31.10.2018

Possibilities and legal framework of investing in Belarus

Possibilities and legal framework of investing in Belarus

Due to the country’s location in the Eastern European Region and to a set of regulations that provide for standard guarantees for the investors, investing in Belarus has many advantages and is a great opportunity for foreign companies.

Belarus is an Eastern European country, bordering with Latvia, Lithuania, Poland, Russia, and Ukraine. Its population is about 9.5 million and the total area of 207 thousand sq km (slightly smaller than Romania or the UK). The country was largely industrialized during the Soviet era. Today, its market economy is evolving, with the state preserving significant presence. Many markets niches are relatively unsaturated, thus providing multiple opportunities for enterprising investors. We hope that the below brief review will help you better understand the actual legal framework of investing in Belarus.

General advantages for investing in Belarus

Belarus holds a specific role in the region. Historically it maintains close ties with Russia, as well as strong historical and economic links with the neighbouring EU countries and Ukraine, thus serving as a bridge between the cultures and economies. Being a member of the Eurasian Economic Union, Belarus has unparalleled access to one of the world’s largest markets that makes investing in Belarus a good choice for the investors interested in expansion to the former Soviet area.

Additionally, Belarus plays role in the Belt and Road Initiative as an important logistics point on the way between Europe and China. The Great Stone Industrial Park established by the Belarusian and Chinese governments, inter alia, has the aim to ensure proper implementation of the Initiative in Belarus. The location is not the only advantage of the country. Since the Soviet times, Belarus preserved an adequate education system for technical specialists, including those in the IT field.

From the legal point of view, Belarus has a set of investment regulations that provide for standard guarantees for foreign companies investing in Belarus, including equality of rights for national and foreign investors, protection against unlawful acts by government authorities, protection of investments from nationalisation and requisition, free repatriation of profits, etc.

Belarus is also a party to Bilateral Investment Treaties with 65 countries, as well as to a number of multilateral treaties on cross-border investment activity:

  • 1965 International Convention on Settlement of Investment Disputes between States and Nationals of Other States;
  • 1985 Convention Establishing the Multilateral Investment Guarantee Agency;
  • 1993 Agreement on Cooperation in the Field of Investment Activity;
  • 1997 Moscow Convention on Protection of Investors’ Rights;
  • 2014 Agreement on the Eurasian Economic Union (with Annexes).
Investment incentives

The Belarusian law provides for various special regimes and instruments, either general, territorial, or sector based. Below you may find a description of the most actual ones.

High-Tech Park

The High-Tech Park (HTP) was established in 2005 as a haven for IT companies. During the following years, its special legal regime was subject to a number of improvements, including those introduced by renowned “digital country” Decree No. 8. Currently, the HTP experiences its best times having 388 residents (about half of which was admitted to the Park during 2018) and USD 1 billion of exports in 2017.

The HTP residency is available for any company or individual entrepreneur having IT related business. The HTP does not require its residents to be located on its territory.

The HTP regime provides for various tax and other legal benefits, including:

  • Tax exemptions and benefits according to Annex (only the most significant ones are listed);
  • Simplified accounting formalities;
  • Exemption from certain foreign trade regulations, including statutory deadlines for receiving payment for the sold goods / provided services;
  • Visa-free entry for shareholders (their employees) and employees of an HTP resident;
  • Exemption from work permits for employees of an HTP resident, simplified order for receiving temporary residence permits;
  • The right to use international legal instruments, like options, convertible loans, and some other instruments.

Great Stone Industrial Park

The Great Stone Industrial Park is a special economic zone located near the capital city Minsk. It was established in 2012 as a joint project of the Belarusian and Chinese governments to foster investing in Belarus into innovative production and logistics businesses. The Industrial Park has more than 9,000 ha of territory that should be fully developed by 2030.

To become a resident of the Industrial Park, a company must be located on its territory and have an investment project in one of the eligible spheres (the list is quite extensive, including telecommunications, logistics, new materials, fine chemistry, etc.) with the amount of investments equivalent to USD 5 million. It is possible to invest a lesser amount (at least USD 500,000) if the investments are made within 3 years or in case of an R&D project. The residents of the Industrial Park enjoy, inter alia, the following benefits:

  • Tax exemptions and benefits according to Annex (only the most significant ones are listed);
  • Exemption from certain currency control and foreign trade regulations, including statutory deadlines for receiving payment for the sold goods / provided services;
  • The right to prepare project documentation, to construct, commission, and operate the Industrial Park facilities under technical standards equal to those of the EU or China;
  • Visa-free entry for shareholders (their employees) and employees of an Industrial Park resident;
  • Simplified order for receiving work permits and temporary residence permits for shareholders (their employees) and employees of an Industrial Park resident;
  • Further benefits in regard to construction, tax, employment, migration, administrative and other issues.

Free Economic Zones

Free Economic Zones (FEZ) are territories with a special legal regime that host export-oriented and import-substituting businesses. There are 6 FEZs in Belarus, one per each region.

The requirements to legal entities and individual entrepreneurs willing to become EFZ residents are the following:

  • To be located on the FEZ territory;
  • To have an investment project presuming investment of at least EUR 500,000 within 3 years;
  • To conclude an agreement on implementation of the investment project with the FEZ administration.

The benefits related to the FEZ regime include, inter alia, the following:

  • Tax exemptions and benefits according to Annex (only the most significant ones are listed);
  • The right to receive land plots into lease for construction of FEZ facilities without holding an auction;
  • Exemptions from lease payments for land plots;
  • Further administrative, customs, and other benefits.

Special regime for small towns and rural areas

Since 2012, companies and individual entrepreneurs operating in rural areas and small towns are subject to a number of benefits and preferences. This special legal regime does not apply to banks, insurance companies, investment funds, professional participants in the securities market, real estate consultants, as well as to businesses operating under some of the preferential legal regimes (including High Technology Park, Industrial Park “Great Stone”) and certain other businesses. The benefits associated with the regime of small towns and rural areas include, inter alia, the following:

  • Tax exemptions and benefits according to Annex (only the most significant ones are listed);
  • Benefits and preferences related to lease of a land plot in case of acquisition from the state of a building or capital construction in a small town area;
  • No restrictions on insuring risks with foreign insurers;
  • Other tax, administrative, and customs benefits.

Investment agreements

The Belarusian law provides for a possibility to conclude the so-called investment agreements with the Republic of Belarus. These agreements are usually used in the following cases:

  • Acquisition of a state-owned enterprise or establishing a joint venture with a state-controlled company to secure a stable legal framework for the project;
  • Greenfield investment projects requiring arrangements for supplies of power and raw materials, prices for goods produced by the new enterprise (especially in the energy sector);
  • Large-scale development and construction projects.

Investment agreements are concluded only in respect to projects in priority sectors of economy identified by the Council of Ministers. Currently, the sectors are, inter alia: information and communication technologies, logistics, mechanical engineering, sugar and confectionery production, processing of secondary material resources, and many others.

The list of benefits under an investment agreement may include, inter alia:

  • Exemption from VAT and customs duties due to import of materials and equipment for the project;
  • Exemption from land tax or lease payments;
  • Construction related preferences, including the right to fulfil construction works, while developing design documentation for the next stages;
  • Other tax, customs, migration benefits.

If needed, it is also possible to apply for the benefits that are not directly stipulated by the law. The respective procedure will require an approval of the President.

Trends of investing in Belarus

The Belarusian economy, especially the private sector, continues to demonstrate a moderate recovery, following the recession of 2015-2017. The positive trends are most noticeable in the IT, retail and other industries.

Recently, the Belarusian IT industry has proved its potential and generated a number of promising projects. The opportunities have not remained unnoticed by regional and global investors, especially those specialising in private equity and venture capital investments. Bright examples of M&A and investment activity in the IT industry are the acquisition by Mail.ru Group of Maps.me, a producer of maps and navigation services, the acquisitions of the Belarusian start-ups MSQRD by Facebook and AIMatter by Google. The industry continues developing, inter alia, due to a favourable regime of the High-Tech Park, and is likely to stay one of the preferred spheres for investing in Belarus in the nearest future.

Retail also shows steady development: the market attracts renowned foreign brands (e.g., Spar, JYSK, Reserved, etc.), as well as saves opportunities for local operators. For instance, the largest food retailer Eurotorg became in 2017 the first Belarusian company to place Eurobonds and now is preparing for an IPO in London. Still, the retail market stays relatively unsaturated, and there is place for new businesses.

If you would like to know more about the legal framework of investing in Belarus, please visit the homepage of Sorainen, the Belarusian partner firm of WTS Global.

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