Employment of foreign nationals in the Republic of Belarus
As practice shows, foreign investors of multiple types may face the need to create a legal entity in accordance with Belarusian law. Among the main industries of interest to foreigners in Belarus, we should mention trade, production and services (first of all, IT). The list of countries from which foreign investors come to Belarus is not a short one. In fact, there is no region of the world whose businessmen are indifferent to Belarus, but according to our observations, foreigners from the Russian Federation, the European Union, China and the United States are particularly active.
Which foreigners can register a company in Belarus?
We can safely say that any foreigners can register a legal entity in Belarus. However, for understanding several classifications can be undertaken. Thus, concerning the legal status, foreign investors can be:
– natural persons – citizens of any state or territory who have full legal capacity under the law of the country of residence and have reached the age of 18;
– foreign legal entities of any organizational and legal form that are operating (not in liquidation or bankruptcy proceedings).
On what the emphases need to be put when choosing the legal status of foreign founders:
— if the founder of a company is a legal entity with a share of more than 25%, the created Belarusian company will not have the right to apply the simplified taxation system;
— A company cannot have the only participant which is the foreign company that itself has one founder.
The difference in the legal status of the founder is also reflected in what documents are required from him when registering the company.
If the founder is a foreign company, it is required to provide:
– an extract from the commercial register of the country of incorporation or other equivalent document confirming the existence of this company – issued by the government body and legalized in the proper manner;
– a copy of the Statute or Founders Agreement (without legalization, it is possible to provide in electronic form).
If the founder is a natural person, a notarized translation of his passport is only required, which can be made both in Belarus by a Belarusian notary, and by a notary of the country of residence with legalization and subsequent translation verification by a Belarusian notary.
Here we have come close to the second classification – concerning the method of legalization of documents. Thus, the founders may be from countries that:
— do not require legalization, documents are recognized if a heraldic seal is on this (the Russian Federation);
— recognize the apostille (countries of the European Union, the USA, Australia, Morocco);
— recognize only consular certification (most Arab countries, Singapore, Canada).
The way documents are legalized affects the time and cost of their preparation. Consular legalization is the most difficult way of legalization. So, if the founder is a natural person, it will be easier for him to come to Belarus than to legalize documents in his homeland. However, if the founder is a legal entity, an extract from the commercial register is still have to be obtained in the country of incorporation.
Who can a company executive in a company with the participation of foreigners in Belarus?
The company executive of a legal entity with foreign participation can be either the founder himself or any third party. If the founder is a foreign citizen, it will matter, first of all, which country he is a citizen of.
The following options are possible here:
1. A company executive is a citizen of one of the EEU countries (Belarus, Russia, Kazakhstan, Armenia, Kyrgyzstan). In this case, he does not need to receive a permission for work in Belarus.
2. A company executive is a citizen of any other country that is not a member of the EEU. In this case, he will have to receive a permission for work in Belarus.
If it is necessary to obtain a special permission, it will matter whether the future company executive is a founder or not. If it is, the review period will take up to 2 weeks. If it is not, it will be necessary to submit information about finding a local workforce for a vacant position, which may extend the period for obtaining a special permission to one and a half months.
Is the “nominee director” service common in Belarus?
Many jurisdictions legally offer foreign investors the option of a nominee director, it is impossible to conduct business in some of them without a nominee director.
We can say that Belarus is not one of these jurisdictions. Although often some unscrupulous consultants provide this option. But it is worth remembering that in Belarus there is no difference between a «nominal» and a real company executive in terms of legislation. And even if the «nominal» director is passive today, no one can guarantee that tomorrow he will legally dispose of all the property of your company or accuse you of fraud.
However, this does not mean that a foreign investor cannot hire a third-party company executive in Belarus. Corporate management services are becoming particularly popular. What is the difference between Corporate management services and nominee director services? The main differences are as follows:
– the nominee director can give the account management to the real owner: the corporate manager retains control of the account, manages the account in accordance with the instructions of the owner that do not contradict the legislation;
– the nominee director is not responsible for the legality of the company’s activities: the corporate manager is fully responsible for compliance of the company’s activities with the law.
It should be noted that the issue of appointment of the director is not a priority when registering a foreign company in Belarus. Obtaining a certificate of incorporation is possible without a director. However, opening a bank account without a Director is not possible, which does not allow to postpone this task for a long time.
What taxes are paid by a legal entity registered by foreigners in Belarus?
This issue is difficult to describe in a concise manner, but if we talk about the basics of taxation in Belarus, we should start with a brief description of the taxation systems: simplified (USN) and general (OSN), as well as a description of payroll tax. At the same time, only taxes that make up 90% of the tax burden of most Belarusian companies will be given.
In the application of USN, the payer pays a tax on gross revenue in the amount of 5% without VAT or 3% with VAT. VAT in most cases, both in the USN and in the OSN is 20%.
In the application of OSN, a profit tax of 18% is paid instead of tax on gross revenue. Also, a certain amount of additional taxes is paid that do not create a large tax burden.
In the application of USN, it needs to know the following:
- USN is not used for certain types of activities (banking, insurance, gambling, and some other high-margin activities);
- In the application of USN, there are restrictions on annual gross revenue and the number of employees. These figures are constantly changing, but at the moment the revenue limit is about $ 500,000 per year, and the employee limit is no more than 50 employees.
Payroll taxes make up a significant part of the tax burden. The company calculates from employees and pays to the budget 13% of the salary in the form of income tax and 1% of the salary as a contribution to retirement insurance. Аt the employer’s expense, retirement insurance is paid in the amount of 34% of the salary and 0.2% of the salary for work accident insurance.
What benefits does a foreigner receive when starting a business in Belarus?
Currently, the presence of a foreign founder, whether from China or the European Union, does not give the created Belarusian company any rights to benefits by default. However, foreign founders are not restricted in using standardized preferential treatment.
Such preferential treatments can be divided into territorial preferential treatments and preferential treatments by type of activity. The most significant territorial preferential treatments include:
– free economic zones (FEZ) operating in all regions of Belarus, including Minsk;
– China-Belarus Industrial Park «Great Stone»;
– rural areas and small-scale populated places.
A special feature of the preferential treatment in rural areas and small-scale populated places is that it is granted to companies that produce goods and services by virtue of being located in the relevant territory. While other territorial preferential treatments require the applicant to comply with additional formalities.
The main type of preferential treatments is the one provided to IT companies within the High-Tech Park (HTP). In addition to the classic custom and product development, HTP residents can be companies engaged in mining and trading tokens (cryptocurrencies). Although the HTP has its own physical boundaries and premises where some residents are located, however, most residents have a location outside the physical boundaries of the HTP.
You can read more about the benefits of each of the preferential treatments in the relevant thematic publications on our site, but it should be noted that most of the preferential modes provide significant benefits (at least 50%) for income tax, VAT and tax on pension contributions.
Also, benefits for a foreign investor can be provided on an individual basis by concluding an investment treaty with the Republic of Belarus. Usually, foreign investors who are going to make significant capital investments and who need to be provided with a land for these purposes are interested in this form of cooperation.