Articles

Tax registration of a permanent establishment of foreign legal entities

As of December 2019

One of the options for foreign organizations to conduct business in the Republic of Belarus is to carry out entrepreneurial and other activities through a permanent establishment.

A permanent establishment is not an organization or a separate division of the organization. It is considered as a legal fact stipulated by the national tax laws of the state, which consists in the permanent direct or indirect business presence of a foreign person on the territory of the Republic of Belarus. Such presence entails the extension of the tax jurisdiction of the Republic of Belarus to the profit of a foreign organization.

For example, a foreign organization wishing to carry out activities in the territory of the Republic of Belarus through a permanent establishment is among the payers of taxes, fees (charges). In this case, only activities that are either carried out in the Republic of Belarus, or are carried out with respect to income from Belarusian sources or property located on the territory of the Republic of Belarus are subject to taxation.

According to article 22 of the Tax Code of the Republic of Belarus, a foreign organization’s obligations as a taxpayer include the obligation to be tax registered in the tax authorities.

Thus, a permanent establishment of a foreign organization is considered to be:

  • permanent place of activity through which a foreign organization carries out business and other activities on the territory of the Republic of Belarus;
  • an organization or individual (dependent agent) that operates on behalf of and in the interests of a foreign organization. These persons must be authorized by a foreign organization to enter into contracts and agree on the essential terms of contracts concluded on behalf of and in the interests of the organization.

Permanent place of activity

A permanent place of activity is considered a permanent establishment under the following conditions:

  • a foreign organization performs works or provides services in the commencement of such activities on the territory of the Republic of Belarus through this place of activity;
  • such activities are carried out continuously or collectively for more than 180 days in a 12-month period.

A permanent establishment may be recognized as a construction site, installation or assembly project under the following conditions:

  • These objects exist on the territory of the Republic of Belarus for a period of more than 180 days in a 12-month period.

Organization or individual

An organization or an individual can be recognize as a permanent establishment under the following conditions:

  • these persons carry out activities on behalf of and in the interests of a foreign organization that are subject to the instructions and control of a foreign organization;
  • the entrepreneurial risk in carrying out such activities lies with the foreign organization, not with the organization itself or an individual.

The permanent establishment does not occur in the following cases:

  1. a foreign organization has a place that is used for one or more of the following purposes:
  2. the storage, demonstration or delivery of goods (without the realization);
  3. purchase of goods, works, and services, property rights for a foreign organization;
  4. collection or dissemination information for a foreign organization;
  5. implementation of other preparatory or auxiliary activities;
  6. import and export movement of goods by a foreign organization, or other movement of goods or other property across the state border of the Republic of Belarus.

Tax registration of foreign organizations that operate through a permanent establishment is carried out on the basis of an application, the form of which is set out in Annex 2 to the Resolution of the Ministry of Taxes and Duties of the Republic of Belarus № 96 dated 31.12.2010.

The application is sent to the Tax Authority at the place of activity.

The deadline for filing the application in this case is before the start of performing works or rendering services by a foreign organization on the basis of the agreement for a period exceeding the time limits given above.

Documents concerning the application are:

  • a certificate on registration as a taxpayer in the country of incorporation with the indication of the code (analog of the code) issued by the Tax Authority of the country of incorporation of the foreign organization;
  • an original and a copy of the agreement under which the foreign organization performs works and (or) provides services on the territory of the Republic of Belarus for a period exceeding the terms;
  • an original and a copy of a power of attorney or other document confirming the authority of a representative of a foreign organization on the territory of the Republic of Belarus to perform transactions or other legally significant actions on behalf of a foreign organization, including the authority to represent its interests in relations regulated by tax legislation;
  • a copy of the constituent document of a foreign organization;
  • a copy of an extract from the commercial register of the country of incorporation or other equivalent proof of its legal status in accordance with the legislation of the country of incorporation, issued no later than three months before the date of submission of documents for registration, issued in accordance with the legislation of the issuing state, certified by the competent authorities of this state and legalized in diplomatic missions or consular offices of the Republic of Belarus.

As for a foreign organization that wants to operate through an organization or an individual, in this case, the application is submitted to the Tax Authority at the location of such an organization or at the place of residence of such an individual.

The deadline for filing the application is before these persons start performing activities on behalf of a foreign organization.

Documents concerning the application are:

  • an original and a copy of the agreement of the foreign organization with the organization or individual through which the foreign organization plans to carry out its activities on the territory of the Republic of Belarus;
  • an original and a copy of a power of attorney or other document confirming the authority of a representative of a foreign organization on the territory of the Republic of Belarus to perform transactions or other legally significant actions on behalf of a foreign organization, including the authority to represent its interests in relations regulated by tax legislation;
  • a copy of the constituent document of a foreign organization;
  • a copy of an extract from the commercial register of the country of incorporation or other equivalent proof of its legal status in accordance with the legislation of the country of incorporation, issued no later than three months before the date of submission of documents for registration, issued in accordance with the legislation of the issuing state, certified by the competent authorities of this state and legalized in diplomatic missions or consular offices of the Republic of Belarus.

Any documents in a foreign language submitted to the Tax Authorities must be translated into Russian or Belarusian. The authenticity of a translation must be certified by a notary or by diplomatic missions or consular offices of the Republic of Belarus.

If a foreign organization is registered with a Tax Authority at the time of the emerging of a permanent establishment, it must report the emerging of a permanent establishment to the Tax Authority. The form of the message is established by Annex 29 to the Resolution of the Ministry of Taxes and Duties of the Republic of Belarus № 14 dated 26.04.2013.

Deadline for the message and the Tax Authority that receives the message:

  • before the conclusion or approval of the terms of the first agreement by an organization or individual – to the Tax Authority at the location or residence of this person;
  • before activities of performing works or providing services through a permanent place of activity for more than 180 days – to the Tax Authority in whose service area the place of such activity will be located. This message is sent regardless of the fact that the 180‑day period has not expired.

If you have any questions about tax registration and the activities of permanent establishment in the Republic of Belarus, please contact us.