In October 2005, the Belarusian President signed an edict that established uniform rules for all Belarusian FEZs.

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1 FREE ECONOMIC ZONES ( FEZ) Preface In November 1998, Belarusian President signed a law on free economic zones (FEZ) in Belarus. The first such zone was established, before the adoption of the law, in the city of Brest. At present time, each of Belarus' six regions has its own FEZ. The tax and regulatory scheme applicable to businesses in these zones is, in principle, much simplier and more rational than elsewhere in Belarus. Significant tax benefits for businesses registered and operating inside the zones include, among others, import tariff and VAT exemptions and income tax reductions of 50% or more. In October 2005, the Belarusian President signed an edict that established uniform rules for all Belarusian FEZs. In order to avoid unfair competition of FEZ businesses with ones outside the zones, the edict made all benefits contingent upon either exporting products manufactured or producing products not in competition with those produced by existing domestic firms. The restrictions reflect the intent to use the FEZs to improve the balance of trade. As of 1 October 2015, 494 companies were registered as a FEZ residents. The largest number of the residents is registered in zones of Minsk (143) and Grodnoinvest (92). They are followed by FEZ of Brest (88), Gomel- Raton (79), Mogilev (52) and Vitebsk (40). The main activity of FEZ residing companies is manufacturing of industrial products (nearly 90% of the total number of enterprises). The number of branches attractive for investors includes precision machinery industry and metal working, electronic engineering and telecommunications, chemical and petrochemical industry, agriculture product processing, production of healthcare products and equipment, modern construction material, new kinds of services. The most active foreign investors, with their share in total volume of foreign investment accumulated exceeding 82% are as follows: - Russian Federation (19.3%), - United Kingdom of Great Britain and Northern Ireland (14.3%), - Germany (15.8%), - Poland (8.4%), - USA (6.7%), - Austria (6.6%), - Cyprus (5.7%), - Latvia (3%), - Czech Republic (2.4%). 1

2 SHORT DESCRIPTIONS Minsk Free Economic Zone Established in 1998, the Minsk Free Economic Zone has attracted 143 businesses, with 97 foreign investors, including firms from the UK and the USA. It specializes in light industry, manufacturing and advanced engineering. It is split over two sites and covers a significant proportion of Minsk and its outlying area, including parts of the international airport. Minsk has attracted a quarter of all FEZ members in Belarus, including the largest privatelyowned printing business in the country, metal-pressing specialists, and a cable company which makes fibre-optic wires for telecommunications. The FEZ is keen to attract investment for hightech export oriented industries, modern construction and technology firms. The Zone has several projects which it is promoting to attract foreign investment. These include a major transport servicing complex on the E30 European highway (which links Moscow and Paris) and a logistics center at the International Airport, which will include a business hub and hotel. There are also plans for a large sports and entertainment complex covering 75 hectares, to the south east of Minsk which will include an amusement park, technology, ecology and tourism centers. GrodnoInvest Free Economic Zone Created in 2002 to attract investment, employment and high-technology industry to the city of Grodno, in Western Belarus and offers an excellent export gateway to the European Union (with the Polish border just 15km away). FEZ GrodnoInvest now: 92 companies employing over people in light industry, building materials, chemicals, petrochemicals, food processing, printing, transport and communications. Nearly three quarters of the businesses in the FEZ are partially or wholly foreign-owned, with investment from 35 countries, including Canada, France, Great Britain and the USA. FEZ has attracted US $940 million of investments. Brest Free Economic Zone The first FEZ in Belarus when it was launched in 1996, Brest is now home to around 90 businesses, three-quarters of which have foreign investment, representing 20 countries. On two areas around Brest, a city of 318,000 people. Close to the Polish border (and therefore the EU) and on the main transport route from Moscow and Paris. Highly developed infrastructure, with an international airport, and EU & CIS standard rail hub and a direct waterway connection to the Black Sea. Focus on developing high-tech enterprises, particularly in the pharmaceutical (medicines and equipment), automotive, electronics and mechanical engineering sectors. The companies operating in the zone produce more than 1000 articles of industrial goods and products including: electrical engineering articles, equipment to paint on the road marking elements, paints and lacquers, gas and electric stoves, furniture, fish and sea food, meats and sausages, confectionery. Employs 20,000 people and generated exports worth US $750 million in Attracted US $83 million in foreign investment in 2014 (mainly from Germany, Russia and Poland). 2

3 Gomel-Raton Free Economic Zone Established in 1998 in Gomel (south eastern Belarus, close to Russia, Ukraine, and Central Europe borders). 79 members (of which 32 are foreign-backed) with US $90 million of investment from 10 countries (2014). On the Helsinki-Athens transport corridor, with a dedicated logistics hub, a Customs clearing zone, extensive rail-side warehousing and spur-tracks to FEZ businesses, Gomel city has an international airport and a river port, linked to the Black Sea, equipped to handle bulk cargo boats a variety of business-ready premises with potential for expansion, ready and waiting to accommodate newcomers to the FEZ. Specializes in plastics with businesses such as Alkopack (plastic packaging and pipe manufacturer from Germany). Other key businesses operate in the areas of electronics, electrical engineering, electric components, cabling and machine building. Mogilev Free Economic Zone Established in 2002 for the period of 30 years, on six sites across the city of Mogilev with the total square of 2108 hectares in industrial parts of Mogilev city. Good infrastructure including road and rail links and a major regional airport. 52 members, half backed by foreign investment from Germany, Austria, Russia, Cyprus and Lithuania. Members produce textiles, glassware, white goods, pulp and paper, and machinery. Foreign investment into the wider Mogilev region stood at more than US $150 million in Two chemical enterprises Mogilevkhimvolokno (the largest manufacturer of artificial fibres) and Belshina (national tyre producer) generate 25% of industrial output in the region. It is also host to Mogotex (the largest textile manufacturer in Belarus) and Lenta (the biggest curtain maker in the CIS). Heineken has a presence in the region following its 70 million purchase of Syabar brewery, the second biggest in Belarus, in Vitebsk Free Economic Zone Has 40 member businesses, of which two-thirds enjoy foreign investment including from the USA, UK, Canada, Germany, Poland and Russia. Located in north-east Belarus, 50 km from the Russian border and 200 km from Lithuania and Latvia. Targeting markets in Russia, Central Europe and Scandinavia Occupies twelve square miles in the city of Vitebsk, on the Helsinki-Athens transport corridor Businesses include construction, food processing, electronics, veterinary medicine, agricultural chemicals, clothing, and fiber-optic cabling. Just under half of goods are made for export, a quarter are produced as part of Belarus importsubstitution program. Exported US $143 millionof goods in 2014 and imported US $125 million (excl. oil and oil products). Vitebsk is a thriving industrial city with a population of 356,000 and pedigree in the fuel, chemical and petrochemical sectors, electric power generation and food-processing. 3

4 1. REGISTRATION 1.1 State Registration of Commercial Legal Entities A company must be registered in order to obtain the status of a legal entity. As a rule, local executive committees carry out the state registration of commercial legal entities. The application package for registration of a company must contain the following documents: Application statement; Сharter (articles of association for companies acting in compliance with articles of association alone) in two hard copies and one soft copy; Excerpt from the trade register (for foreign entities). The excerpt must be certified and apostilled and translated into the Russian/Belarusian language by a certified Belarusian translator and issued not earlier than one year before application for state registration. The signature of the translator must be certified by a Belarusian notary public or by a Belarusian diplomatic mission abroad; passport copy (for foreign individuals). The copy must be translated into Russian/Belarusian by a certified Belarusian translator. The signature of the translator must be certified by a Belarusian notary public or diplomatic mission abroad; document confirming payment of the registration fee. The most popular forms of companies with foreign investments in Belarus are the following: Limited Liability Company (LLC); Unitary Enterprise (Private Enterprise); Joint-Stock Company (open or closed). During this period the registration body performs the registration of the legal entity and registers the legal entity with the Social Security Fund, the tax authorities, the state insurance company and the statistics body. Joint stock companies are required to register the issue of their shares with the Department on Securities of the Ministry of Finance of the Republic of Belarus and this increases the time required for registration. Normally, state registration will take 5-7 business days from the day of filling the application. 4

5 1.2. Registration as a FEZ resident A legal entity of the Republic of Belarus or an individual entrepreneur of the Republic of Belarus located within the FEZ territory that concluded an agreement on terms of activity in FEZ can be registered as a FEZ resident. In order to apply for the FEZ residence a legal entity or an individual entrepreneur (hereinafter the Applicant) submits the following documents to FEZ Administration: An application in accordance with the form approved by FEZ Administration. Duly notarized copies of the Articles of Incorporation (for legal entities). The original documents should be presented during the submission. A copy of the certificate of the state registration. Original document should be presented during the submission. A document proving payment of the state fee for registration as a FEZ resident in the stipulated amount. The investment project business-plan developed in accordance with the form approved by FEZ Administration. The business-plan of a legal entity that reports to or shares of which are controlled by a republican authority of public administration, another public organization reporting to the Government of the Republic of Belarus, local Executive Committee should be approved by this public authority or organization. Basically, the investment project business-plan should correspond to the following conditions: Urgency of the investment project and its conformity to purposes and aims of FEZ creation and activity as well as to the character of social and economic policy of the state Absence of similar productions in the territory of the Republic of Belarus outside the territory of free economic zones. Investments into the project are not less than 1 million EURO. Export orientation of the project (not less than 70% of goods - for export, except importsubstituting goods and goods sold to other residents of free economic zones). Location of production within the borders of FEZ territory. A resident of FEZ can be a legal person of any form of ownership created by Belarusian and (or) foreign legal and (or) physical person. Within 14 business days FEZ Administration considers whether the submitted documents comply with legal requirements. The state fee for registration as a FEZ resident is 50 basic amounts (approx. 500 USD). According to the results of the submitted documents consideration, a draft of the Agreement on conditions of activity in FEZ is sent to the Applicant for the decision on registration as a FEZ resident to be made and the Agreement to be concluded. The Agreement is concluded for the 5

6 duration of the investment project stipulated in the business-plan. A form of the Agreement is approved by FEZ Administration. A copy of FEZ Administration's decision to refuse conclusion of the Agreement and registration of the Applicant as its resident specifying grounds of refusal is sent back to the Applicant no later than the day following the day of this decision. In case FEZ Administration refuses to conclude the Agreement and to register the Applicant as its resident, the registration fee is reimbursed to the Applicant in the order stipulated by the legislation. The Applicant can appeal against the decision of FEZ Administration to refuse registration as a FEZ resident in court in the set order. The Agreement should be concluded within 5 (five) days from the day the Applicant has received it but no later than one month after the date of this decision. The Applicant is registered as a FEZ resident on the day the Agreement is concluded and till the Agreement expiration date. The Certificate of registration as a FEZ resident is sent (delivered) to its resident no later than three days after conclusion of the Agreement. If the Applicant does not conclude the Agreement, the paid registration fee is to be reimbursed in the order stipulated by the law. 6

7 2. FEZ. PREFERENCES AND BENEFITS Republic of Belarus has established a UNIFIED LEGAL REGIME (tax and customs) for all six free economic zones. Economic entities are held accountable for violations of the terms and conditions of operating in the zones. In addition, this special legal regime is applied to the products of FEZ residing companies deemed for export or if they are on the import-substitution goods list adopted by the President of the Republic of Belarus. The allowances act towards the following taxes and receipts: own product profit tax is not charged within 5 years after profit is declared; then, upon the expiration of 5 years from the day of the date of profit declaration, the profit tax is paid in the amount of 50% of the normal standard. Owing to the reduction of the profit tax rate in 2012 from 24% to 18%, FEZ residents will calculate a profit tax at the rate of 9%; import-substituting goods are liable to VAT at the rate of 10%; real estate tax on buildings and constructions (including excessive construction in process) located in the territory of corresponding FEZs is not charged; land tax from building estates for the period of design and construction (but no more than 5 years) is not charged; exemption from contributions to the innovation fund of the Ministry of Architecture and Construction of the Republic of Belarus is provided; customs and VAT exemption in importing equipment and goods for purposes of own production, etc. An additional point is that FEZ residents have some other preferences: the right to freely dispose currency earnings is granted; favorable terms on paying rent for plots of land used to execute investment projects (moreover, residents registered after January 1, 2012, are exempted from paying for the right to conclude an agreement on the lease of a plot of land and from rent collection for the period of design and construction) are provided products are provided with the status of import-substituting goods over a period of 3 years from the date of putting it on the List of such goods; the state renders assistance in the financing of construction and development of infrastructure facilities necessary for the execution of investment projects priced at from more than 10 million Euros; compensatory payments for removable and transplantable objects of the vegetable world in construction within the FEZ boundaries as well as for losses and damages inflicted on the previous land user and the state by withdrawing plot of land. 7

8 Both national and foreign currencies are accepted for settlement within free economic zones in accordance with the rules and regulations endorsed by the National Bank of the Republic of Belarus. Foreign investors operating in FEZ enjoy investment protection guaranteed by the state. The state guarantees foreign investors the right to reimbursement of their share of a company s property in accordance with its residual value as well as due revenues, including foreign currency revenues, generated from their investments in the Republic of Belarus. 3. BANKING, ACCOUNTING, AUDITING 3.1 Bank accounts Foreign companies may open settlement accounts in Belarusian banks both in local currency and in foreign currency. In practice, pledges over Belarusian bank accounts are not taken because of enforcement issues. Instead, direct debit arrangements in respect of bank accounts are sometimes implemented. 3.2 Currency of settlement and currency exchange Foreign currency can be used in settlements between Belarusian residents only in a limited number of cases. Settlements between a resident and non resident may be both in local currency and in foreign currency if the National Bank has set the official exchange rate of the BYR (Belarusian rubles) against the other currency (the list comprises 79 foreign currencies, including USD and EUR). Certain limitations as to the use of foreign currency in settlements with foreign companies may be set in international treaties of Belarus. *** NOTE!!! For repatriation of investor s proceeds local currency may be freely changed to foreign currencies through the bank. 3.3 Mandatory Conversion of Foreign Currency Belarusian legal entities are subject to the mandatory conversion of proceeds in a foreign currency received from the export of goods, works, and services into Belarusian rubles. The mandatory conversion obligation applies to 30% of all proceeds in a foreign currency. The conversion must be performed via a service bank within seven business days of receipt of a foreign currency. *** NOTE!!! FEZ residents are EXEMPT from this obligation. 3.4 Requirements for obtaining a loan from a non resident A Belarusian borrower requires a permit from the National Bank Bank to obtain a loan from a non resident, if any of the following criteria is met: interest rate for a loan in USD or EUR exceeds 14% p.a., or for a loan in other currencies the 8

9 refinancing interest rate of the respective central bank plus 5% p.a.; the default interest rate exceeds 0.01% daily (3.65% p.a.); the loan will not be repaid from the borrower s account; the creditor is registered in an offshore zone; the loan is disbursed to the account of a third party; additional payments (e.g. commitment fee, front end fee, prepayment fee) are set by the agreement (this criterion is not applicable to loan agreements with foreign banks) 3.5 Accounting Requirements All companies in Belarus are required to keep accounting records. Accounts must be kept in Belarusian rubles and in compliance with Belarusian accounting rules. In addition, a company may keep parallel accounts consistent with any other accounting standards, e.g. GAAP. 3.6 Audit Requirements Pursuant to Belarusian legislation, some companies are obliged to have their annual financial statements audited. An annual audit of the financial statements is obligatory for the following entities: Entities in the form of OJSC (open joint stock companies); Banks and non-banking financial organisations; Exchange markets; Companies with foreign investments; Insurance companies and insurance brokers; Residents of HTP (High Technologies Park); Entities conducting the guaranteed refund of individuals bank deposits; Entities with more than EUR 600,000 revenue for the year previous to the reporting. Within 30 days of receiving the auditor s opinion, the entities must make corrections to the financial statements in connection with any irregularities and misstatements investigated by auditor. The audit conducted under the special audit task must be performed for: the document confirmation of a company with a foreign investments statutory fund formation; the document confirmation of a legal entity s (resident of FEZ) statutory fund formation; the confirmation (as established by legislation) of the origination of the monetary funds that are contributed to the start-up statutory funds for insurance companies by the participants; the confirmation of the reliability of the acting through a permanent establishment foreign company s tax return; the confirmation of an enterprise s value before sale; N.B. Only individual auditors or auditing firms may perform audits in Belarus. 9

10 4. CUSTOM PREFERENCES On the territory of free economic zone for FEZ residents can be determined Free Customs Zone (FCZ) territory, where the goods placed under the procedure of FCZ can be stowed and used. The procedure of FCZ is characterized by the following: foreign goods (equipment, tools, raw, materials and components for production, stipulated by the investment project), imported to the territory of FCZ and placed under the procedure of FCZ are not imposed with customs duties and taxes; while exporting out of the Customs Union foreign goods and products made with the use of foreign goods, placed under the procedure of FCZ, import customs duties and taxes are not paid; while exporting to the Customs Union territory foreign goods and products made with the use of foreign goods, placed under the procedure of FCZ, import customs duties and taxes are paid. 5. TAXATION FOR FEZ RESIDENTS Residents of six FEZs situated in Belarus are subject to corporate profit tax (CPT) paid at a rate reduced by 50 % (but not greater than a 12 %), VAT, excises, real estate tax (except the tax on objects that are situated on the territory of an FEZ), ecological tax, land tax (or rent), offshore levy, state duty, patent fees, license and registration fees, stamp duty, local taxes and duties, contributions to the Social Fund in accordance with the Tax Code, Customs Code, presidential decrees and the laws of the Republic of Belarus. The residents of FEZ are exempt from corporate profit tax from the selling of own manufactured goods, works and services for 5 years starting from the day when profits were declared for the first time. The residents of an FEZ act as tax agents in accordance with the requirements of the Tax Code. A special taxation is applied to the following transactions: Sales of goods (work, services) manufactured by the residents of FEZ on its territory to foreign legal entities or individuals under agreements between them and with the export of goods for limits of territory of Belarus; Sales of substitutes of imported goods (work, services) produced by residents of FEZ Sales of goods (work, services) produced by the residents of an FEZ to other residents of an FEZ under contracts between them. 10

11 Duty Type FEZ Residents 1.Real Estate Tax not paid 2.Motor Vehicles Purchase Tax 3.Charge to Republican Support Fund of Agricultural Producers, Food-stuffs Producers and Agricultural Science 4.Special Purpose Charge on City (Region) Infrastructure Maintenance and Development 5.Special Purpose Charge on Public Transport Renovation and Repair 6.Value Added Tax 7.Income and Profit Tax 8.Land Tax (or Land Rent Payment) 9.Excises 10.Ecological Tax 11.Deductions to Population Social Protection Fund 12.Income Tax on Natural Persons not paid not paid not paid not paid VAT is paid in a 50% amount of the sum subject to payment provided that the import substituting own manufacture goods sold on the territory of the Republic of Belarus Profit earned from the sale of products and services of own manufacture is exempted from taxation for the period of 5 years from the date of profit declaration. When a 5-year period is over the profit is subject to taxation by the rate reduced by 50% of the rate established by tax legislation that is by 12% rate Rent payment rates for land plots is defined proceeding from the cadastre cost of these plots with the ration 0,02 but not less than land tax rates of corresponding land category. The rate of land rent payment, calculated at the date of rent contract signing can not be changed during the term of rent contract Tax is subject to taxation by the generally established rate Tax is subject to taxation by the generally established rate Tax is subject to taxation by the generally established rate Tax is subject to taxation by the generally established rate 11

12 In total, a FEZ resident pays nearly 50% of taxes less than the amount of taxes established for the entrepreneurial entities of Belarus. Duty Type Residents of the Republic of Belarus FEZ Residents 1. Profit Tax 18% 2. Value Added Tax 20% 3. Excises 4. Land Tax (or Land Rent Payment) 5. Ecological Tax 6. Real Estate Tax 7. Offshore Fee By tax rates for every type of excised products or goods Tax rates is calculated according to the cadastre cost of the land plot. By tax rates depending on volumes of: - pollutant emissions (dumping); - minerals outputs. 1% of depreciated cost of fixed production and non-production assets 15% of the amount transferred to nonresidents of the Republic of Belarus registered in offshore zones or transferred to the accounts opened in these zones. Profit tax is calculated and paid at the rate reduced by 50% of the rate established by tax legislation (9% rate). Profit of FEZ residents earned from the sale of products (works and services) of own manufacture is exempted from taxation for the period of 5 years from the date of profit declaration. VAT is paid by FEZ residents in the 50% amount of the turnover tax sum from sales at the local market, subject to payment, provided that the goods of the own manufacture sold on the territory of the Republic of Belarus are produced on FEZ territory and are import substituting ones according to the Specification of import-substituting products. The VAT sums released as above are not liable to taxation (charges). The same Rent payment rates for land plots is defined proceeding from the cadastre cost of these plots using rations depending on the land functions and purpose of usage. The same Not paid for fixed assets (excess construction-in-progress objects) situated on FEZ territory regardless of the above-mentioned assets purpose. The same Tax benefits are applicable if the FEZ resident provides the tax authority with a certificate of goods of own production issued by the Belarusian chamber of commerce and Industry Special taxation is NOT applied to: public catering, gambling business, trade and procurement activity, stock transactions; products (works, services) sale, production (execution, rendering) of which is carried out using fixed assets being in property right of a FEZ resident and/or using labour of the employees of a FEZ resident outside FEZ territory; 12

13 6) Employment of Foreigners. Work Permits. All foreign citizens intending to work in Belarus are required to obtain work permits. A work permit is issued upon application to the local Belarusian authorities. The timeframe for obtaining a work permit is approximately two-three weeks, normally. *** NOTE!!! Person is considered a Belarusian tax resident if he was physically present in Belarus for a period of over 183 days in a calendar year (regardless of nationality). If you arrive at the territory of Belarus later than 2 July you are not considered a Belarusian tax resident regardless the period of your staying in Belarus in that calendar year In order to obtain a work permit investor must submit the following documents to the immigration authorities (Department on Citizenship and Immigration of the General Directorate of Internal Affairs of the Minsk City Executive Committee): -- application form -- photocopy of the foreigner s passport or equivalent document -- a document confirming payment of the state fee for obtaining a special permit. *** NOTE!!! Director of a Belarusian legal entity with foreign investments DOESN T NEED to obtain a work permit. In order to employ expatriates the employer must obtain a special permit (license) granted by the Ministry of Internal Affairs of the Republic of Belarus. The contract with the investor is subject to registration. The state fee for obtaining work permit depends on validity term applied for: 15 days about USD 24; 1 month about USD 37; 3 month about USD 61; 1 year about USD 122 *** NOTE!!! FEZ residents are EXEMPT from this state fee The validity term of a work permit is 1 year and can be extended for a year pursuant to the same procedure as established for its issue. The validity of work permit issued to a foreigner is terminated in the event of the expiration of the special permit (license) issued to his/her employer for providing employment to foreign citizens and stateless persons in the Republic of Belarus. Foreign workers wages can be transferred abroad. Social insurance and social security service (except for pension coverage of foreign citizens) is regulated by the legislative enactments of the Republic of Belarus. Employment of the citizens of the Republic of Belarus at organizations representative offices is carried out on the basis of labour agreements (contracts) in compliance with the legislation of the Republic of Belarus. 13

14 7. INSURANCE 7.1. Medical insurance Medical insurance is required for all foreign citizens visiting and residing Republic of Belarus. To be eligible for emergency medical care in Belarus all foreign citizens should have the medical insurance agreement with a Belarusian insurance company or with an authorized foreign insurance company and possess the insurance certificate (policy) issued by the company The insurance certificate (policy) issued by a foreign insurance company should be valid on the territory of the Republic of Belarus during the stay and should cover the insurance cases established by the Law of the Republic of Belarus. The minimum limit of insurance responsibility is 5000 USD. The representatives of Belarusian insurance companies will provide foreign citizens with necessary insurance agreements and certificates on any border crossing point of the Republic of Belarus including International airport Minsk-2 (code MSQ). Local medical insurance costs 1$ per 2 days stay in Belarus. 7.2 Social Security Fund Contributions (SSFC) The maximum amount of contribution calculation basis is limited to the amount four times as much as the salary of employees in the Republic of Belarus for the month preceding the month when mandatory insurance contributions are paid. Any income above the specified amount is not subject to insurance contribution payments. As of October 2015 the average salary of employees comprised BYR 6,837, 568 (approximately USD 395). The base for the social fund contributions is payroll in cash or in other forms (but not greater than four times the average salary of a Belarusian employee), based on total remuneration except for those types specifically stated as an exception on a list stipulated by the Government. The following rates are applicable to calculating mandatory social insurance for retirement, disability (invalidity), and loss of breadwinner (pension insurance): For a majority of employers, a rate of 28%; 24% for employers engaged in agricultural production provided that agricultural products constitute more than 50 per cent of output; 29% for individuals who pay SSFC independently; 1% for employees (whose contributions are withheld by the employers). There are some specific contribution rates. The amount of mandatory insurance contributions on insurance against temporary disability, pregnancy and maternity, care of children under three years old, etc., comprises 6%. In consideration of the foregoing, as a rule, the total insurance contribution paid by organizations employing people comprises 34%. Moreover, such organizations withhold contributions of 1% from the income paid to the employee. *** NOTE!!! Foreign citizens who work in Belarus pay SSFC on a voluntary basis. 14

15 7.3 Obligatory insurance payments against accidents at work and professional diseases Obligatory insurance payments against accidents at work and professional diseases are specified by Belarusian legislation. The base for obligatory insurance payments against accidents at work and professional diseases comprises payroll in cash or in other forms, based on the total remuneration except for those types specifically stated as an exception on a list stipulated by the government. The insurance payment s rate is 0.6 % (special coefficients from 0.5 to 1.5 are applied). 8. JOINT VENTURES ONLY? There are no restrictions for the companies registered in the territory of Free Economic Zone (FEZ). Legal organizational form of an enterprise is determined by an investor only. Technically, the current Belorussian legislation does not provide significant benefits for companies with foreign investment. At the moment, the main benefit for companies with foreign investment is the possibility of delaying payment of 50% of the company s initial charter capital for 2 years (this benefit is not applicable to open joint stock companies with foreign investment which must fully form their charter capital before they can be registered in Belarus). o N.B.: in order to qualify as a company with foreign investment, the company must have at least one foreign shareholder/participant and the contribution made by the foreign participant(s) into the charter capital must amount to at least USD 20,000. Thus, if a company is wholly owned by foreign entities or individuals, its charter capital must be equal to or exceed USD 20,000. If a company is a Belarusian foreign joint venture, its charter capital must be comprised of a contribution by the foreign participant of at least USD 20,000 and a contribution by the Belarusian participant of any amount. Nothing prevents foreign investors from having shares/units worth less than USD 20,00 in Belarussian companies. In such a case, the company will have the same status as a regular Belarusian legal entity. 15

16 9. Land Rights Current Belarusian legislation has some restrictions on the acquisition of immovables by foreigners. It is prohibited for foreigners and foreign entities to own land plots; foreign entities are allowed to lease land plots only. An exception to the rule is the right of temporary use for foreign investors under the terms of concession agreements concluded with them. It is also significant that Belarusian legislation makes a distinction between residential and non-residential premises. Foreigners are allowed to own nonresidential premises only, with one exception concerning the citizens of the Russian Federation who are allowed to own residential premises as well. Belarusian legislation provides that land rights may be acquired by: o Domestic legal entities (including entities set up by foreigners) on the basis of: the right of permanent use (this right can only be granted to particular legal entities, including, inter alia, residents of Free Economic Zones, agricultural organizations and to other legal entities for construction projects approved by the President of the Republic of Belarus); the right of temporary use (this right is granted on the same basis as the right of permanent use). As a general rule, the right of temporary use can be granted for a period not exceeding 10 years; the right of ownership (although in theory private companies have a right to acquire state owned land, it is quite difficult to realize this right in practice. The acquisition of privately owned land on the basis of a commercial transaction is also possible); the right to rent (which is possible for up to a maximum period of 99 years). As a default rule, state*owned land plots (which constitute about 95% of all land in Belarus) for construction purposes can only be rented; o Foreign legal entities only on the basis of the right to rent (for up to a max. period of 99 years). o Both domestic and foreign legal entities on the basis of the right of temporary use for the purpose of realization of a concession agreement (up to 99 years). 9.1 Acquisition of Land Rights More than 90% of the land in Belarus is owned by the state. Generally, the rights to state-owned land in Belarus may be acquired: trough a public auction; or without an auction at the discretion of local executive committees or the President. *** NOTE!!! The land rights acquisition without holding an auction is granted to FEZ residents; 16

17 However, the acquisition of state-owned land is not the only way of acquiring land plots. Another option is the acquisition of the privately-owned land. The rights to privately-owned land can be acquired under a relevant commercial contract concluded between the private parties. Companies may also acquire the rights to land without an auction being held. However, in these cases the respective authorities may determine unilaterally the title under which the land plot is granted (e.g. ownership/lease/use). The land may also be acquired indirectly through the acquisition of a building or a company as a complex of assets. Under Belarusian legislation, the sale of a state-owned building and/or a company as a complex of assets simultaneously involves the transfer of the right to lease the land necessary for maintenance of the building and/or operation of a company. 9.2 Use of Land Plot A company must start using a land plot (e.g. construction or other use of the land if the land plot has been acquired for a purpose other than the construction of a building) within 6 (six) months of obtaining the right to use the relevant land plot (regardless of the type of right) Lease Agreements As a rule, lease agreements are concluded for a limited term, although lease agreements for an indefinite term are also possible. Lease agreements contain, inter alia, the obligations of the parties which are not influenced by any assignment of the ownership of leased property to another entity or individual within the term of lease agreement. Belarusian law provides protection for lessees, e.g. (1) limits on maximum rental rates for stateowned real estate, (2) a lessor generally cannot terminate a lease agreement until expiration of its term. Lease agreements which are concluded for an indefinite period can be terminated with a relatively short notice period (usually three months). Lease agreements which include an option to purchase are unusual in Belarus; however, the inclusion of an option to purchase in a lease agreement is possible under Belarusian law. 9.4 Rights on Premises Belarus has no codified legal act regulating the status of buildings and structures, and construction activity. However, it is possible to distinguish between two categories of buildings with a different legal status (i) residential and (ii) non-residential buildings. Foreign companies and individuals have the following rights with respect to premises: to own non-residential premises; to own residential premises if those premises are purchased by them from individuals or private companies; to lease non-residential premises; to lease residential premises. 17

18 Belarusian companies (even if established by a foreigner) and Belarusian individuals may own and rent any type of premises in Belarus. In respect of premises, only (i) the right of ownership and (ii) the right of rent are applicable. The right of permanent/temporary use is not applicable to premises Ownership of Building and the Right to the Land on Which a Building is Erected As stated in Article 267 of the Civil Code of Republic of Belarus, the ownership of a building does not automatically mean that the land on which the building is erected is also owned. The land may be used on the basis of other available rights, e.g. right of permanent use or rent. It is legally possible (and it is usual) to be an owner of a building erected on state-owned land. As a rule, the sale of a land plot and a building erected on this land plot must be performed simultaneously if both the land and the building are owned by the same owner. However, the parties can agree that the buyer of the building will not obtain ownership of the relevant land plot and will use this land plot based 10. OPENING BANK ACCOUNTS (for non-resident entities in Belarus) In accordance with the law of the Republic of Belarus, legal entities not resident in Belarus may open accounts in Belarusian rubles (local currency) and foreign hard currencies with any Belarusian bank. o List of documents to be submitted to the Bank to open an account for a legal entity *: Signed Application form to open an account; Copy of an extract from the Commercial Register of a non-resident s country of incorporation or such other document that confirms its legal status in accordance with the law of its country of incorporation, and a copy of its Charter and/or Articles of Incorporation **; Power of Attorney or a copy thereof to open (re-establish) and/or close an account and/or administer funds in such non-resident legal entity s account **; Book of specimen signatures of a legal entity s officers authorized to sign payment documents, and of a seal impression ***; Certificate from BELGOSSTRAKH (local state-owned insurance company) to open an account OR a statement from the account holder that under the law of the Republic of Belarus it is not required to register as an insured. Account Management Agreement. o List of documents to be submitted to the Bank to open an account for the representative office of a legal entity*: Signed Application form to open an account; 18

19 Copy of an extract from the Commercial Register of the country of incorporation or such other document that confirms legal status in accordance with the law of the country of incorporation, and a copy of Charter and/or Articles of Incorporation **; A notarially certified copy of a permit from the Ministry of Foreign Affairs of the Republic of Belarus to open a representative office; Power of Attorney or a copy thereof to open (to re-establish) and/or close an account and/or administer funds in such non-resident legal entity s account **; Book of specimen signatures of a legal entity s officers authorized to sign payment documents, and of a seal impression ***; Certificate from BELGOSSTRAKH to open an account; Bank Account Management Agreement. * - any individual applying to the Bank on matters of opening an account is to produce an ID document. **- any document or a copy thereof issued, made up and/or certified through due process outside the Republic of Belarus in accordance with the law of such foreign countries will be accepted if legalized or apostilled unless otherwise prescribed by an international treaty to which the Republic of Belarus is a party. Any document or a copy thereof submitted in a foreign language is to be accompanied by a duly certified Russian (Belarusian) translation. *** - authenticity of signatures by persons authorized to sign payment documents in the book of specimen signatures and of seal impression is to be witnessed by a body authorized to perform notarial services. Fees for opening accounts for legal entities and sole proprietors not resident in Belarus Type of operation/service Opening of bank account, C-type account for a legal entity/sole proprietor Opening of bank acc. for a legal entity s representative office Certification of the authenticity of signatures of officers authorized to sign payments documents and of seal impression Fee rate examples (approx.) USD per each acc. USD 15 per each acc. USD 3 19

20 11. Currency Regulation. Capital and Profit Transfer Pursuant to the Investment Code of the Republic of Belarus ( Investment Code ), foreign investors have the same rights as the local business and may at their sole discretion dispose of income or revenue generated by their investment and repatriate profits without any restrictions upon payment of the relevant taxes in Belarus. 12. GUARANTEES FOR INVESTORS The Belarussian State guarantees investments' protection and other property rights of an investor: Equal rights and possibilities for the implementation of investment intentions and projects. Protection from discrimination and other illegal restrictions or actions regarding the rights of all managing subjects irrespective of a country of origin and legal form. Guarantees of property owners' rights regarding the use of profits from the investment activity, free disposal of the capital and property. Unhampered transfer of incomes abroad including in foreign currency received from the investment activity in FEZ. No interference in the managing activity of a company with foreign investments on the part of the state bodies is possible. Independent ownership and disposal of the results of the investment activity. The right for the return of a share in the property of a company. Equal protection of rights and legal interests of investors. Protection of investments and deposits made in the territory of FEZ are guaranteed by the law of the Republic of Belarus and International agreements of the Republic of Belarus. The Belarussian State guarantees the investors legally acquired property rights, and protects these rights. The State guarantees equal rights to investors, regardless of their form of ownership, as well as equal (without any discrimination) protection of the rights and legitimate interests of the investors. The State guarantees the stability of the investor's rights on investment activity and its termination according to the Investment Code of the Republic of Belarus. The investor has the right to define and implement, in accordance with the legislative acts of the Republic of Belarus, all actions arising from the possession, use and disposal of the objects and results of investment activity Guarantees of the use of the investment activity results The investor has the right to use the profit (income) received as a result of investment activities, including reinvesting in the Republic of Belarus in accordance with the legislative acts of the Republic of Belarus. 20

21 Reinvestment is the investment of the profit (income) received in the result of investment activity to new objects of investment activity on the territory of the Republic of Belarus. The State guarantees the investors a free transfer of the profit (income received on the territory of the Republic of Belarus as result of investment activities) from the Republic of Belarus, as well as proceeds from the full or partial investment property sale upon termination of investment activity Investment protection The State guarantees investments protection in accordance with the legislative acts of the Republic of Belarus. Investments CAN NOT be nationalized or expropriated. Nationalization or requisition are possible only with the timely and full compensation for the cost of nationalized or requisitioned investment property and other damages caused by nationalization or requisition. The procedure and conditions of nationalization and requisition as well as compensation cost are established by the Investment Code and the legislative acts of the Republic of Belarus Compensation of the cost of nationalized or requisitioned investment property Compensation of the cost of nationalized or requisitioned investment property should be equal to the real value of the property at the moment of nationalization or requisition. In addition, the compensation must include the percent calculated at the official rate of the Belarusian ruble against the relevant foreign currency, from the date of de facto nationalization or requisition (or a public announcement) to the date of actual payment of compensation. Specified percentage shall not be lower than the corresponding percentage set in the London interbank market (LIBOR). Compensation for the nationalized or requisitioned investment assets to the domestic investor is paid in the official currency of the Republic of Belarus, to the foreign investor - in the currency in which the investments were initially made. The amount of compensation for the nationalized or requisitioned investment property can be appealed by the investor in the Court Guarantees against illegal actions (inaction) of state bodies and their officials Actions (inaction) of state bodies or their officials, of the administrative-territorial units or their officials and acts of the state bodies or the administrative units of Belarus, which violate the rights of the investor and (or) causing losses and other damage may be appealed by the investor in the Court. Damage, including looses caused by the actions (inaction) or acts mentioned above must be compensated from the relevant treasury by the Court. The order of damage compensation, including looses, is determined by the legislative acts. 21

22 13. VISA TYPES FOR INVESTORS An potential investor may apply for different types of visas: o C type short-term and valid for 90 days issued, among others, for a business trip. The consular fee for the short-term visa (type C) is listed below: 60 Euro for a single-entry visa; 90 Euro for a double-entry visa; 120 Euro for a multiple-entry visa. o D type long-term, valid up to 1 year, providing the right to stay for up to 90 days unless otherwise provided for by the international treaties of the Republic of Belarus. A visa may be issued to support business ties, among others. The consular fee for the long-term multiple-entry visa (type D) is 150 Euro. o The foreign investors who have invested at least Euro into in the territory of the Republic of Belarus can apply for a permanent residence permit in the Republic of Belarus. 22