New Belarusian tax code can recognize foreign companies as Belarusian and oblige them to pay taxes on their global incomes to the country’s budget. The changes are expected to come into force on 1 January 2019.
Big changes are coming.
How does the place of registration affect tax payments to the country’s budget?
Tax legislation in Belarus divides organizations into Belarusian and foreign – at the place of its tax registration.
Belarusian companies pay taxes on their global incomes (domestic and foreign) to the country’s budget. Meanwhile, foreign companies pay taxes on activities, incomes, and property on the territory of Belarus.
Can a foreign company be recognized as a Belarusian one?
The current version of the tax code states that if a company lacks or doesn’t operate via its place of state registration, it is recognized by:
- the location of the supreme governing body;
- the place where key management decisions are made;
- the place where the main accounting documents are located;
- the place of residence of the head of the company or its founder.
What will change?
In the latest Tax Code edition, the criteria for recognizing a foreign company as a Belarus were detailed and expanded. This can happen in the following cases:
- in accordance with an international tax treaty of Belarus, the provisions of which determine the residency of the organization;
- in case if a foreign organization is inactive in the state under the legislation of which it was created, and has a place of its actual management in Belarus.
Foreign companies may become tax residents of Belarus, primarily if they don’t have a working executive body abroad: a director, manager or shareholders, depending on who is in charge of the current management of the organization.
Such changes are aimed at combating fictitious and inactive companies on the territory of foreign countries that are actually managed from the territory of Belarus.
To what companies a new law can be applied?
Trading companies for operations with non-residents
Such companies were created in the Russian Federation to execute documents on imports from Belarus and pay import VAT.
Transport and freight forwarding companies whose main customers are non-residents
The management of such companies does not always require a permanent presence on the territory of a foreign state. Negotiations, correspondence, as well as monitoring movement of goods can be carried out via the internet from anywhere in the world.
The specificity of the business allows you to register a company in a convenient jurisdiction, but manage it from Belarus and have personnel here.
Foreign companies related to the Belarusian business
These are the companies whose managers live in Belarus, provide operational guidance and visit the place of registration only to take key decisions.