Changes to the process of investing in Belarus
On July 23, 2024 a new edition of the Law of the Republic of Belarus «On Investments» (hereinafter – the Law) comes into force. The new edition of the Law is targeted to invigorate investors by providing them with new opportunities to make investments and give a «second life» to public-private partnership in Belarus.
For reference: currently, such investment instruments as, for example, an investment agreement with the Republic of Belarus are not popular with investors due to the complexity of the procedure, insufficient awareness and understanding of possible benefits.
The most significant changes are:
- establishing a «preferential investment project»;
- establishing a «special investment agreement»;
- expansion of the list of preferences;
- establishment of new principles of investment, which are aimed at a more individualized approach to investors;
- expansion of the powers of state bodies in the field of control and management of investments, which, among other things, implies simplification of the procedure for concluding investment agreements;
- establishment of the investors obligation to reimburse the amounts of benefits and (or) preferences, pay the amounts of customs duties and pay a penalty in case of termination of the investment agreement on grounds other than its execution.
In general, the novels of the new Law are implementing tools that have already been used in international practice and are known to many investors from the practice of the Russian Federation into the national legislative system.
Preferential investment project
A preferential investment project is a project implemented in a priority sector of the economy (in a priority activity) established by the regional (Minsk City) executive committee or the Government, if the regional list is not approved.
The status of a preferential investment project is assigned on the basis of a decision of the executive committee of the basic or regional level and does not require the conclusion of an agreement.
Special investment agreement
The subject of a special investment agreement is the organization of production of improved products on the territory of the Republic of Belarus. We believe that the emphasis in the application of this mechanism will be placed on the implementation of the import substitution program.
The main attraction of concluding such an agreement is that investors who will implement projects under special investment agreements will be provided with a guarantee for the sale of part of the products – the Republic of Belarus provides the opportunity to sell part of such products within the framework of public procurement using the procurement procedure from a single source.
Among other preferences:
1) conditions for the application of the «stabilization clause» (guarantees against unfavorable changes in tax legislation for 5 years) have been established;
2) the possibility of compensation of part of the costs incurred in connection with the creation of backbone and distribution infrastructure facilities in certain regions (in need of additional support) has been established. The lists of such regions will be established by the Council of Ministers of the Republic of Belarus;
3) there is a possibility to gat a ‘state loan’ upon the decision of the President of the Republic of Belarus under the condition of achieving certain KPI. Such KPI are established annually and are not subject to adjustment;
4) it is possible to choose any land plot for the realization of an investment project.
For reference: currently, only land plots included in the list of land plots intended for subsequent provision to investors can be provided to investors for the implementation of investment projects. Lists of such plots can be found on the website of executive committees in the «For Investor» section.
Priority Activities
On June 15, 2024 the Resolution of the Council of Ministers of the Republic of Belarus dated June 13, 2024 No. 417 «On Priority Activities for Investment» (hereinafter – the Resolution) has been published following the adoption of the new edition of the Law.
In addition to the priority sectors of the economy and priority activities, the Council of Ministers also established the minimum volume of investments required for each type of activity to implement investment projects with the conclusion of investment agreements.
For example, for the group of activities «agriculture, forest and fish industry» the minimum volume of investment, including investments in fixed capital, is set at 1 million basic units (40 000 000.00 BYN, about 12 million EUR). At the same time, the minimum volume of investments in fixed capital should be at least 70% of the minimum volume of investment.
For some sectors of the economy, the fixed capital investment requirement does not apply, e.g. IT sector.
Compared to the current version, the list of priority sectors of the economy for investment is significantly changed. The list itself has been reduced, but new sectors have appeared, such as aerospace technologies, production based on the use of biotechnologies, nanotechnology, production of electric vehicles, components for it and charging infrastructure, etc. We believe that such sectors will be particularly popular for concluding «special investment agreements».
The list of priority activities, despite the reduction of priority sectors of the economy, has expanded significantly.
In particular, some types of retail trade will appear in the list of priority activities, for example, retail sale of fresh and processed fruits and vegetables in specialty stores, retail sale of meat and meat products in specialty stores, retail sale of fish and seafood in specialty stores, etc.
NB: Some activities will be prioritized only within the framework of preferential investment projects and special investment agreements.
For example, such activities will include the manufacture of coke oven products, computer programming activities, etc.
The Resolution enters into force on July 11, 2024, shortly before the new version of the Law enters into force.
