As we have written in an earlier article, key changes to the Belarusian Tax Code were expected for 2019 already in the middle of last year. The proposed changes were amended several times during 2018 and finally came into force on 1 January. Below we comment on the changes of the Belarusian Tax Code 2019 and the latest TP trends that we consider to be the most important.
Cancellation of 20% deviation from the arm’s length price
One of the key changes regarding the latest TP trends in Belarus is that now any deviation from the arm’s length price (profitability range) in controlled transactions may trigger additional corporate income tax liabilities. Previously 20% deviation from the arm’s length price (profitability range) was allowed.
Advance pricing agreements
Taxpayers with controlled transactions exceeding a value of BYN 2 million excluding indirect taxes (currently approx. EUR 800,000) and high taxpayers are entitled to enter into advance pricing agreements with the tax authorities.
The list of related persons is extended
A person that directly or indirectly influences the business conditions or economic results of another person is recognized as a related person. Tax Code 2019 introduces the new term “beneficiary of the company” which is defined, for tax purposes, as an individual who directly or indirectly takes key managerial decisions and decisions affecting the business activities of the company. Such beneficiaries and the company are related persons.
The latest TP trends regarding the trade in shares of companies
The current opinion of the Belarusian tax authorities regarding TP control of transactions involving shares between related persons is that the sale of shares can be interpreted as transactions involving property rights which are subject to TP control. Still there is a lot uncertainty because the Tax Code does not specify how to determine the arm’s length price of shares. Currently there is no rule that taxpayers should stick to the value of net assets per share or similar.
Practice of the supervisory authorities
President Lukashenko publicly announced a campaign against corruption and manipulations in structures involving intermediaries. Financial investigators of the State Control Committee now pay close attention to structures involving related intermediary companies during their audits, especially those registered outside Belarus. We expect that the supervisory authorities will focus even more on deals involving intermediary companies in 2019.
If you would like to know more about the new Tax Code and the latest TP trends in Belarus, please visit the homepage of Sorainen, the Belarusian partner firm of WTS Global.