If past experience is anything to go by, foreign investors of various profiles often benefit from creating a legal entity under the Belarusian law. Commerce, industry and service sector (above all, IT) are the branches of Belarusian economy most appealing to foreigners. The list of countries providing investors for Belarus is quite large: in fact, businessmen from all over the world are interested in Belarus. However, we have observed that foreigners from the Russian Federation, European Union, China and USA are most active in Belarus.
What foreigners may register a company in Belarus?
It is safe to say that any foreigner may register a legal entity in Belarus. However, for a better understanding of the procedure, it will be useful to draw a range of classifications. Thus, according to legal status, foreigners may be:
— natural persons – citizens of any states or territories, provided they have reached the age of 18 and have full legal capacity according to the law of the country of residence;
— foreign legal entities of any business legal structure, provided they are active (not subject to a dissolution or bankruptcy procedure).
You should have regard for these aspects when choosing a legal status of a foreign investor:
— where a legal entity acts as a founder with an equity share exceeding 25%, the created Belarusian company will not be entitled to apply the Simplified Taxation System (STS);
— a foreign company having one founder cannot be the sole participant of a business entity.
Founders of different legal statuses have to submit different suites of documents when applying for a registration of a foreign-invested legal entity.
Where a foreign company acts as a founder, it must submit:
— an extract from the commercial register of the country of incorporation or another equivalent document confirming company existence – issued by a state body and duly legalized;
— a copy of the articles of association or the deed of incorporation (may be submitted without legalization, in electronic form).
Where a natural person acts as a founder, only a notarized translation of his/her passport will be required. Such translation may be formalized either in Belarus (by a Belarusian notary), or by a notary in the country of residence (in such a case, the translation has to be notarized and subsequently authenticated by a Belarusian notary).
Here goes another classification — by the manner of document legalization. Note that founders may come from countries that:
— do not require legalization: the documents will be acknowledged provided they have a coat-of-arms seal (Russian Federation);
— acknowledge apostille (countries of European Union, USA, Australia, Marocco);
— acknowledge consular legalization only (most Arab countries, Singapore, Canada).
The chosen procedure of document legalization will affect the processing time and fees. Consular legalization is the most difficult. Where a natural person is the founder, it will be easier to come to Belarus than to legalize documents in the home country. However, where a legal entity is the founder, an extract from the commercial register of the country of registration must be obtained anyway.
Who can act as the CEO of a foreign-invested company in Belarus?
Either founder himself or a third party may act as the CEO/director of a foreign-invested legal entity. Where a foreign national is the founder, the country of origin matters most.
The options here are:
The foreigner is a citizen of a EAEU country (Belarus, Russia, Kazakhstan, Armenia, Kyrgyzstan). In this case, a permit for activities in Belarus is not required.
The foreigner is a citizen of a non-EAEU country. In such a case, the foreigner will have to obtain a special permit to work in Belarus.
In case a special permit is required, whether the to-be CEO is the founder or not matters. Where the to-be CEO is the founder, the review duration will take up to 2 weeks. Where the to-be CEO is not the founder, an application for the search of local labor has to be submitted, which may extend the processing time to 6 weeks.
Is the “nominal director” service popular in Belarus?
Many jurisdictions propose the nominal director option to foreign investors quite legally, moreover, in some jurisdictions it is basically impossible to do business without a nominal director.
Let us state positively that Belarus is not among such jurisdictions. Still, careless advisers propose the option from time to time. However, bear in mind that the Belarusian law does not have a difference between a “nominal” and actual director/CEO. Even where a “nominal” director is quite passive today, noone can warrant that tomorrow he will not (quite legally) dispose of all your corporate assets or accuse you of fraud.
Still, this doesn’t mean a foreign investor cannot hire a third-party CEO in Belarus. Corporate governance services are increasingly popular. The principal differences between corporate governance services and nominal director services are as follows:
— nominal director may pass control of the bank account to the beneficial owner – while a manager will maintain control over the account and will manage the account in compliance with owner’s lawful instructions;
— nominal director will not bear responsibility for the lawfullness of company’s activities– while a manager will be absolutely responsible for the compliance of company’s business with the applicable law.
We emphasize that appointment of director/CEO is not a primary issue when registering a foreign legal entity in Belarus. You can obtain a registration certificate without an appointed director. However, you will not be able to open a bank account without an appointed director, which will prompt you to resolve the issue as early as possible.
What taxes are to be paid by a foreign-invested legal entity in Belarus?
This question is difficult to tackle briefly. Speaking about basic taxation in Belarus, we must start with a brief description of the existing taxation systems – Simplified Taxation System (STS) and General Taxation System (GTS) – and a description of existing payroll taxes. In doing so, we dwell only on taxes that constitute 90% of tax load of most Belarusian companies.
When using the STS, a taxpayer will pay a 5% tax (net of VAT) or a 3% tax (inclusive of VAT) from gross revenue. VAT, in most cases (under STS or GTS), amounts to 20%.
When using the GTS, a taxpayer will pay (instead of the revenue tax) the profit tax at the rate of 18%. Also, some additional minor taxes are paid that don’t contribute much to the tax load.
When using the STS, you have to be aware of the following:
— STS is not applied in some sectors (banking, insurance activities, gambling and some other high-margin activities);
— STS sets limits on annual gross revenues and staff count. The indices are subject to ongoing change. At present, the gross revenue limit is ca. 500,000 USD per year, and the staff count limit is 50 employees.
Payroll taxes constitute a large portion of the tax load. A company must withhold from employees and pay to the state budget 13% of each employee’s salary as personal income tax plus 1% of salary as a contribution to the pension fund. An employer pays pension deductions in the amount of 34% of salary and 0.2% of salary to insure against job-related accidents.
What privileges does a foreigner enjoy when opening a business in Belarus?
At the present day, foreign founders, whether coming from China or the European Union, are not entitled to any privileges when creating a Belarusian company. However, foreign persons are free to use the regular privileged regimes offered in Belarus.
Such regimes may be subdivided into territorial regimes and type of activity regimes. The most significant territorial regimes are:
— free economic zones (FEZs): they operate in all Belarusian regions and in Minsk;
— “Great Stone” industrial park;
— rural zones and small communities.
The privileged regime of rural zones and small communities is peculiar, in terms of registration of foreign-invested entities, in that it is granted to any companies that manufacture goods and/or services just by virtue of company’s location in a respective zone. Other territorial regimes require an applicant to comply with additional formalities.
The most attractive preferences are granted to IT companies by the High Tech Park (HTP). Alongside with the regular product development to order, other activities may be pursued by HTP residents, such as mining and trading in tokens (crypto currencies). The HTP has its own physical boundaries and premises accommodating some of the residents. However, most HTP residents are located outside the HTP’s physical boundaries.
You can read more detailed information about privileges and benefits of each of the existing regimes in respective topical articles on our website. In general, most of the privileged regimes grant considerable remissions (at least 50%) of profit tax, VAT and pension tax.
Privileges/remissions for a foreign investor may also be granted individually, by way of concluding an investment agreement with the Republic of Belarus. Normally, such cooperation pattern appeals to foreign investors that intend to make large capital investment and need a land plot allocated to that effect.
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Registration of a foreign company
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