The Hi-Tech Park (HTP) in Belarus has become an important centre of attraction for IT companies and startups, offering unique business conditions. One key aspect attracting more new residents is tax incentives and preferences that promote the development of innovative companies and attract investment. In this article, we will look at the tax obligations of HTP residents and the benefits they receive under current legislation.
Who are HTP Residents
The residents of the Hi-Tech Park (HTP) in Belarus are companies engaged in software development, IT services, artificial intelligence, telecommunications, gaming, and other high-tech areas. The HTP includes only IT companies registered in Belarus that have fulfilled the conditions to become HTP residents. In particular, a business plan was developed and defended before the HTP Supervisory Board.
HTP has registered large and small IT companies that specialise in various aspects of IT and technology. The full list of residents can be found on the official website of the Hi-Tech Park.
Tax Benefits are One of the Advantages for HTP Residents
Tax benefits are one of the key advantages for residents of the Hi-Tech Park (HTP) in the Republic of Belarus, contributing to the creation of favourable conditions for developing IT companies and innovative businesses.
1. Income Tax Benefits
In some cases, HTP residents are exempt from income tax or pay a reduced rate, which allows companies to reinvest the saved funds in technology development, team expansion, and entry into new markets.
2. Preferential Procedure for the Payment of Compulsory Insurance Premiums
HTP residents have the right to use the benefit of mandatory contributions to the social protection fund: they can pay contributions from employees’ salaries that do not exceed the average salary in Belarus for the previous month. In the case of such benefits, employee pensions are calculated based on the amounts of mandatory contributions paid. However, this benefit reduces the total cost of the payroll and allows for more efficient resource management. It should be noted that employees of HTP resident companies have the right to waive such benefits.
4. Exemption from VAT and Customs Duties
The import of equipment, software, and other necessary resources is exempt from VAT and customs duties. This simplifies modernising the technical base and reduces the cost of launching projects. Turnover on the sale of HTP residents’ services within Belarus is also exempt from VAT.
5. Investment Promotion
There is no tax on the income of foreign founding companies and business partners of HTP residents (0% rate). It creates incentives for foreign investment in high-tech projects.
Such preferential terms make HTP an attractive jurisdiction for local and international IT companies (through establishing companies in Belarus and EOR services), creating a competitive advantage for Belarus in the global IT industry.
Comparison of the General Tax Regime with Taxes in HTP
Belarus has a generally accepted tax regime and a more preferential tax regime established for HTP residents. Let’s compare the general and tax rates set for HTP residents.
Value Added Tax
HTP residents in Belarus are exempt from VAT on sales of services, works, goods, and property rights. This also includes the following turnover on the sale of works, services, property rights (including in electronic form) by foreign business partners to HTP residents in Belarus:
- Property rights to intellectual property objects.
- Advertising, marketing, and consulting services.
- Information processing services.
- Services (works) software development, modification, testing, and technical support.
- Hosting services (hosting information resources on the server and providing access to these resources), including comprehensive services for hosting and managing websites.
- Services for searching and transmitting information about potential buyers (consumers) to the customer;
- Services for creating databases and providing access to them.
HTP residents are exempt from VAT, which customs authorities pay when importing equipment to Belarus to conduct their business and implement investment projects.
When the VAT Benefit is Not Applied
- In some cases, HTP residents need to pay VAT. The VAT exemption does not apply to:
- Export turnover
- The rent that HTP residents receive from leasing their real estate
- Turnover when selling property, including real estate, after 12 months have passed since its acquisition or the emergence of rights to it.
In case of sale or use not for own purposes within 2 years from the date of importation into Belarus of the equipment imported for own activities without payment of customs VAT.
Income Tax
The generally established income tax rate in Belarus is 20%. HTP residents are exempt from income tax, except when they are tax agents (they pay income to foreign companies).
When Income Tax Exemption is Not Applied
HTP residents pay income tax at a rate of 9% in the following cases:
- When a participant alienates his share or part of it in the authorized capital.
- When selling an enterprise as a property complex.
- When selling (redeeming) securities.
- On interest for the provision of funds for use.
When selling property 12 months after its purchase (obtaining rights to it), income tax is paid at a generally established rate of 20%.
Offshore Collection
The generally established offshore fee rate is 15%. Belarusian companies are required to pay this fee for money transfers or obligations to offshore companies, and for deposits into offshore accounts. HTP residents do not have to pay this fee for advertising, marketing, intermediary services, or for transferring dividends to founders and a share of property profits.
Land Tax
Land tax rates in Belarus vary depending on the purpose of the land and other circumstances. For example, the land tax rate for lands set aside for business purposes in cities is 236,84 Belarusian rubles per hectare. HTP residents do not pay land tax on land plots within the HTP territory for three years when building real estate for their business.
When the Land Tax Benefit is Not Valid
The land tax benefit does not apply when no circumstances relate to the construction of real estate within the boundaries of the HTP. For example, when an HTP resident builds real estate to operate not on the territory of the HTP but in another place in Belarus.
Real Estate Tax
The real estate tax rate for most commercial companies in Belarus is 1%. Local councils of deputies can change these rates upward or downward no more than twice. The real estate of HTP residents in the HTP territory is exempt from property tax except in cases of rental.
When the Property Tax Benefit is Not Valid
The real estate tax benefit does not work when HTP residents rent out their properties in the HTP territory.
Income Tax for Foreign Organizations
The generally established income tax rates for foreign organizations without a representative office in Belarus vary from 6% to 15%. HTP residents apply a 0% rate on the following incomes of foreign organizations when paying them income:
- From the sale of shares (part of a share) in the authorized capital (units, shares) of an HTP resident organization (provided that a foreign company continuously owns shares (parts, units, shares) on the right of ownership for 365 calendar days).
- From data processing and information hosting activities (data processing services, web hosting (including comprehensive website hosting and management services).
- From providing data processing services and compiling specialized reports based on this data.
- From providing data entry and processing services.
- From providing a place and time for advertising on the global computer network Internet.
- From the activities of web portals to the operation of websites that use search engines, extensive databases of Internet addresses and content are created and maintained in a format that provides easy information search.
- From providing disk space and/or a communication channel for hosting information on the server and its maintenance services.
- From debt obligations, regardless of their registration method, to royalties.
- From intermediary services to advertising services.
The tax rate on dividends of foreign companies is 5%, but a more preferential rate is applied if an international agreement establishes it.
“Salary” Taxes
Today, the rates of “salary taxes” (income tax, mandatory insurance contributions to the social protection fund and the Belgosstrakh) are the same for employees of all Belarusian companies. Although the income tax rate on employees’ salaries of HTP resident companies is envisaged to be 9%, this rate will not apply in 2023-2024.
Currently (in 2024), the income tax rate for all employees’ salaries is 13%. All employees can apply deductions from the tax base (accrued income before taxation). Deductions are deducted from accrued wages before income tax is calculated. For example, these are deductions for minor children and dependents, deductions for receiving the first paid education, and deductions for building or buying the first home.
Conclusion
The residents of the Hi-Tech Park in Belarus have unique tax advantages that contribute to the development of the IT business and attract investments to the country. The low tax burden, income tax benefits, and the absence of some general taxes create favorable conditions for innovation.
These measures allow companies to manage financial resources effectively, directing them to expand their business, develop technology, and increase competitiveness. At the same time, HTP residents must comply with strict rules and requirements established by law, which contributes to transparency and sustainable development of the sector.
Thus, tax incentives for HTP residents are an important element of government policy to stimulate digital transformation and strengthen Belarus’ position as an international IT hub.
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