Belarus business and investment guide Tax issues 2012

Tax

Contents

Country profile Incentives for foreign investors Tax administration Types ofbusiness presence Taxation ofbusinesses inBelarus Belarusian-sourced income offoreign companies Taxation ofindividuals Customs issues Currency control issues Your contacts inDeloitte CIS

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Introduction

This Belarus business and investment guide has been prepared byDeloitte toprovide information ofinterest tothose considering investing ordoing business inBelarus. The information provided isprimarily addressed tonon-residents ofBelarus who may becontemplating business activities orinvestment inthe country. The information presented inthis publication iscorrect at, and reflects the situation asof 1 March 2012. The purpose ofthe booklet isto explain, inbroad terms, the requirements oflocal laws affecting the taxation and also the establishment and operations ofbusiness enterprises inBelarus. The information provided inthe following pages isnot exhaustive, nor isit intended tobe so. The reader should beaware that the general framework ofthe legislation and the detailed regulations underpinning itare subject tofrequent change. Therefore, before making any decisions, further advice should besought. The combination ofincreased globalization and the growing complexity oftax systems inindividual countries gives rise tomany tax exposures. For both companies and private individuals, the consequences ofmisjudging the tax and legal situation can beserious. Asadvisors with extensive experience inBelarus and abroad, Deloittes role ismore than merely identifying risks - wealso find solutions.

Thanks toDeloittes powerful worldwide network, wecan propose tailor-made solutions that enable your organization toreduce risks and take advantage ofopportunities tooptimize your tax position. Deloitte tax consulting services cover all ofthe tax matters that affect companies and individuals, irrespective oftheir size orsphere ofactivity. These include filing tax returns, tax planning and assistance intax matters. These consulting services are specifically designed for each industry orform oforganization. Deloitte isa global leader among professional services organizations interms ofthe number ofits tax partners and professionals. Deloitte offers awide range ofservices and isable todeploy experienced professionals with extensive knowledge and specialized skills towork for clients across awide range ofsectors.

Consulting ondirect and indirect taxation Consultation onvarious tax issues International tax planning and structuring Advice oncustoms and indirect taxes, value-added tax and excises according todomestic legislation Tax reviews and identification ofpossible tax optimization options Tax planning for investment projects Development oftax accounting policies and related procedures Services related tomergers and acquisitions, including due diligence

Outsourcing and tax compliance services Accounting and reporting inaccordance with Belarusian legislation Maintenance ofbank accounts; bank and cash transaction accounting Tax accounting and tax reporting Outsourcing services related topayroll and related tax assessment Preparation ofstatistical reports and their submission tothe Belarusian statistics authorities Services related toIAS accounting and transformation Accounting automation, implementation ofinformation technologies Restoration ofcompany accounting Tax dispute resolution Tax advice incomplicated legal situations Pre-trial settlement oftax disputes with the authorities

Global employer and employee orindividual solutions Assisting individuals inpreparing tax returns Registration with the tax authorities Advice onvarious issues relating toemployment inBelarus Tax advice onpersonal income tax and other obligatory charges imposed onemployees and employers Tax advice toindividuals onthe application ofthe relevant provisions ofinternational double tax treaties and onthe interpretation ofthese provisions bythe tax authorities Advice onlegislative requirements with regard toforeign nationals inBelarus, including obtaining and the preparation ofdocuments necessary for their stay and work inBelarus Tax and other services for banks, insurance and other financial companies Planning and establishment offinancial and holding structures Due diligence and assessment ofrisks Advice oncompliance with bank (or insurance company) registration and licensing requirements; follow-up advisory assistance inestablishing separate bank departments Advice onthe determination ofvarious tax aspects ofinsurance activities, including forming, financing, investing, placing and using insurance reserves, etc. Advice onregulatory acts regarding banking activities, analysis ofinternal bank regulations and their compliance with the principles and requirements ofBelarusian legislation Advice ontax aspects ofloans, securities, foreign exchange and other bank operations Consulting support inestablishing the banks subsidiaries, such asleasing/insurance companies Other tax and legal advisory services inaccordance with the current legislation ofBelarus: Minimization ofthe banks exposure totaxation (application ofinternational double tax treaties, analysis oftaxable base and tax calculations) Analysis oftax risks and other possible consequences ofapplying the clients business structures and assistance inintroducing international compensation schemes

International taxation Advice onthe application ofdouble tax treaties International tax planning aimed atimproving business efficiency, reducing operating costs and managing economic risks Structuring ofcross-border investments Consultation regarding tax efficient international holding structures International tax planning presentations, workshops, conferences, seminars, etc. Assistance insetting upcompanies inforeign jurisdictions International cooperation with other Deloitte practices ensures adirect and efficient transfer ofknowledge. The Deloitte network has aworldwide database with tax information covering more than 185 countries. The international network ofDeloitte tax professionals forms the fundamental basis for providing high quality consulting inall international tax matters.

Belarus business and investment guide

Country profile

Belarus islocated inEurope, atthe crossroads ofboth west-east and north-south trade routes, and links CIS member states with the countries ofWestern Europe. Belarus borders onPoland, Lithuania, Latvia, Russia, and Ukraine. History and government On 8 December 1991, inViskuli (Brest region), the leaders ofthe USSR founding republics, i.e. Belarus, Russia, and Ukraine, made adecision toeliminate the USSR and establish the Commonwealth ofIndependent States (the CIS). Minsk was chosen asthe administrative center ofthe CIS, and the Republic ofBelarus became anindependent state. In1994, anew constitution was adopted and the first president was elected. Belarus isa presidential republic. The Parliament isa representative and legislative body ofthe Republic ofBelarus and consists oftwo houses: the House ofRepresentatives (110 members) and the Council ofthe Republic (64 members). According tothe Constitution, state power inthe Republic ofBelarus isexercised onthe basis ofthe separation oflegislative, executive, and judicial powers.

Currency The Belarusian national currency isthe Belarusian Ruble (BYR). Asof 1 March 2012, the National Bank ofBelarus established the following official exchange rates for major currencies: BYR 8,110 for USD 1 BYR 10,920 for EUR 1 BYR 279.50 for RUB 1 There are some restrictions onforeign currency exchange inBelarus. However, the Belarusian government istaking steps towards liberalization ofthe currency market. Banking system Banks dominate the Belarusian financial market; asof 1 January 2012, there were 32 commercial banks inBelarus. Most Belarusian banks have foreign investors asshareholders, although the state currently has adominant share inthe charter capitals ofthe three biggest banks. Itplans todecrease the state share inthese banks and toattract foreign investments tomeet the requirements for aninitial public offering (IPO). Todate, the Belarusian stock market remains largely undeveloped.

Incentives for foreign investors

Belarus beneficial geographical location has made ita country with ahigh potential for foreign investment. For acompany planning toestablish aproduction ordistribution unit inEastern Europe, Belarus offers askilled and cheap labor force, low price levels, and arelatively well developed infrastructure. The Belarusian government has established aspecial program for attracting foreign investment, and the protection offoreign investment isguaranteed under the Investment Code. The code states that foreignowned companies have the same rights aslocal businesses, aswell asthe right torepatriate profits without any restrictions. Furthermore, Belarus has signed bilateral agreements onthe protection and promotion ofinvestments with many countries around the world. Due topolicies encouraging foreign investment, investors may gain significant advantages, such astax benefits and exemptions from certain obligations, byinvesting inthe Republic ofBelarus. High Technology Park (HT Park) Belarusian legal entities (including those with 100% foreign investment) and individual entrepreneurs, whose activities are concerned with the analysis, development and software support ofinformation systems and data processing, can become members ofthe HTPark inBelarus. The HTPark provides for full exemption from almost all taxes and duties, including income tax, VAT, and real estate tax. Moreover, the technical equipment imported byHT Park residents into the Belarusian customs territory isexempt from customs duties and VAT. Anexhaustive list ofsuch equipment has been determined bythe state authorities and includes computers, aswell ascopying and facsimile devices. The tax rate paid onthe income received from dividends, debt liabilities, royalty, and licenses byforeign legal entities that donot operate inthe Republic ofBelarus through permanent establishments, provided they originate from anHT Park resident, amounts to5%, unless more favorable terms are established byinternational treaties. Inaddition, the residents ofthe HTPark donot pay offshore duty onthe dividends paid totheir shareholders (participants).

Free Economic Zones (FEZs) An FEZ isa part ofa country with well defined borders and aspecial legal regime that provides more favorable conditions for business. Basically, the objective ofthese zones isto attract and ensure the effective use offoreign and national investments tocreate and develop goods for export, and will bebased onthe latest technologies, aswell asthe effective use ofavailable production space. There are 6 FEZs inthe Republic ofBelarus. The appeal ofa special legal regime like anFEZ for apotential investor ispreferential taxation. FEZ residents pay reduced rates ofcertain taxes, including profit tax at9% and VAT at10%. Profit received byFEZ residents from supplies ofgoods, work orservices oftheir own production isexempt from profit tax and transportation duty for aperiod of5 years after the profit inquestion isgenerated. Moreover, FEZ residents donot pay real estate tax onbuildings located within FEZs.

Belarus business and investment guide

Tax benefits from conducting business inrural areas and small towns Effective from 2008, aspecial tax regime and tax benefits have been provided for both foreign and Belarusian legal entities (including branches, representative offices, separate subdivisions) and individual entrepreneurs located/residing inrural areas (as well asin small town centers and not included onthe list bythe Council ofMinisters ofBelarus) and carrying out business activities involving the manufacture ofgoods, performance ofwork orprovision ofservices inthose orother rural areas ortowns. In certain cases, legal entities and individual entrepreneurs may beexempt from: profit tax and personal income tax with regard togoods (work orservices) they produce themselves; real estate tax onproperty located inrural areas; customs duties and VAT (except VAT charged ongoods imported from the Russian Federation) payable onproduction equipment, aswell asrelated spare parts and accessories imported

for the purpose offorming orincreasing the legal entity inquestions charter capital. The foreign and Belarusian legal entities mentioned above are exempt from the compulsory sale offoreign currency inthe amount of30% for 5 years from the date oftheir registration. Inaddition, they may apply free pricing tothose goods they produce which are sold internationally. They may also independently determine employee salaries and use the services offoreign insurance companies. Tax benefits for motorway services Profit received bylegal entities and individual entrepreneurs from supplies ofgoods (work orservices) through motorway service facilities (e.g., motels, hotels, campsites, service and car washing stations, retail, canteens, secured parking lots, parking lots for vans and residential trailers) isexempt from profit orpersonal income tax for aperiod of5 years after the establishment ofsuch facilities. Inaddition, motorway service facilities are not subject toreal estate tax for aperiod of2 years from the date trading activities start.

Tax administration

The Belarusian Tax Code General information The General Part ofthe Tax Code came into force on 1 January 2004. The Special Part ofthe Tax Code came into effect on1 January 2010. Both parts ofthe Tax Code are effective from 1 January 2010 but Acts previously adopted bythe President ofBelarus regulating taxation issues still apply. Types oftaxes and duties There are state aswell aslocal taxes and duties inBelarus. Anumber ofspecial tax regimes are mentioned inthe Tax Code: Tax applied under the simplified system oftaxation Unified tax for individual entrepreneurs and other individuals Unified tax for agricultural producers Gambling tax Lottery tax Interactive electronic game tax Duties for artisanal activities Duties related toagro- and ecotourism services The Belarusian system oftaxation includes the following taxes and duties. National taxes and duties: Value-added tax (VAT) Excise tax Profit tax Tax onthe income offoreign entities not operating inBelarus via apermanent establishment Personal income tax (PIT) Real estate tax Land tax Environmental tax Mining tax Duties onthe importation ofozone-depleting substances

Duties onforeign nationals motor vehicles which travel onBelarusian highways Offshore duty Stamp duty Consular fee State duty Patent fees Customs duties and fees Local taxes and duties: Dog tax Resort levy Vendor tax In addition totaxes, there are also compulsory insurance contributions tothe Social Security Fund and RUE Belgosstrakh and contributions toinnovation funds. Payers oftaxes and duties The Tax Code defines the payers oftaxes and duties inBelarus. The following organizations are taxpayers: Belarusian legal entities Foreign and international organizations, including those that are not legal entities Simple partnerships (contract partners injoint activities) Economic groups The term individuals includes: Belarusian citizens Foreign citizens Stateless persons

Belarus business and investment guide

Accounting and audit Accounting By 31 December each year, enterprises must formulate anannual financial statement consisting ofa balance sheet, anincome statement, astatement ofchanges inshareholder equity and acash flow statement. According todomestic tax accounting rules, and depending ona taxpayers accounting policy, income inaccounting and tax accounting isrecognized oneither anaccrual ora cash basis. The accrual basis implies the recognition ofincome atthe time ofthe delivery ofgoods orservices. The cash basis involves the recognition oftaxable income when both events (delivery and payment) have taken place. Obligatory independent audit The following entities are subject toan obligatory annual independent audit: Open joint stock companies Banks and non-bank financial intermediaries Stock exchanges Commercial organizations with foreign investments Insurance companies and insurance brokers HT Park residents Legal entity that provides guaranteed repayment ofindividual bank deposits Other legal entities (excluding collective farms and regular farms) and individual entrepreneurs whose revenue for the preceding year exceeded EUR 600,000 Transfer Pricing New transfer pricing rules are included inthe Belarus Tax Code effective from 1 January 2012. The rules apply tothe following transactions: Sales ofreal estate where the transaction price ismore than 20% lower than the market price onthe date ofthe sale; and Foreign trade transactions, including transactions with related parties, where the price ofthe transaction (or transactions with the same party within asingle calendar year) exceeds BYR 20 billion (approximately EUR 1.8 million) onthe date ofacquisition ordisposal ofthe goods and the price ofthe transaction deviates bymore than 20% from the market price ofthe goods.

If the tax authorities determine that the transaction price deviates from the market price bymore than 20%, they may adjust the tax base and profits ofone ofthe parties tothe transaction toan amount that would have been obtained had the transaction price been set atthe market level. The tax authorities can use the comparable uncontrolled price, resale minus, and cost-plus methods for determining the market price. Tax audits The Belarusian Ministry ofTaxes and Duties isresponsible for levying taxes and duties. The local tax authorities, which are subordinate tothe Ministry, have the right toperform tax audits. The local tax authorities may perform both scheduled and unscheduled audits ofbusiness entities. The frequency ofscheduled/field tax audits ofa taxpayer (or another liable person/entity) depends onthe risk group the audited person/entity isassigned to: High risk not more than once ina calendar year; ifno violations are found based onthe results ofa scheduled audit, the next one will beperformed after aminimum oftwo years Medium risk not more than once every three years; ifno violations are found based onthe results ofan audit, the next one will beperformed after aminimum offive years Low risk onan as-needed basis, but not more than once every five years The criteria for assigning anaudited entity toa certain risk group are specified inthe legislation. Effective from 2010 inBelarus isthe principle ofgood faith towards the audited entity. Inparticular, ifthere isan ambiguous orunclear provision ofthe law, decisions should bemade infavor ofthe audited entity. The legislation provides for amoratorium onaudits for two years after the establishment ofan entity (or representative offices offoreign entities inBelarus).

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However, despite these restrictions, there isa high risk ofthe tax authorities performing anunscheduled audit: If the controlling/supervisory authority has information (including that obtained from astate authority, aforeign state, another entity oran individual) giving evidence ofa violation oflegislation being/having been committed orof any threatening orinflicted damage Liquidation ofthe entity Cross-audit ofanother legal entity Where the tax authorities have information tosuggest that abusiness entity has not been conducting business activities for 12 consecutive months and has not provided the tax authorities with areason for this To confirm the validity ofsetting-off orrefunding tothe audited entity VAT that was excessively accrued and charged onthe sales ofgoods (work orservices), property rights Audits will beperformed for aperiod not exceeding three calendar years prior tothe year the audit takes place. However, please note that this restriction does not apply toaudits ofcompliance with budget and tax legislation; audits performed byorder ofthe President ofBelarus, the Presidium ofthe Council ofMinisters ofBelarus, the Chairman ofthe State Control Committee and his/her deputies, orthe General Prosecutor and his/her deputies; and audits performed aspart ofsupervision over banking activities, including ona consolidated basis. According toBelarusian legislation, the duration ofa tax audit should not exceed 30 business days (although anextension ispossible). However, inpractice, the duration ofa tax audit usually does not exceed 10 calendar days. Information about scheduled audits can befound onthe website ofthe State Control Committee ofBelarus www.kgk.gov.by Offences, crimes and penalties Administrative liabilities The effective Belarusian Code ofAdministrative Offenses (hereinafter, the Administrative Code) sets out the sanctions that may beimposed ontaxpayers who have broken the law. Typical violations committed bytaxpayers and the amounts offines ineffect from 1 April 2012 are listed below. Late registration with the tax authorities issubject toa fine ofup tothe equivalent ofUSD 62, for both

individuals and legal entities. If alegal entity oran individual entrepreneur operates without registering with the tax authorities, that legal entity issubject toa fine of20% ofthe income from the activities carried out while unregistered, but noless than USD 863. Anindividual entrepreneur issubject toa fine ofup toUSD 247. Late notification ofthe opening orclosure ofbank accounts with adelay ofmore than five days. Any account activity will entail afine for individual from USD 123 toUSD 247, depending onthe length ofthe delay. Inthe case ofa legal entity, this fine will befrom USD 123 toUSD 863. Late filing ofa tax return entails afine of10% ofthe tax due onthe return for both individual entrepreneurs and legal entities, but not less than afine ofUSD 25 and USD 123, respectively. Non-payment orpartial payment oftaxes within the term determined bythe legislation, results ina fine of20% ofthe unpaid tax for both legal entities and individuals, but not less than USD 123 and USD 25, respectively. A tax agents failure towithhold taxes entails afine of20% ofthe tax due for individual entrepreneurs and legal entities, but not less than USD 25 and USD 123, respectively. The penalty can beincreased upto USD 740 incases ofwillful violation. Late payment oftax issubject toa daily late payment fine of1/360 ofthe National Banks refinancing rate and, effective from 1 March 2012, afine of0.1056% per day applies. Fines imposed for non-payment/non-withholding oftaxes may not beapplied totaxpayers/tax agents who have paid/withheld the full amount oftaxes due atthe beginning ofthe audit performed bythe tax authorities. Criminal liability In addition totax and administrative fines and penalties, Article 243 ofthe Criminal Code, OnTax Evasion, provides for three years imprisonment for ordinary tax evasion and three toseven years imprisonment for tax evasion causing extensive damage tothe state budget. Because ofthe personal liability that may arise for tax violations, good tax planning and careful compliance are essential for achieving success.
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Types ofbusiness presence

Belarusian legislation provides for anumber ofdifferent legal forms through which businesses may operate. Abrief description ofeach ofthese legal forms has been set out below. The most common forms ofconducting business inBelarus for foreign companies are: Representative offices Legal entities Registration requirements Belarusian legislation requires that aforeign legal entity registers its presence with the tax authorities ifit conducts orintends toconduct any activities inBelarus. Representative offices Historically, representative offices (ROs) are established inorder toact asthe eyes and ears ofa foreign legal entity (FLE), and donot lead toa taxable presence for the FLE inBelarus. Currently ROs may beboth taxable (if the ROperforms the functions ofa permanent establishment itqualifies asa PE) and non-taxable. The Belarusian Civil Code envisages the activities ofan ROas representing the interests ofan FLE inBelarus and performing other functions that donot contradict Belarusian legislation. According tothe Belarus Tax Code, aPE isdeemed toexist where there isa separate subdivision oroffice through which aforeign entity carries out entrepreneurial and other activities inBelarus, which leads toprofits generation. An entity orindividual that carries out activities onbehalf ofand/or for the benefit ofa foreign entity and/or has and exercises the authority ofthe foreign entity toconclude contracts orto agree upon essential terms and conditions

Therefore, ROs are only taxable ifthey carry out commercial orother similar activities inBelarus, including negotiating and concluding contracts. An FLE isnot deemed tohave created aPE ifa Belarusian legal entity orindividual carries out activities onbehalf ofthe FLE inquestion inthe ordinary course ofits business activities. Taxation ofa commercial ROis very similar tothat ofan ordinary Belarusian legal entity, with afew minor distinctions. Opening anRO The Belarusian Ministry ofForeign Affairs will issue apermit toopen anRO onthe basis ofthe documents provided (an application form, copies ofstatutory documents, etc.). The ROoperates onthe basis ofregulations approved bythe head company, and the head ofthe ROacts onthe basis ofa power ofattorney issued bythe head company. The power ofattorney must beissued and legalized (or apostillized) inaccordance with established procedures. The state duty toopen aRO isequal to65 basic amounts (approximately USD 800) for one year. According toBelarusian legislation, aRO must register with the tax authorities, keep accounting records and pay taxes inaccordance with established procedures.

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Types oflegal entities The three most common types oflegal entities under the Belarusian Civil Code are joint stock companies, limited liability companies and unitary enterprises. These are regulated bythe law On business entities and the Civil Code, respectively. The establishment ofbanks and insurance companies isregulated byseparate legislative acts. Joint-stock companies Joint-stock companies (JSCs) are defined ascompanies whose capital isdivided into adefinite number ofshares. AJSC may beeither open orclosed, and isdeemed open ifits shares are distributed tothe general public without permission from other shareholders. AJSC isdeemed closed ifthe distribution ofits shares requires the consent ofother shareholders, and/or shares are distributed only tocertain categories ofindividuals. Both types ofJSCs may issue privileged shares ofup to25% ofthe statutory capital. Open joint-stock company (Otkrytoe Aktsyonernoye Obshchestvo, OAO) An open jointstock-company (OAO) allows for anunlimited number ofshareholders. Subject todisclosure requirements, anOAO isthe only form oflegal entity whose shares may beopenly traded. The minimum charter capital should beequal to400 basic amounts (approximately USD 5,000.) Closed joint-stock company (Zakrytoe Aktsyonernoye Obshchestvo, ZAO) The most common type ofJSC isa closed joint-stock company (ZAO). Shareholders enjoy preemption rights toany shares offered for sale bya retiring shareholder. There isno obligation topublish the accounts ofa ZAO, and shares are only distributed among its founders orwithin another predetermined group ofindividuals. AZAO may not hold anopen subscription ofshares for anunlimited group ofpeople. The minimum charter capital should beequal to100 basic amounts (approximately USD 1,240).

Limited Liability Company (Obshchestvo sOgranichennoi Otvetstvennostyu, OOO) An LLC/OOO isdefined asa company, whose capital isdivided into ownership interests (units), the amount ofwhich isdetermined bythe articles ofassociation. The number ofmembers ofan LLC/OOO should not exceed 50. There isno established minimum amount ofcharter capital. An OOO (along with aunitary enterprise) isthe most flexible type ofcompany. Units are not shares, and they fall outside the scope ofBelarusian securities law. One drawback ofan OOO for minority participants isthat any participant has the right towithdraw from the company and isentitled torequire the other participants topurchase orredeem their units ata pro-rata value. Unitary enterprise (UE) A unitary enterprise isdefined asa commercial organization that has noownership rights tothe assets transferred tothe company bythe owner ofthese assets. This essentially means that the company isnot the owner ofits property. Aunitary enterprise may have only one founder. Instead, the founder ofthe company remains the owner ofthe assets, which may not bedivided into shares. There isno established minimum amount ofcharter capital. The simple management structure ofthis type ofentity often makes itthe vehicle ofchoice for foreign investors.

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Formation requirements for companies with foreign investments According tothe Belarusian Investment Code, the minimum share capital that should beinvested bya foreign investor asthe authorized share capital ofa company with foreign investments should benot less than the equivalent ofUSD 20,000.

Registration procedure for alegal entity An application-based principle ofregistration isapplicable inBelarus. Furthermore, the requirement for aminimum amount ofcharter capital was abolished for all legal entities, except for ZAO, OAO and companies with foreign investments. The registration procedure includes the following stages: State registration (including tax registration, registration If one wishes toestablish ajoint venture with with the State Social Funds, the State Statistical Board, aBelarusian investor, the minimum amount ofthe etc.) statutory share capital should bemore than USD Stamp orseal production 20,000. For example, aforeign investor could contribute Opening bank accounts USD 20,000 and aBelarusian investor could contribute USD 1,000 astheir respective initial investments thereby The registration authorities should decide whether meeting the minimum requirements. Please note that ornot toregister alegal entity onthe day the aforeign investor may contribute less than USD 20,000, documents are submitted. but the established company will not beregarded asa company with foreign investments and, assuch, Five days are now needed toobtain all ofthe will not beable toenjoy certain privileges determined documents necessary for tax registration, registration byBelarusian legislation. with the State Social Funds, Belgosstrakh, etc. Thus, the whole process usually takes about 7 to10 days. JointUnder the existing law, in-kind contributions aswell stock companies are required toregister their share issue ascash may beclassified ascapital contributions. with the State Securities Commission and this increases the time required for registration.

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Taxation ofbusinesses inBelarus

National taxes 1. Profit tax 1.1. General information Profit tax islevied ongross profit, which isdetermined byadding the following sums: Profit from the sale ofgoods (work orservices) and property rights Income from non-sales operations, minus the deductible expenses incurred inconnection with these operations The profit orloss from the sale ofgoods (work orservices) orproperty rights (except for fixed orintangible assets) isdefined asthe difference between the receipts from their sale, less sales taxes and duties paid from the receipts, and the deductible expenses associated with the production and sale ofgoods (work orservices) orproperty rights. The profit orloss from the sale offixed orintangible assets isdefined asthe difference between the receipts from the sale ofthe fixed orintangible assets, less taxes and duties payable from the receipts, and the depreciated cost ofthe fixed orintangible assets, aswell asthe cost ofthe fixed orintangible assets sold. Non-sales income isoffset bynon-sales expenses and then included into taxable profit. Non-sales income includes, among other things, the following: Income from participation inother organizations, including dividends received from foreign entities, income from the sale ofshares and profit from the liquidation ofan investee Positive exchange differences Income from previous years recognized inthe current tax year Fines, penalties and interest received for breaking contractual obligations, and compensation for losses recognized bythe debtor orpayable bythe debtor under acourt ruling Income from granting the right touse intellectual property ifit isnot the payers main activity Interest onloans and deposits Property (work orservices) orproperty rights, received free ofcharge Non-deductible expenses There are some expenses that are related tobusiness activities but are deducted for profit tax purposes only within the deductible limits determined bylegislation. These expenses include business trip expenses and expenses associated with payments ofenergy resources. Most expenses are deducted infull for tax purposes, including the costs ofconsulting, marketing, information services, advertising and payroll expenses. Expenses not related tocommercial activities are not deductible with regard tocalculating taxable income. The amount ofprofit (income) tax paid ina foreign state may beoffset against the amount ofprofit tax paid tothe Belarusian government, irrespective ofwhether ornot this offset isprovided for bya relevant double tax treaty. Inorder toreceive the said offset, the payer isrequired tosubmit acertificate confirming the payment oftax inthe foreign state. 1.2. Payers According tothe General Part ofthe Tax Code, the following types oforganizations pay Belarusian profit tax: Belarusian legal entities Foreign and international organizations, including those that are not legal entities Simple partnerships (contract partners injoint activities) Economic groups. Branches, ROs and other separate sub-divisions oflegal entities, which have their own separate balance sheets and bank accounts, carry out the tax obligations ofthese legal entities. 1.3. Tax base The tax base for profit tax isdetermined astaxable income expressed inmonetary terms.

Belarus business and investment guide

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1.4. Tax benefits The tax profit isreduced bytax benefits which are asfollows: a) The amount ofprofit received from operations with state securities (short-term and long-term bonds, promissory notes), aswell asbonds issued bylegal entities who are Belarusian tax residents between 1 April 2008 and 1 January 2013 b) The amount ofprofit expended ondonations toenterprises, institutions and other organizations involved inpublic health, public education, social welfare, culture and sports, which are registered with and funded bythe state upto amaximum of10% ofthe tax profit Enterprises inwhich disabled individuals make upmore than 50% ofthe total workforce are exempt from profit tax. Furthermore, the taxpayers may deduct part ofthe value ofthe newly acquired property, plant, and equipment orintangible assets when they are first recorded inbooks (up to10% ofthe value ofbuildings and upto

inthe charter capital (interest orstocks) ofthe entities inBelarus orto any part thereof istaxable atthe 9% rate. 1.6. Tax period The tax period for profit tax isa calendar year. Taxpayers should submit atax return tothe tax authorities once ayear, bythe 20th ofMarch inthe year following the previous tax period. Tax has tobe paid inadvance by22 March, 22 June, 22 September and 22 December in2011 and (effective from 2012) by22 April, 22 July and 22 October inthe current tax period and by22 January ofthe year following the previous tax period. 1.7 Loss carry-forward Since 2012, Belarus has introduced the loss carryforward rules. Entities are entitled toloss carry-forward, including losses of2011, for subsequent 10 years. 2. Value-added tax 2.1. General information Value-added tax (VAT) ischarged for the supply ofthe majority ofgoods, services and property rights inBelarus, and onmost imports into Belarus. 2.2. VAT payers VAT payers are asfollows: Belarusian legal entities Foreign and international organizations acting via apermanent establishment inBelarus and registered with the Belarusian tax authorities Simple partnerships (contract partners injoint activities) Economic groups Trust managers with respect tosales turnover arising inconnection with the management ofthe trust property onbehalf ofthe trustees and/or beneficiaries. Individual entrepreneurs whose turnover for the previous three months exceeds the equivalent ofEUR 40,000, orwho voluntarily elect topay VAT Entities and individuals regarded astaxpayers inrelation tothe handling ofgoods through Belarusian customs incompliance with Belarusian legislation and international treaties ofthe Republic ofBelarus that form part ofthe international treaty framework ofthe Customs Union. There are nospecial provisions for VAT registration inBelarus. Acompany may only beregistered asa taxpayer with regard toall taxes.

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20% onmachinery, equipment, vehicles, and intangible assets). 1.5. Tax rate The tax rate applied tothe majority oftaxable income oforganizations is18%. A12% rate isapplied todividends. The income from the sale ofshares

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2.3. Turnover that isnot subject toVAT taxation oris exempt from VAT In general, the following transactions are not subject toVAT: The supply ofgoods orservices inBelarus for official and personal use bydiplomatic and/or administrative and technical personnel from foreign diplomatic representative offices Property contributions from the legal entitys founders orparticipants toits charter fund Compensated and gratuitous transfers ofgoods orproperty rights byone owner Sale ofsecurities (including initial offerings made inaccordance with legislative requirements), forward and future contracts, options and other concurrent financial instruments from the derivatives market Transfer ofproperty due togratuitous use Supply ofgoods placed under the re-export customs procedure Cost ofwork orservices purchased orpaid for bya companys own employees Major VAT-exempt activities include: Commission fees for insurance brokers from insurance companies for brokerage services Rendering medical services; the sale ofcertain pharmaceuticals and medical equipment Transfers ofindustrial property rights Housing and communal services provided toindividuals Communication services provided toindividuals Services provided bybanks and non-banking financial institutions Insurance (co-insurance, reinsurance) services

2.4. Rates VAT islevied atthe following rates: 0% ongoods exported toCustoms Union member states, including goods exported onthe basis oflease agreements/contracts, loan agreements and contracts for the production ofgoods, loading, shipment and transshipment, and other similar services directly related tothe sale ofexported goods. 0% isalso levied onexported transportation services, exported work orservices related tothe production ofgoods using raw materials supplied bya customer, maintenance work orservices, modernization, the re-equipment ofaircraft and their engines, railway vehicle units orservices performed for foreign companies orindividuals. . A rate of0.5% isapplied tothe importation ofdiamonds and other precious stones for production purposes (international activity number 7102, 7103) from countries which are Customs Union members. 10% onthe supply ofgoods produced through plant growing (excluding flowers and decorative plants), animal breeding (excluding animals used infur production), fishery and honey bee production, and onthe importation and/or supply offoodstuffs and goods for children inBelarus, inaccordance with alist determined bythe President 20% onother goods and services not listed above Moreover, the law establishes rates of9.09% and 16.67% tobe applied togoods sold atregulated retail prices. Ifpenalties are imposed onbuyers orcustomers for the violation ofcontractual terms these penalties include VAT atthe above rates.

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2.5. Tax base Companies calculate their VAT base asthe sale price ofgoods, including excise, ifapplicable. For commissioners and agents, the tax base isbased oncommission orfee income. Ashipping companys VAT base isthe amount ofshipping fees inaccordance with ashipping contract. Ifa contractor sells construction work performed bysubcontractors, the VAT base for the contractor isthe cost ofthe work carried out bythe contractor without subcontractor costs. For imports, the tax base isthe customs value plus customs duty and excise where applicable. If goods are sold atregulated retail prices that include VAT, the VAT base will bethe difference between the sale and acquisition price ofthese goods. Both the sale price and acquisition price should include VAT. The VAT base for the sale ofsecurities, reusable packaging and health resort vouchers. The free-of-charge transfer ofgoods (provision ofservices orexecution ofwork) isalso subject toVAT, except for non-taxable transfers. The tax base isdetermined asthe cost price ofthe goods (work orservices) inquestion, oras the acquisition price inthe case ofa free-of-charge transfer ofacquired goods. The VAT base for goods imported into the territory ofthe Republic ofBelarus isthe total oftheir customs value and the applicable customs and excise duties (for goods that are subject toexcise duties). Ifprocessed goods are exported from the customs territory, the VAT base isdetermined asthe cost oftheir processing. 2.6. VAT output, VAT input and offset rules The invoice method ofcalculating VAT liabilities isapplied inBelarus. The VAT liability ofa taxpayer iscalculated asthe product ofthe tax base and the tax rate. VAT payable tothe authorities isdetermined asthe difference between VAT calculated bytaxpayers and charged tocustomers (output VAT) and VAT paid tosuppliers ofgoods (work orservices) (VAT invoiced totaxpayers orinput VAT), which isrelated toproduction/sales activities, orother VAT-able transactions.

If input VAT exceeds output VAT, the payer isnot obliged topay VAT, and the difference iscarried over, without penalty, and iseither deducted from the tax liability inthe next period, orrefunded tothe payer. Input VAT onpurchased business supplies isgenerally recoverable when the supplies are received, orwhen customs VAT ispaid and accounted for inthe book accounts. Nevertheless, legal entities that operate ona cash basis (i.e. whose profit isaccounted for according tothe accounting policy when both delivery and payment have taken place) can only offset previously paid VAT. VAT isrecoverable onthe basis ofprimary documents (customs declarations, waybills, delivery/acceptance certificates) that indicate VAT invoiced bysuppliers and tobe paid tothem. Organizations that donot carry out any entrepreneurial activities inBelarus should include input VAT amounts into the cost ofpurchased goods (work, services and property rights). If the purchased goods (work, services orproperty rights) are used inproduction and/or iftax-exempt goods (work, services orproperty rights) are sold, the VAT paid upon the purchase should beincluded into the taxpayers deductible expenses. One oftwo VAT offset methods may beused bytaxpayers intheir accounting policy: the separate accounting method orthe VAT-able supply ratio method. Starting from 2011, taxpayers are allowed tooffset VAT paid onfixed and intangible assets inthe previous tax period, inthe current tax period. These amounts are tobe offset inequal portions ofone twelfth inevery reporting period (if acalendar month isrecognized asthe reporting period) orone quarter (if acalendar quarter isrecognized asthe reporting period). However, VAT from previous tax periods may beoffset infull.

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2.7. Import VAT VAT iscollected bythe customs authorities when goods are imported into the customs territory ofthe Republic ofBelarus. VAT ongoods imported into Belarus from Customs Union member states (Russia and Kazakhstan) iscollected bythe Belarusian tax authorities. Depending onthe type ofgoods imported, VAT isapplied ata rate ofeither 10% or20%.

International cooperation with other Deloitte practices ensures adirect and efficient transfer ofknowledge.
Certain goods may beexempt from import VAT. These include, among other things, goods and cash registered asforeign aid, goods for official use byforeign diplomatic representatives (or for personal use bytheir diplomatic and/or administrative and technical personnel) who are non-residents, equipment for research activities, and certain vehicles, inaccordance with the Presidents List. 2.8. Payments and filing tax returns The standard VAT period isa calendar year; the VAT reporting period isa calendar month ora calendar quarter atthe taxpayers own choice. AVAT return isdue bythe 20th ofthe month following the reporting period, and the tax iscalculated based onthe amount oftax accumulated from the beginning ofthe year. VAT ispayable bythe 22nd ofthe month following the reporting period.

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3. Excise Tax 3.1. Taxpayers The following entities are excise tax payers: Belarusian legal entities Foreign and international organizations, including those that are not legal entities Simple partnerships (contract partners injoint activities) Economic groups Individual entrepreneurs In certain cases individuals upon importing goods into Belarus. Branches, representative offices and other separate sub-divisions oflegal entities with their own separate balance sheets and acurrent, settlement orother bank account must calculate and fulfill the tax liabilities oflegal entities. 3.2. Objects oftaxation Excise tax isimposed onboth imports and the manufacture ofa specific list ofgoods, the primary categories ofwhich include: Alcohol, spirits, beer, cider, tobacco Oil for diesel and/or petrol engines Petrol, diesel Automobiles and minibuses Fixed rates are applied tothese goods. Exports ofexcisable Belarusian goods are exempt from excise tax. Excise duty isaccrued ona monthly basis onthe sale amount ofexcisable products which are manufactured and/or imported, and used for companies own purposes (e.g. for testing and sampling purposes). Excise tax ispayable ona monthly basis bythe 22nd day ofthe following month. Certain excisable goods may only besold inBelarus ifthey bear aspecial excise stamp. Certain alcohol and tobacco products require anadvance payment inthe form ofan excise stamp, which must beattached toeach item prior toits sale. The stamps are purchased from the tax authorities ona prepayment basis atthe cost ofBYR 170 (approx. USD 0.021) per stamp for alcohol products and BYR 70 (approx. USD 0.009) per stamp for tobacco products.

4. Property tax 4.1. Taxpayers The following entities pay property tax: Belarusian legal entities Foreign and international organizations, including those other than legal entities Simple partnerships (contract partners injoint activities) Economic groups Individuals Branches, representative offices and other separate sub-divisions ofBelarusian legal entities which have their own separate balance sheets and have bank accounts that were opened bythe legal entity and whose officials have the right tomanage these bank accounts, must calculate the amount oftaxes, duties and/or fees onthe taxable items and discharge the tax liabilities ofthe legal entities inquestion. Please note that alegal entity isconsidered tobe ataxpayer ifit isacting asa lessee under alease contract and ifthe contract inquestion issigned bya foreign legal entity that does not act through apermanent establishment inBelarus, orwith aforeign individual. 4.2. Objects oftaxation The tax isimposed onthe residual cost ofproduction and non-production buildings that are owned orare inthe possession ofthe taxpayer, and onthe cost ofbuilding work and construction inprogress, within the timeframes set out inthe design and estimate documentation. 4.3. Tax rate The annual property tax rate is1%: for legal entities and 0.1% for individuals. A2% rate isapplied tothe cost ofprojects ofabove-standard construction inprogress ifthe organization isbuilding the real estate itself.

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4.4. Tax allowances The tax isnot imposed on: Buildings and facilities designated for social orcultural use, aswell asthose which form part ofthe housing portfolios oflocal Councils ofDeputies and other organizations (excluding those that belong toorganizations based inresidential buildings containing anumber offlats, where these buildings donot house individual residents) Buildings and structures that have been temporarily put out ofoperation Buildings and structures designed toprotect the environment and/or improve environmental conditions, asspecified bythe President General-purpose roads including roads with drains, pavements, artificial constructions, and street furniture toorganize road traffic and associated infrastructure Agricultural buildings and structures used togrow crops, for bee-keeping orfor animal husbandry New buildings and structures belonging toan organization that were first put into service within ayear ofbeing commissioned. 4.5. Payments Tax iscalculated annually for legal entities, subject tothe existence ofbuildings and structures, asof 1 January ofthe respective calendar year. This isbased onthe residual cost and the cost ofbuildings and structures ofabove-standard construction inprogress, and the approved annual tax rates. Tax for individuals isset according toan assessment ofthe buildings methodology approved bythe President. Legal entities should pay tax ona quarterly basis and infour equal installments bythe 22nd day ofthe third month ofeach quarter. The amount ofreal estate tax paid toa foreign state may beoffset against the amount ofreal estate tax paid tothe Belarusian government, irrespective ofwhether such anoffset isprovided for bya relevant double tax treaty ornot. Inorder toreceive this offset, taxpayers are required tosubmit acertificate confirming the payment oftax tothe foreign state inquestion.

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5. Environmental tax and mining tax 5.1. Taxpayers The following entities are payers ofenvironmental and mining tax: Legal entities Owners ofproduction waste Individual entrepreneurs 5.2. Objects oftaxation The following items are subject tothis type oftaxation: Volume ofair pollution emissions Volume ofsewage water and environmental pollutants Volume ofproduction waste subject tostorage and underground disposal Volume ofmaterial harmful tothe ozone layer (including that contained inproducts) imported into Belarusian territory Volume ofextracted orprocessed natural resources Ozone-destroying materials imported into Belarusian territory are taxable at the rate of BYR 23,000 (approximately USD 3) per kilogram of harmful ozone material (including that contained in products). The environmental tax and natural resource extraction/ processing tax rates are determined pursuant tothe Appendices tothe Special Part ofthe Tax Code ofthe Republic ofBelarus. The co-efficient isdetermined for environmental tax rates inamounts varying from 0.006 to0.9, depending onthe type ofwaste. Ifthe set limit isexceeded, orthe extraction (procession) ofnatural resources iscarried out beyond the limits (volumes) determined bythe effective legislation, tax often times the determined rate must bepaid.

6. Land tax Both Belarusian and foreign legal entities and individuals that have been granted lifetime ownership rights toplots ofland inBelarus with hereditary succession, orpermanent ortemporary use ofthe land, orto whom land has been transferred into private ownership, are deemed tobe payers ofland tax. The object ofland tax isa plot ofland that isowned, held orused bythe taxpayer. The amount ofland tax onagricultural land isdetermined based onthe cadastral value ofthe plot ofland and isestablished asan annual fixed payment per hectare ofthe plot ofland; ifthe cadastral value isnot established, the agricultural land tax rate iscalculated inthe amount ofthe average rate ofthe land tax determined for every region. The amount ofland tax onpopulated land iscalculated inpercentage terms, based onthe cadastral value ofthe plot ofland, depending onthe use ofthe land and subject tothe category ofthe respective locality. The amount paid onleased plots ofland isspecified inthe relevant contract.

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7. Simplified system oftaxation Both legal entities and individuals may qualify for the simplified system oftaxation within aparticular calendar year, provided that they meet the criteria below throughout the year: Total headcount isnot inexcess of100 employees onaverage Total gross revenue isnot inexcess ofBYR 9 billion (approximately USD 1.11 mln) for the first 9 months ofthe year The simplified system oftaxation replaces the following taxes and payments: profit tax, property tax, land tax, environmental tax, natural resource extraction/ processing tax, and value-added tax, where total headcount does not exceed 15 employees and total revenue does not exceed BYR 3.4 billion (approximately USD 420,000). The tax base isthe gross revenue, comprising the proceeds from goods (work and services) property rights and non-operating revenue over the reporting period. Subject tocertain conditions, retail enterprises and public catering companies are entitled touse taxable income astheir tax base. The tax rates are asfollows: 7% for non-VAT payers (both legal entities and individual entrepreneurs) 5% for VAT payers (both legal entities and individual entrepreneurs) 2% applicable torevenue from goods sold and services rendered outside ofBelarus 15% for entities and individual entrepreneurs using taxable income asthe tax base

Deloitte tax consulting services cover all ofthe tax matters that affect companies and individuals, irrespective oftheir size orsphere ofactivity.

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Other taxes 1. Offshore duty 1.1. Offshore duty payers According tothe General Part ofthe Tax Code, the following types oforganizations pay Belarusian offshore duty: Belarusian legal entities Foreign and international organizations, including those that are not legal entities Simple partnerships (contract partners injoint activities) Branches, representative offices and other separate sub-divisions oflegal entities with their own separate balance sheets and acurrent orother bank account. 1.2. Objects oftaxation The following transactions are subject tooffshore duty: Transfers ofmonetary funds bya resident toa non-resident inan offshore zone orto another company, towhich anoffshore resident has obligations, orinto anoffshore bank account Non-cash settlements with any non-resident Transfers ofproperty rights and/or obligations between parties, one ofwhom isa resident ofthe Republic ofBelarus and the other anon-resident registered inan offshore zone

Offshore duty does not apply tothe following transactions: Transfers ofmonetary funds bythe state authorities inorder todischarge Belarusian obligations tointernational organizations, inaccordance with international orintergovernmental agreements Transfers ofmonetary funds from Belarusian banks byVISA and MasterCard transactions tonon-residents orowners ofinternational payment systems who are registered inoffshore zones orwho have bank accounts inthese zones. Transfers ofmonetary funds torepay credit, loans and interest Transfers ofmonetary funds inaccordance with contracts totransport goods bysea 1.3. Tax rate The offshore duty rate is15% ofthe transferred sum.

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Belarusian-sourced income offoreign companies

Elimination ofdouble taxation The Republic ofBelarus has signed more than 60 international double tax treaties providing for alower tax rate orfull tax exemption. Where there isno valid double tax treaty, Belarusian tax legislation permits profit tax and real estate tax paid inforeign countries tobe offset against the payment ofthe relevant taxes inBelarus. In order totake advantage ofa lower tax rate ortax exemption inaccordance with aninternational treaty, prior topayment the foreign company must provide the Belarusian tax agent with confirmation oftheir tax residency, signed bya competent authority inthe foreign country. The Belarusian tax authorities may also require aBelarusian ora Russian translation ofthe confirmation. If this confirmation isnot provided prior topayment, and the foreign company suffers awithholding rate greater than that stipulated bythe agreement, itis possible toapply for arefund within three years ofmaking the payment. Intheory, upon receiving the proper documentation, the Belarusian tax authorities should refund any excess tax nolater than one month after the application date. Special provisions allow foreign banks and airlines tobypass the residence confirmation requirements, provided that they have acopy ofan extract from the international publications The Bankers Almanac, BIC Directory, orThe Airline Coding Directory.

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Withholding tax Withholding tax onthe income offoreign legal entities that donot operate inthe Republic ofBelarus through permanent establishments iscompulsory - particularly onthe following types ofBelarusian-sourced income for foreign entities that are resident inBelarus: Dividends 12% Income from the disposal ofshares incharter capital, stocks and/or interest oflegal entities located inBelarus 12% Royalties (including payments for leased property) 15% Licenses 15% Interest 10% Freight (charges for international shipping and forwarding services, except for international transportation bysea) 6% Other income - 15%

For tax purposes, royalties include payments for the use ofor granting the right touse property and rights tocopyrighted items, including literary and scientific works, computer programs and other copyrighted work. This also extends toobjects ofallied rights, including the creation ofsoundtracks toprograms bybroadcasting companies, aswell aspayments for any license, patent, trademark, service mark, business name, drawing, utility model, diagram, formula, industrial standard orprocess. Equally included are payments for any information regarding industrial, commercial orscientific research (including know-how), payments for the use ofproperty inBelarus orfor granting the right touse such property. Excluded are payments made for international (continental and intercontinental) channels and leasing telecommunications networks. Other types ofincome include, among other things, income derived from training services, information, management, advertisement, insurance and audit services, and income derived from the disposal ofreal estate located inBelarus.

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Taxation ofindividuals

Personal income tax inBelarus Payers According tothe law, individuals are regarded aspersonal income tax payers. Belarusian citizens and foreign nationals who are tax residents are taxed ontheir worldwide income paid incash orin kind, and onany material benefits received during acalendar year. Individuals who are not considered tobe tax residents ofBelarus (the duration oftheir stay inBelarus is183 days orless) pay tax ontheir Belarusian-sourced income only. The actual duration ofstay isthe period oftime anindividual stays inBelarus, and isnot interrupted bytrips abroad for medical treatment orbusiness trips.

Personal income tax rates A flat rate of12% isapplied inBelarus both totax residents and tothose not regarded astax residents. Other rates apply tospecific income: 9% Income received byindividuals from residents ofthe HTPark under labor contracts (except for support personnel who service and guard premises, rooms orplots ofland) 15% Income from entrepreneurial and private notary activities Taxable income Taxable income isdefined asany and all income, irrespective ofthe source, less allowable tax deductions (standard, social, property and professional). There are limited types ofincome that are tax-exempt inBelarus: Pecuniary aid paid bythe employer that isthe taxpayers principal place ofemployment isexempt from tax atthe rate ofBYR 8 mln (approximately USD 990) during the year, orBYR 530,000 (approximately USD 65) during the year ifpaid byother employers Monetary funds received from individuals who are not individual entrepreneurs totaling BYR 26.5 mln (approximately USD 3,300) from any source within the tax period asa result ofgift and immovable property under arental contract Income received byway ofinheritance Income from the state securities ofBelarus and bonds issued bybanks Income inthe form ofinterest received onbank accounts and deposits with abank situated inBelarus It isthe responsibility ofthe individual todeclare his/her income and topay PIT tothe authorities.

Payroll taxes Payroll taxes resulting from employment orcivil contracts include the following: Personal income tax (PIT) Payments tothe Social Security Fund Payments toRUP Belgosstrakh The employer should calculate, withhold and remit PIT tothe government onbehalf ofthe employee. Payments tothe Social Security Fund are made bythe employer (34%) and the employee (1% oftheir salary, including other remuneration paid bythe employer). Payments toBelgosstrakh are made bythe employer atrates varying from 0.1% to2.4% ofthe gross payroll.

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Tax returns Individuals must calculate their PIT liability and file atax return/declaration inthe prescribed format ifthe following applies: Income has been received from other individuals who are not approved tax agents Income has been received bythe tax resident from sources based abroad Other income withholding ofPIT which isnot charged bythe tax agents; and income received incertain other cases. Filing procedures An individual who must file atax return/declaration isrequired todo sono later than 1 March ofthe following tax year. The tax return should besubmitted tothe local tax authorities. Inthe tax return, the taxpayer must report all income received inthe taxable year and specify every item, source, amount and date. Standard, social and property deductions may bemade either bythe employer (during the tax period) orby the tax authorities (at the time offiling the tax return). Taxable income istaxed atthe rates listed above.

Belarusian tax liabilities are payable by15 May ofthe year following the tax year. Any overpaid tax may bereimbursed (although this isdifficult and timeconsuming inpractice) orcredited against any future tax liability, but only with regard toamounts overpaid during the previous three years. Elimination ofdouble taxation Belarus has signed anumber ofbilateral double tax treaties, which, under certain conditions, enable individuals toavoid taxation ofthe same income under the tax systems oftwo ormore countries byway ofapplication oftax exemption inone ofthe countries orthrough areduction inthe tax rate. Therefore, according tonational legislation, personal income taxes paid inforeign countries may becredited against Belarusian PIT, provided that the documents confirming the amount oftaxes paid into foreign budgets are shown tothe Belarusian authorities. In other words, ataxpayer may avoid double taxation without needing tofollow the application procedure for international tax treaties. Proper allowance must bemade for the fact that the amounts oftax paid into aforeign budget cannot exceed the amount oftax calculated from the income inaccordance with Belarusian legislation.

Deloitte tax consulting services cover all ofthe tax matters that affect companies and individuals, irrespective oftheir size orsphere ofactivity.

Penalties Individuals who fail tosubmit tax returns ontime, pay taxes, orwho avoid the payment oftaxes, are subject toadministrative and criminal liabilities.

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Customs issues

Import duties Effective from 1 January 2010, the rates ofimport customs duties are set inaccordance with the Unified Customs Tariff ofthe Customs Union ofthe Republic ofBelarus, the Republic ofKazakhstan and the Russian Federation. The most commonly applied customs duties rates are advalorem, and are calculated asa percentage ofthe customs value ofthe goods. Inaddition, customs duties may beset atfixed rates per unit ofmeasurement ofgoods (specific rates). Acombination ofboth methods isalso allowed (combined rates). Import customs duty rates depend onthe classification ofthe imported goods under the Unified Trade Classification ofForeign Economic Activities ofthe Customs Union. However, customs duty rates may vary depending onthe country oforigin ofthe goods and oncertain other factors. For example, with respect togoods originating from developing countries (Customs Union users ofthe Unified System ofCustoms Preferences), the import customs duty rate applied is75% ofthe usual import customs duty rate inaccordance with the Unified Customs Tariff. The list ofcountries using the Unified System ofCustoms Union Tariff Preferences and the list ofgoods originating from developing orleast-developed countries that are granted tariff preferences when imported into member countries unified customs territory are determined bythe Customs Union Commission. On 1 July 2010, the unified customs territory with Russia and Kazakhstan was created. Aunified economic area isin effect from 1 January 2012. Export duties A limited number ofgoods, e.g. fuels and marine products, are subject toexport duties upon their exportation outside the borders ofthe Eurasian Economic Community.

Special customs procedures The Customs Code ofthe Customs Union provides for 17 customs procedures. A number ofspecial customs procedures grant either full orpartial relief from customs duties. For example, full relief may begranted for goods that are imported into the Customs Territory for processing and subsequent re-export (Processing inthe Customs Territory). Import duties are not payable unless the conditions ofthis procedure are violated. A similar procedure may also beapplied togoods that are exported from the Customs Territory for processing and subsequently re-imported. Under this procedure (Processing outside ofthe Customs Territory), relief isgranted for goods placed under the procedure ofissue for domestic consumption. Import duties are, therefore, calculated based only onthe value which has been added tothe goods outside the Customs Territory (i.e. the processing element.) Goods may also beregistered under the temporary import (allowance) procedure. As the name suggests, this allows for either full orpartial relief from import duties and taxes for goods that are temporarily imported into the territory ofthe Customs Union. Henceforth, non-tariff regulation measures donot apply tothese goods. Certain goods may not, however, beeligible tobe listed under the temporary import procedure. Once the specified time limit (typically two years) has expired, the goods must either beexported from the customs territory orplaced under adifferent customs procedure.

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Currency control issues

Currency control Both residents and non-residents ofBelarus are permitted tohave foreign currency and ruble accounts with authorized banks. The Currency Control Law separates transactions involving foreign currency and securities inforeign currency into two groups: Current currency transactions, which have fewer restrictions Currency transactions associated with the movement ofcapital, which may require permission from the National Bank ofBelarus (the NBRB) The effective legislation provides aclosed list ofcurrent currency transactions: Settlements related toexported and/or imported goods (except for monetary funds, securities and real estate), proprietary information, exclusive rights tothe results ofintellectual activity, work orservices Settlements related toleasing out property oracquiring property under lease Transfer and receipt ofdividends and other investment income Non-trading operations: Transfers and receipt offunds for the payment ofwages and salaries, stipends, pensions, alimony, state benefits, allowances and compensation, aswell asdisbursements for damages Transfers offunds for the purpose ofreimbursing expenses inconnection with employee business trips abroad Transfers and receipt ofinherited funds and funds received from selling inherited property Transfers and receipt offunds related tothe death ofcitizens, including transportation and other burial expenses

Receipt ofmonetary compensation for the victims ofpolitical repression, aswell asmembers oftheir families and their heirs Payment offunds inorder tomaintain Belarusian diplomatic missions and consular institutions abroad Receipt offunds byjudicial and arbitration authorities, including notaries, investigation and other law enforcement agencies inconnection with the above authorities Receipt offunds inconnection with court rulings and other procedural documents Transfer ofmembership fees topublic, religious orinternational organizations aswell asother obligatory payments for participation ininternational organizations Transfer and receipt ofBelarusian rubles, foreign currency, transfer and receipt ofother foreign currencies under gift contracts, including donations, incompliance with Belarusian legislation Residents taking currency valuables received from non-residents into custody Payment oftaxes and other compulsory payments envisaged bythe legislation ofBelarus orother countries Transfers offunds for duties and other payments topatent authorities Transfers and receipt offunds inconnection with participating inconferences, seminars, sporting events, exhibitions and fairs Repayment offunds transferred due toan error Other transactions listed bythe President ofBelarus or, upon the Presidents initiative, bythe Belarusian Council ofMinisters, including those envisaged byinternational treaties ratified byBelarus

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Currency transactions associated with the movement ofcapital Currency transactions associated with the movement ofcapital include currency transactions between residents and non-residents, other than those classified ascurrent currency transactions.

Residents may perform currency transactions associated with the movement ofcapital onthe basis ofthe National Banks permits, except asotherwise expressly stipulated bylegislation. The transactions below require permits: Acquisition ofshares tobe distributed among the founders, and acquisition ofa share inthe statutory fund orin anon-residents property Acquisition ofsecurities from non-residents, asissued bynon-residents, except for the acquisition ofshares tobe distributed among the founders Acquisition ofproperty outside ofBelarus and treated asreal estate under Belarusian legislation Placing money ina non-residential bank account ortransferring money tonon-residents (other than tonon-resident banks) under atrust management contract Extension ofloans Settlements relating tothe liabilities ofsubjects/ residents ofcurrency transactions (other than banks) tonon-residents under suretyship orguarantee agreements concluded between them Receipt ofcredit and/or loans for aperiod ofover 180 days, providing that atleast one ofthe conditions below Settlements relating tothe obligations ofa currency ismet: transaction subject/resident (except for abank) and toa The interest rate for acredit and/or aloan exceeds non-resident based ona duly concluded agreement the limit set bythe Board ofDirectors ofthe National onthe assignment ofa debt orclaim Bank (14% per annum for currency transactions inUSD and EUR and the refinancing rate ofthe relevant central ornational bank, effective asof the date ofreceiving acredit and/or loan bythe currency

transaction subject-resident, increased by5%) The interest rate for acredit and/or loan incase ofa delay inthe repayment ofa credit and/or aloan (in the amount ofthe increase inthe interest for the delay inrepayment ofthe credit and/or loan) and the penalty amount intotal exceed 0.01% for each day ofdelay (3.65% per annum). Towork out this rate, the penalty amount should beexpressed asa percentage ifit isexpressed asa fixed amount inthe contract. Apart from the interest rate for acredit and/ or aloan, the agreement between acurrency transaction subject orresident (except for abank) and anon-resident (except for anon-resident bank) provides for additional payments, except for the interest rate ondelays inrepaying acredit and/or aloan (in the amount ofthe increase inthe interest for the delay inrepayment ofa credit and/or loan aswell aspayments related topaying the penalty) Acredit and/or aloan isused tofulfill aresidents/ borrowers monetary obligations not through their bank account Obligations related tothe repayment ofa credit and/or aloan are not fulfilled through the borrowers account Acreditor ora lender isregistered with the state register ofthe country (in the country) inwhich apreferential tax regime applies and/or which permits the non-disclosure ofinformation onfinancial transactions (offshore zones)

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The law On currency regulation and currency control contains alist ofcurrency transactions related tothe movement ofcapital that donot require permission from the National Bank. Banks and customs authorities are responsible for controlling the correct and timely payment ofcosts and the receipt ofgoods orservices under export and import contracts, regardless ofthe currency used inthe settlement. Obligatory conversion ofexport revenue Belarusian legal entities are currently required toconvert 30% oftheir foreign currency export revenue into Belarusian rubles byselling through authorized banks within seven working days ofreceipt. Purchase offoreign currency Currency transaction subjects may purchase foreign currency, onthe following conditions:

Currency transaction subjects/residents may only purchase foreign currency onthe exchange market via adesignated bank (i.e. the bank with which the residents inquestion have opened anaccount specifically intended for the receipt offoreign currency purchased onthe Belarusian internal exchange market, orany other account whatsoever specifically opened inorder tomake bank transfer transactions related topurchasing, selling orconverting foreign currency) Currency transaction subjects/residents may purchase foreign currency onthe off-exchange market: inthe amount ofnot more than one lot established for the exchange market, ofone ofthe foreign currency for each contract (transaction) per day As there isinstability inthe Belarusian currency market, the National Bank may introduce limitations onpurchases offoreign currency for the settlement ofimport contracts.

Deloitte offers awide range ofservices and isable todeploy experienced professionals with extensive knowledge and specialized skills towork for clients across awide range ofsectors.

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Payments for imports participant and the bank involved Please note that the NBRB currently prohibits Currency control measures include the following: advance payments under foreign economic contracts Settlements relating totransactions between Belarusian involving import transactions. This prohibition applies residents (including companies with foreign investments) toBelarusian rubles aswell asto foreign currency. may only beconducted inBelarusian rubles, with afew Anexception ismade for importers acquiring raw exceptions. materials under the terms ofan advance payment Settlements between residents and non-residents for the further production ofexport-oriented goods. ofthe Republic ofBelarus may beperformed ina freely Effective from 15 January 2009, these importers are only convertible foreign currency orin Belarusian rubles. entitled tomake advance payments using their own There are also strict rules relating toforeign currency export proceeds inforeign currency. Advance payments held incash when the use ofcash ispossible. may also bemade tothe non-residents registered inthe Furthermore, there are limitations onthe amount Russian Federation and Kazakhstan; from loans (credits), offoreign currency that acompany may keep inits cash received from non-residents. The advance payments office. tothe non-residents may also bemade byimporters atthe expense ofthe hard currency received after Anti-money laundering legislation provides for additional 15.11.2008 ascapital contributions, foreign aid, measures tobe taken bythe authorities inorder dividends and other income from investments, interest toprevent illegal operations. These measures include the onloans tonon-residents and bank deposits and debt registration ofsuspicious transactions, communication instruments. ofinformation tothe tax authorities and other special bodies, inspections and audits ofsuspicious transactions In other cases, advance payments made toa bystate authorities, and the interruption ofillegal non-resident from aBelarusian bank account may only transactions. beperformed ifthe importer has permission from the NBRB. Inorder toobtain permission from the NBRB, Opening ofaccounts outside ofBelarus byBelarusian animporter should submit anapplication form from residents requires permission from the Belarusian the Belarusian Council ofMinisters and acopy ofthe National Bank, except incertain cases. foreign trade contract. The NBRB isentitled torequest additional documents related tothe transaction. Enforcement ofcurrency regulations Belarusian legislation provides for penalties for any breach ofcurrency regulations, both for the individual carrying out the transaction and the Belarusian bank that, asa currency control agent, isobliged toensure compliance with legislation. The range ofpenalties includes the following: Penalties upto amaximum of100% ofthe value ofthe transaction inquestion Invalidation ofany licenses orpermits previously issued bythe currency control authorities toboth the

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Your contacts in Deloitte CIS

Minsk 51 Korolya St., 4th floor Minsk, 220004 Tel: +375 (17) 200 03 53 Fax: +375 (17) 200 04 14 www.deloitte.by Russia, Moscow Gennady Kamyshnikov CIS Managing Partner gkamyshnikov@deloitte.ru Russia, St. Petersburg Artem Vasyutin Partner avasyutin@deloitte.ru

Andriy Servetnyk Partner aservetnyk@deloitte.ua

Ukraine, Kyiv Grigory Pavlotsky Partner gpavlotsky@deloitte.ua

Russia, Yuzhno-Sakhalinsk Andrey Goncharov Director agoncharov@deloitte.ru

Viktar Strachuk Senior Manager vstrachuk@deloitte.by

Azerbaijan, Baku Nuran Kerimov Partner nkerimov@deloitte.az

Tajikistan, Dushanbe Gaukhar Iskakbayeva Partner giskakbayeva@deloitte.kz

Georgia, Tbilisi George Tavartkiladze Senior Manager gtavartkiladze@deloitte.ge

Turkmenistan, Ashgabat Russell Maynard Partner rmaynard@deloitte.kz

Kazakhstan, Almaty, Atyrau, Astana and Aktau Vladimir Kononenko Partner vkononenko@deloitte.kz Kyrgyzstan, Bishkek Gaukhar Iskakbayeva Partner giskakbayeva@deloitte.kz

Uzbekistan, Tashkent Vladimir Kononenko Partner vkononenko@deloitte.kz

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