In Belarus dividends constitute income, which is generally taxed at a personal income tax rate of 13%. However, the tax payment procedure for dividends sourced in Belarus and from abroad differs.
Dividends from Belarusian companies
Belarus-sourced dividends are taxed in Belarus for both residents and non-residents. The good news is that no additional actions are normally required from individuals, since Belarusian companies, as tax agents, withhold personal income tax from the dividend amount.
When Belarusian companies calculate personal income tax from dividends paid to individuals, they tax them as of the date of actual receipt, i.e. when a corporate decision to distribute the profits and pay out dividends was made according to Belarusian legislation.
The standard rate of tax on dividends in Belarus is 13%. A special tax rate of 6% applies if for three years in a row shareholders who are Belarusian tax residents have not distributed profits, but have rather reinvested the profits. If Belarusian tax-resident shareholders have not distributed profits for five consecutive years, a 0% tax rate applies to dividends in Belarus. These reduced tax rates are not applicable for tax non-residents in Belarus.
Dividends in Belarus from foreign companies
Foreign dividends are only taxed in Belarus for Belarusian tax residents. An individual is generally recognised as a Belarusian tax resident if they stay in the territory of Belarus for more than 183 days in a given calendar year. This 183+-day term includes time spent out of Belarus:
- on business trips formalised in accordance with Belarusian labour law
- for medical treatment
- on holiday, provided that the holiday did not exceed two months overall in a calendar year
Since foreign dividends are foreign-sourced income, residents must report them in their annual personal income tax return, which must be submitted no later than 31 March in the year following the date when the dividends were actually received.
Date and currency
While an individual is filling in the return, some questions may arise.
One question may concern the date of receipt of the dividends. This aspect differs from the mechanism established for Belarusian companies. Individuals must indicate the date of payment, i.e. the transfer of income to the bank account or electronic wallet of the relevant individual, as being the date the foreign dividends were received.
Another practical question is what the currency of income is if a company transfers money in one currency, but the bank account of the recipient converts it into another currency.
This question is not directly regulated by national legislation, but we believe the income should be indicated in the currency in which the foreign company paid it to the individual. This situation may arise when dividends in Belarus are paid, for example, in euros, but are transferred to the individual’s bank account in US dollars. In such a situation a banking conversion takes place: i.e. the bank first exchanges euros to US dollars, and then transfers the amount of money to the individual’s account.
The bank acts as an intermediary here; the dividends in Belarus are received by the bank in the currency that the foreign company decided to pay them in. Therefore, the income should be reflected in the tax return as it was received by the recipient bank directly from the foreign company. The details of the conversions of funds are specified in the agreement between the recipient bank and the account owner. Consequently, with regard to taxation, conversions should not affect the receipt of income in the form of a dividend. However, we recommend always being ready to confirm the amount and currency of the income with the relevant documents.
In terms of the currency, it is worth mentioning that as a final step the tax authorities recalculate the income received in the foreign currency to Belarusian rubles at the National Bank’s official rate for the date the income was actually received.
After submitting the annual return, an individual must pay 13% personal income tax no later than 1 June in the year following the date when the dividend was actually received.
Offsetting of tax paid abroad
Foreign jurisdictions normally oblige their resident companies to withhold personal income tax when paying out dividends, although some specific jurisdictions such as Cyprus do not. In such situations, according to Belarusian legislation, an individual has the right to offset the amount of tax paid abroad. To do this, the individuals must confirm the income and paid taxes with an official document from the foreign tax authorities containing the relevant information.
It is permitted for offsetting to be requested when the personal income tax return is submitted with attached corporate documents confirming income and paid taxes. However, after this the individuals are still obliged to provide proof, with documents issued by the tax authorities of the foreign country, within one year of submitting the tax return. If the confirmation documents mentioned above are not provided on time, the tax authorities will recalculate the personal income tax due and charge additional fines for not paying on time.
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