`s location. The reporting period for VAT is a calendar quarter.
- Foreign organisations that plan to provide services in electronic form to Belarusian users – individuals who live in Belarus – must register with the tax authorities and pay VAT for those services when required by law. Individuals who live in Belarus are described by the Draft not only as individuals living in Belarus but also as individuals who have an account in a Belarusian bank that is used for service payments, a network address or a telephone number registered in Belarus.
- The list of services in electronic form is broad and covers almost all possible ways of interaction between foreign organisations and Belarusian users via Internet. These services cover e.g. providing rights to use software (including computer games), electronic books, graphics, music, inter alia by providing remote access to them for viewing or listening via Internet, providing advertising services on the Internet, providing data through stock exchange reports in real time mode, translation in real time mode, and hosting.
- Additionally, the Draft excludes from the scope of services in electronic form the following:
- sale of goods, works, services ordered via Internet, if delivery is performed without using the Internet;
- sale (transfer of rights for use) of software (including computer games), data bases in permanent form;
- providing consultancy services via Internet;
- providing services on Internet access.
- For the purpose of avoiding double taxation, foreign organisations need not calculate and pay VAT for services provided to individuals who live in Belarus, if they are established in accordance with the laws of the European Union (EU) and notify the Belarusian tax authorities of the services provided with references to the norms of the EU Directive and national laws stipulating the obligation of such organisations to pay VAT at the place of the supplier.
- Alongside foreign organisations providing services in electronic form, foreign organisations-intermediaries that participate in settlements with individuals, e.g. on the basis of commission agreements, must be registered with the tax authorities and pay VAT.
- We draw to your attention that foreign organisations providing services in electronic form need not issue electronic VAT invoices (EVI) for services provided.
The Draft also covers some other important changes to General and Special Parts of the Tax Code.
General Part of the Tax Code
- The Draft introduces changes to the procedure for determining related parties for taxation purposes. Related parties are parties that each individually have a direct and (or) indirect participation stake in an organisation comprising not less than 20%. However, direct and (or) indirect participation by the state is not a basis for such organisations or other parties to be found related.
- Taxpayers will be able to obtain information on taxes, tax obligations and tax authorities at any tax authority office regardless of their place of tax registration. The Draft also regulates the process for use of a personal account by taxpayers.
- The place of providing search services and (or) information on potential buyers for the purpose of VAT payment is determined as the buyer’s location. Therefore, those services provided by many foreign platforms in Belarus will be subject to Belarusian VAT at a rate of 20%.
- The website of the Belarusian Ministry of Taxes and Duties will publish a monthly list of taxpayers – individual entrepreneurs (IE) and legal entities – that owe unpaid taxes. We consider this measure to be directed at stimulating taxpayers to carry out their tax obligations promptly.
- The list of data that do not constitute tax secrets has been enlarged. The plan is that tax secrets will not include data on a taxpayer`s registration in beneficial tax regimes (e.g. HTP, FEZ), as well as data provided to participants within the AIS “Invoices Accounting”.
Special Part of the Tax Code
Major changes have affected VAT and corporate income tax (CIT).
- For realisation of goods at retail prices, VAT payers must indicate the VAT rate and amount at the buyer`s request.
- The Draft requires correction of VAT sums issued to a buyer to be carried out on the basis of EVI as well as reconciliation acts of mutual payments signed by seller and buyer.
- The Draft changes the term for issuance of EVI: EVI must be issued no later than the 10th day of the month following the month of dispatching goods, performing works or providing services. Apart from existing exceptions, EVI should not be created for goods imported to Belarus by IE that are not VAT payers for realisation of goods (works, services) or proprietary rights. EVI must also not be created for realisation of goods (works, services) or proprietary rights that is VATable with a tax base equal to zero. However, EVI should be uploaded directly to the portal, avoiding the buyer in relation to freight forwarding services exported and VATable at a rate of 0%.
- The Draft also excludes the opportunity to provide EVI on paper in case of malfunctions in portal operation.
- Changes concern non-operating income. Non-operating income does not include amounts transferred to organisations and (or) their creditors from parties carrying out subsidiary liability for the obligation of that organisation in the process of bringing those parties to subsidiary liability.
- The Draft abolishes the special low CIT rate of 5% in relation to income gained by members of the science-technological association (“Infopark”) created by the Belarusian State University received from realisation of information technologies and development services.
Among other things, the Draft also introduces changes to regulation of real estate tax, handicraft duty, duty for carrying services on farm- and ecotourism and proposes to abolish use of the single tax by individuals engaged in tutoring who do not carry out entrepreneurial activity. Additionally, the Draft broadens the taxation object for withholding tax which, as it is planned, will include search services and (or) providing information about potential buyers and providing access to databases. The Draft also contains novelties introduced in 2016 such as:
- Payment of VAT at a rate of 25% in relation to carrying out telecommunication services. The VAT reporting period here is one calendar month.
- Income received from bank deposits in the form of interest is subject to personal income tax withheld by the bank as a tax agent when certain conditions are met (e.g. if the deposit time is less than one year – for deposits in BYN and two years – for deposits in foreign currency; or accounts are used for entrepreneurial activity).
It also covers the provisions of the Belarus Constitutional Court Decision of 26 April 2016 on the right to appeal against tax authorities’ decisions, requirements, action and inaction, as well as clarifying the procedure for appeal in such cases.