GILS Corporate law: Belarus

GILS Corporate law: Belarus

BELARUS

(1) Forms of doing business and Establishment

1.1. What are the options for establishing a company's presence in a country (branch, representative office, subsidiary, etc.), and what are their key advantages and limitations?

The following options for presence in Belarus are possible: 

1. Legal entity; 

2. Representative office of a foreign organisation; 

3. Branch (available for establishment from 19.11.2024). 

The most popular option of presence in Belarus is the establishment of a legal entity in the form of a limited liability company (hereinafter - LLC). It is also possible to establish an open joint-stock company (hereinafter - OJSC) or a closed joint-stock company (hereinafter - CJSC). A unitary enterprise (hereinafter - UE) is used much less frequently. 

  

1.2. What is the process for creating a legal entity or another form of presence in the country, including the laws to follow, legal entities to be considered, documents required, stages and terms for registration? 

The registration procedure depends on the form of presence and usually includes the following steps:

1. pre-registration activities (defining the basic conditions, drafting the documents, agreeing on the name (if necessary), etc.);

2. payment of the state fee (depends on the form of presence and can roughly range from EUR 11 to 800);  

3. submission of documents to the registration authority; 

4. obtaining the registration certificate; 

5. post-registration (formalisation of employment relations, opening of bank accounts, registration with tax and other authorities, etc.). 

The general list of documents includes: 

1. an application of the form set by the law; 

2. legalised extract from the commercial register of the country of establishment (for founders from foreign countries); 

3. founding document (Articles of Association or regulations on the representative office/branch); 

4. document confirming the authorisation of the signee; 

5. document confirming payment of the state fee. 

Documents drafted in a foreign language must be accompanied by a notarized translation into Belarusian or Russian, and documents issued or certified by a competent authority of a foreign state must be legalised, unless otherwise provided by international treaties of the Republic of Belarus. 

The term of state registration for business companies is 1 business day (without consideration of drafting of the necessary documents). 

1.3. What additional authorizations/approvals are required to create a legal entity or start operations, and how do they vary depending on the type of business (if any)? 

In general, establishing a presence does not require obtaining additional authorizations or approvals. Certain activities require obtaining a licence under certain conditions. A list of such activities can be found at the link. 

1.4. What are the most common types of Legal Entities in your country and the differences between them in terms of taxation, liability, and management?

The most common types of legal entities in the Republic of Belarus are LLC, JSC, and CJSC. Such forms as additional liability company (ALC), UE are used much less frequently. There are no significant differences regarding taxation and liability of shareholders. 

   1.4.1. What are the shareholder structures of these types of legal entities? 

LLC is a company with no more than 50 shareholders, whose statutory fund is divided into shares of specified sizes determined by the Articles of the company. May be established by 1 person. JSC is a company whose statutory fund is divided into a certain number of shares. The number of shareholders of a joint stock company is not limited; however, the Articles of Association of a CJSC may set such a limitation. JSC may be established by 1 person.

   1.4.2. What is the Shareholders’ responsibility in these types of legal entities? 

Shareholders of LLC are not personally liable for the obligations of the company and bear the risk of losses associated with the company's activities within the value of their contributions to the statutory fund. Shareholders of JSC are not personally liable for the obligations of the company and bear the risk of losses associated with the company's activities within the value of their stocks.

   1.4.3. What is the responsibility of the representatives in these types of legal entities? 

As a general rule, representatives of legal entities bear the same liability as the shareholders. However, the representatives of the company may be held liable for subsidiary liability if their actions lead the company to insolvency.

   1.4.4. Briefly, what are the characteristics of the other types of Legal Entities? 

One distinctive feature of ALC is that its shareholders bear joint and several subsidiary liability for the obligations of the company with their property within the limits determined by the company's Articles, but not less than the amount established by legislative acts, proportionally to the contributions of these shareholders to the share fund of the ALC. A UE can only be registered by one person (either individual or legal entity), and the right of ownership of the property remains with the founder.

1.5. What are the operating costs associated with the maintenance of a legal entity or presence in the country?

Operating costs can be categorised into one-time and recurring costs: 

1. One-time costs:

  • obtaining a stamp (about EUR 20);
  • obtaining an electronic digital signature (about EUR 60);
  • obtaining a bank key (token) (about EUR 25).

Additionally, costs for obtaining a licence, trademark registration may also be included as one-time costs. 

2. Fixed:

  • lease of the premises (on average about EUR 10-20 per m2);
  • bank services (depends on the tariff of a particular bank, about EUR 20 for 1 bank account);
  • salary payments;
  • tax payments, contribution to the Social Security Fund, Belgosstrakh;
  • accounting service (in case of outsourcing, EUR 100-300 per month). 

(2) General taxation issues 

2.1. What tax obligations are associated with doing business in the country? 

There are two taxation systems for legal entities in Belarus: the general taxation system (hereinafter - GTS) and the simplified taxation system (hereinafter - STS). 

Under the GTS, a legal entity pays the following taxes on its activity: 

- income tax, general rate is 20%; 

- value added tax (hereinafter - VAT), general rate is 20%. 

Under the STS, a legal entity pays the following taxes on its activity: 

- tax under STS, general rate is 6% of revenue. 

Depending on the specific type of activity and property of a legal entity, a legal entity may also pay other taxes, e.g. property tax, land tax, income tax for the income of foreign organisations, environmental tax, etc. 

Regardless of the taxation system, legal entities pay the following taxes and obligatory payments from the salary: 

- income tax for individuals, general rate is 13% (this tax is withheld from an employee's salary and transferred by an employer); 

if the income exceeds BYN 200 000 during the calendar year the tax rate will be 25% for all the income. 

- state social insurance contributions, general rate is 35% (34% is paid by an employer from his own funds, 1% is withheld from an employee's salary and transferred by the employer); 

- accident insurance contributions, general rate is 0.6%. 

2.2. What tax and customs incentives are available in a country? 

Tax preferences include reduced tax rates, tax exemption for a certain period of time, and tax deductions. In Belarus, tax preferences are provided for residents of the High Technology Park, the Chinese-Belarusian Industrial Park ‘Great Stone’, residents of free economic zones, investors who have concluded investment contracts, enterprises located in rural areas, etc. Customs preferences are also provided for the persons mentioned above, which can be expressed in the form of exemption from customs duties. For example, for enterprises located in rural areas, exemption from import customs duty is provided for goods imported as a contribution of a foreign founder to the statutory fund within the terms established by the articles of association for the formation of such a fund.

2.3. What are the accounting and reporting requirements for different types of presence, and how often must they be submitted? 

Accounting is kept for all business operations in the general order. Business operations are formalised by primary accounting documents when the business operation is directly performed, and if this is not possible - after it has been performed. There are annual and interim accounting reports. 

2.4. What is the taxation of dividends for foreign investors? 

1. Taxation of dividends for foreign investors - legal entities 

The general dividend tax rate for legal entity investors is 15%. Other rates may be established by agreements on avoidance of double taxation (AADT). 

2. Taxation of dividends for foreign investors - individuals. 

The general dividend tax rate for individual investors is 13%. Other rates may be established by AADT. 

If a foreign citizen is a tax resident of Belarus and profits were not consistently distributed among the shareholders of a legal entity within 3 preceding calendar years, the tax rate for dividends is 6%. If the profit was not distributed within 5 preceding calendar years consecutively - 0 %. The tax is withheld and transferred to the budget directly by the legal entity who paid dividends to an individual foreign investor. Preferential taxation of dividends is established for residents of the High Technology Park, the Chinese-Belarusian Industrial Park “Great Stone”.

(3) Regulatory and miscellaneous 

3.1. What are the general data protection and privacy requirements in the country, and how do they affect company operations? 

Mandatory measures for personal data protection include: 

1. appointment of a structural unit or person responsible for internal control over the processing of personal data; 

2. issuance of documents defining the policy regarding the processing of personal data (it is necessary to ensure unlimited access, including through the Internet, to such documents before processing begins); 

3. familiarisation of employees with the local regulations regarding the processing and protection of personal data; 

4. establishment of procedures for access to personal data; 

5. ensuring technical and cryptographic protection of information, etc. 

In case of non-compliance with the data protection measures by the company and identification of violations of the legislation on personal data during a scheduled or unscheduled inspection, the National Center for Protection of Personal Data issues a written order (prescription) to eliminate the identified violations and (or) suspend (terminate) the processing of personal data in the information resource (system) with an indication of specific actions that must be suspended (terminated), and sets a time frame for such elimination and (or) suspension (termination), not exceeding 6 months. If the company does not comply (or formally complies) with the above requirements for ensuring the personal data protection in accordance with Article 17 of the Law, there is a risk of being held administratively liable.

3.2. What labour law features should be considered when hiring local and foreign employees? 

  • A foreign employee must obtain a special work permit (except for the employment of citizens of the Russian Federation and the Republic of Kazakhstan).
  • A fixed-term employment contract shall be concluded with an immigrant employee, the term of which shall not exceed the term of validity of the special permit.
  • The employment of more than 10 foreigners (stateless persons) requires obtaining a licence for attracting the foreign labour. For more information on employment, see GILS Employment Law. 

3.3. What are the requirements for currency regulation and currency control? 

1. Registration of contracts. 

Currency contracts concluded between residents and non-residents, the amount of obligations of which is not determined, reaching or exceeding 2000 basic units for individuals (around EUR 23 000) and 4000 basic units for legal entities and individual entrepreneurs (around EUR 46 000) in equivalent, are subject to registration by the resident in the user's personal account on the web portal of the National Bank of Republic of Belarus. 

Subsequently, the execution of such a contract is also reported on the web portal. 

2. Repatriation of revenue 

Legal entities-residents are obliged to credit to their accounts opened in banks of the Republic of Belarus (hereinafter - repatriation): 

  • in case of export - Belarusian rubles and/or foreign currency;
  • in case of import - Belarusian rubles and/or foreign currency in case of return of funds in case of non-performance or incomplete performance by a non-resident of its obligations.

The period for repatriation is determined by the legal entity based on the conditions and actual terms of fulfilment of contractual obligations by parties under a currency contract. The procedure for determining such a period is established by the National Bank. The law also establishes periods for which the repatriation period is extended, as well as cases when the obligation to repatriate ceases. Currency allowed for payments between residents of Belarus is the Belarusian ruble.

3.4. What corporate law features should be considered when planning mergers, acquisitions, and company restructuring in the country? 

Consent of the Ministry of Antimonopoly Regulation and Trade of the Republic of Belarus (MART) for economic concentration (merger clearance). 

Merger clearance may be required for the following transactions: 

  • reorganisation in the form of a merger, acquisition;
  • transaction resulting in the alienation of fixed or intangible assets of another organisation representing 20% or more of the book value, including on the basis of a transfer deed (separation balance sheet);
  • creation of an association or holding company;
  • alienation of 25 or more percent of voting shares (stakes).

Merger clearance for such transactions is required if one of the following conditions is met: 

  • the book value of assets of one of the parties or target exceeds 200 thousand basic units (approximately EUR 2.2 million) (from 07.07.2024 - 400 thousand basic units (approximately EUR 4.4 million));
  • the amount of revenue of one of the parties or the target exceeds 400 thousand basic units (approx. EUR 4.4 million) (from 07.07.2024 - 800 thousand basic units (approx. EUR 8.8 million));
  • one of the parties or the target is included in the State Register of Economic Entities Holding a Dominant Position on Markets or in the State Register of Natural Monopolies.

In the cases described above, consent may not be required if it’s an intra-group transaction. 


Authors:

Violetta Liudchyk, Julia Stefanovich, Kristina Panchenko.

 

Belarus
Corporate and M&A

Authors

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