Belarusian Tax Newsflash - February 2013
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  Maksim Salahub
   
  Maksim Salahub
Partner
maksim.salahub@sorainen.com
   
  Iryna Mitsianiova
   
  Iryna Mitsianiova
Associate
iryna.mitsianiova@sorainen.com
   
  Karyna Modnik
   
  Karyna Modnik
Legal Assistant
karyna.modnik@sorainen.com
   
Dear clients and cooperation partners,

In this Belarusian Tax Newsflash we would like to draw your attention to the most material changes to Belarusian tax laws which came into force on 1 January 2013.  The national taxation system, not so long ago ranked by the World Bank as one of the worst in the world, continues to improve, in certain aspects (e. g. introduction of a Tax Free system) overtaking other members of the Customs Union. 

Transfer pricing regulations and thin capitalisation rules, recently introduced in the Tax Code, are being fine-tuned, and application of the simplified taxation system, already positively assessed and actively used by many businesses, is being expanded.
Please read more below.

Corporate income tax (CIT)

  • The difference between the selling price of shares in commercial companies and their nominal value (share premium), formed on initial stock offerings, is no longer subject to CIT.
  • The period during which revenues obtained from operations with bonds are exempt from CIT is prolonged by two more years - to 1 January 2015.
  • Transfer pricing: the grounds for reviewing export-import transactions by tax authorities for potential adjustment of the CIT base have changed. Currently, export-import transactions can be subject to control when the price of the transaction (or transactions with the same party) in a calendar year is (i) higher than BYR 60 billion (approx EUR 5,291,000) (previously– BYR 20 billion (approx EUR 1,764,000), and (ii) the price deviates from the market price by 60% or more (previously – 20%).
  • Thin capitalisation rules are introduced. These limit the deductibility of interest on loans to related parties and apply if the lender is: (i) a foreign company that directly or indirectly owns more than 20% of the authorised capital of a Belarusian company; or (ii) a Belarusian company which is an affiliate of such a foreign company. The debt-to-equity ratio is 1:3.
  • A company can not carry forward losses if it made a profit on its activities overall. A Belarusian company can carry forward losses only if total costs for the previous tax period connected with production and sale of goods (works, services), property rights, and non-operating expenses exceeded the amount of revenues and non-operating income.

VAT

  • Belarus is the first country of the Customs Union to launch a VAT refund system for foreign citizens (Tax Free system). A foreign citizen who buys goods worth at least BYR 800,000 (about EUR 71) including VAT within one day in one shop participating in the Tax Free system can claim a VAT refund through an operator under the Special Tax Free system.  
  • From 2013 the moment of actual sale of goods (works, services), property rights for the purposes of calculating VAT is determined by taxpayers (except for taxpayers that use a simplified taxation system) only “on a realisation basis”. Rules establishing the procedure for determining the moment of actual sale upon receipt of payment or other termination of obligations in relation to dispatched goods (performed works, rendered services), transferred property rights were excluded from the Tax Code.
  • New procedure for deduction of input VAT. The amount of VAT charged on acquisition of goods (works, services) and property rights in Belarus can be deducted regardless of the date of payment for those goods (works, services), property rights.

Simplified taxation system

  • Generally established tax rates under the simplified taxation system are reduced:
    - from 7% to 5% for taxpayers who use the simplified taxation system without paying VAT;
    - from 5% to 3% for taxpayers who use the simplified taxation system with paying VAT.
  • Eligibility criteria for the simplified taxation system are changed. In particular, companies that need not pay VAT can currently use the simplified taxation system if within one calendar year their gross revenues do not exceed BYR 8,200,000,000 (approx EUR 723,000) (previously - BYR 3,400,000,000 (approx EUR 300,000) and the number of personnel does not exceed 50 employees (previously 15).
  • The obligation to pay real estate tax is introduced for two categories of taxpayers that use the simplified taxation system: (i) legal entities whose total area of buildings, parts thereof, car parking spaces exceeds 1,500 square meters, and (ii) legal entities that lease buildings, parts thereof or car parking spaces regardless of the size of the total area of real estate owned.
  • Organisations and individual entrepreneurs that use the simplified taxation system and whose total land area exceeds 0.5 hectares must now pay land tax.

Real estate tax

  • Buildings and constructions in the process of reconstruction or modernisation are not subject to real estate tax.
  • Regional (Minsk city) Councils of Deputies may increase the real estate tax rate by not more than five times on buildings and constructions, parts thereof, which are unused or used inefficiently.

Ecological tax

The rates of ecological tax on emissions, waste-water discharges, production waste burial and storage are generally increased by1.22 times.

Gambling tax

The tax rates which apply to gaming tables, slot machines and bookmaking office counters are indexed on average by 22%.

Personal income tax (PIT)

In 2013 income received by Belarusian individual entrepreneurs (as well as private notaries and attorneys) from carrying out their activities is taxed at the 15% PIT rate, while the 12% PIT rate applies with regard to income of foreign entrepreneurs (down from15% in 2012).

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