On 21 December 2017, the President of the Republic of Belarus adopted Decree #8 On Development of the Digital Economy Decree #8.
The President of the Republic of Belarus initiated the adoption of Decree #8 with a view to extend the benefits of residents of the Belarusian High Technology Park and to legalize mining and transactions with cryptocurrencies.
The HTP was established by Decree No. 12 of the President of Belarus “On High Technology Parks” dated 22 September 2005 with a view to provide special tax, customs and employment benefits for IT companies and develop this industry. As results of those measures, since 2008 more than 238 software and high-tech companies have become residents of the HTP. The total revenue of existing residents reached USD one billion in 2017.
Following global trends, after approximately two years discussion with HTP key players and investors and several M&A transactions between global IT companies and the HTP residents the Belarusian government decided to extend the benefits providing investors with new opportunities and increase their interest into investments to the HTP. Among other things, Decree #8 includes a large number of rules which apply to matters that were not previously covered by Belarusian legislation, especially ICO and mining of cryptocurrency.
Decree #8 shall become effective on 28 March 2018. In contrast to the majority of new laws and regulations, the implementation of Decree #8 does not require amendments or updates of other Belarusian laws and regulations
The most significant developments are summarized below.
1. Period of the HTP
Initially the HTP was established for a period up to 22 September 2020. Decree #8 extended the benefits of the HTP until 1 January 2049.
2. Tax Benefits
The residents of the HTP are entitled to the following tax benefits for the duration of the HTP (ie, until 22 September 2020):
- full exemption from corporate income tax (the standard rate of corporate income tax is 18%);
- full exemption from VAT (the standard rate of VAT is 20%) on revenue acquired from the sales of the products on the territory of the Republic of Belarus. This benefit does not apply to sales to countries that are members of the Eurasian Economic Union. The export of products to member-countries of the Eurasian Economic Union and outside the Eurasian Economic Union is subject to VAT at the 0% rate;
- full exemption from land tax in relation to land used for the construction of MSSB buildings (if any) for the construction period (not exceeding three years);
- full exemption from real estate tax.
- employees of a HTP resident are subject to individual income tax at the rate of 9% of the salary (the standard rate of individual income tax is 12%); and
- dividends paid by a HTP resident to its shareholders (participants) are subject to dividend tax at the rate of 5% (according to the Belarusian Tax Code, dividend tax is charged at the rate of 12%).
3. Customs Benefits
The residents of the HTP are entitled to full exemption from import VAT and customs duties in relation to certain items imported into the HTP, including machinery, goods and equipment required for their for processing.
4. Mining and Transactions with Cryptocurrency
Decree #8 legalizes ICO, mining and transactions with cryptocurrency in Belarus. The residents of the HTP are entitled to launch ICO, keep the ICO in virtual wallets, and acquire and sale tokens.
5. Foreign Law/Arbitration
The investors of the HTP’s residents may agree that foreign law, including English Law, governs shareholders agreements. In contrast to common practice, disputes arising from shareholders agreements may be resolved by international arbitration. These new provisions allow foreign investors to construe their relationships under the law that is closest to them and resolve corporate disputes outside Belarusian state courts.
6. Employment Issues
Foreign employees and founders of HTP residents are fully exempted from visa and work permit requirements. Foreign employees may enter into Belarus without a visa at any time under the list certified by the HTP administration. The temporary registration of foreign employees with the migration police may be performed under an employment contract of those employees. Foreign employees who do not have temporary migration registration may stay in Belarus for up to 180 calendar days without a visa.
In general, the adoption of Decree #8 may be regarded as a positive measure on the part of the Government of the Republic of Belarus, aimed at improving the investment climate and developing the digital economy of Belarus.